State of affairs not as rosy as Brown claims

UT San Diego, 1/22/14.

SACRAMENTO — Gov. Jerry Brown offered a buoyant take on California’s fiscal situation during his State of the State address in the Assembly chambers on Wednesday morning. Amid cheers from Democratic legislators, Brown touted California’s fiscal resurgence and chided commentators who had suggested that he skip this traditional exercise of pomp and circumstance.

“It occurred to me that these critics – who have long recited our state’s decline – perhaps have nothing to say in the face of California’s comeback – except, ‘please, don’t report it,’” the governor said. “Well, I’m going to report it, and what a comeback it is: A million new jobs since 2010, a budgetary surplus in the billions … and a minimum wage rising to $10 an hour.”

Perhaps the governor has spent too much time basking in the glow of some writers who recently have championed the 75 year-old governor — half-seriously, perhaps — as a possible presidential contender. The balanced budgets look better than a sea of red ink, of course, but it doesn’t take much digging to see that the governor has overstated this “comeback.”

“He has done a nice job reducing short-term debt by $10 billion, but long-term debt has increased by two times that amount (in his proposed budget),” said David Crane, a Stanford professor, and well-known Democratic fiscal hawk who had served in the Schwarzenegger administration.

For instance, Brown’s recently released budget doesn’t address $3 billion in additional annual payments needed to pay for the state’s medical-care obligations and avoids at least $3.5 billion in annual contributions needed to keep the state teachers’ retirement system solvent. That obliterates the surplus.

Brown isn’t alone among governors in California’s past and from other states who avoided dealing with these debts, but that hardly is cause for gloating. “Even if accounting rules let you do things, leaders can do the right thing,” Crane added. As a result of punting on these matters, the state is spending far more on pensions and debt service than a few years ago – and far less on infrastructure, education and the courts.

Brown acknowledged some of these problems. “And while we know our revenues will fluctuate up and down, our long-term liabilities are enormous and ever growing,” he said in the speech. But the governor has a history of addressing major problems with rhetorical candor, but then avoiding any equally direct action.

Republicans praised the governor for his nod toward fiscal responsibility in his budget and his address – i.e., his willingness to resist the pull from legislative Democrats to create new social-spending programs. But they raised concerns about broader economic problems.

Senate Republican leader Bob Huff, R-Diamond Bar, took jabs at the governor’s claims about job creation. The governor talked about 1 million new jobs, Huff explained, but didn’t mention the many more jobs that have fled to other states. The governor’s anti-global-warming policies and hike in the minimum wage – two things that Brown showcased in his speech – are among his many policies that are “anti-job-creation,” he added.

But Huff was impressed with some remarks made by Lt. Gov. Gavin Newsom, who introduced Brown. Newsom quoted from Winston Churchill: “Some people regard private enterprise as a predatory tiger that needs to be shot. Others as a cow that needs to be milked. Not enough people see it for what it is, a healthy horse pulling a sturdy wagon.” Newsom wants to re-establish the state “as the tent-pole for job creation in the American economy” and warned against those who are pro-job but anti-business.

Shortly after the Brown address, Hoover Institution, a think tank at Stanford University, released the results of a statewide opinion poll showing that Californians, by an 11-point margin, believe the state is worse off now than it was a year ago. They are worried about jobs and the economy – with 71 percent of those polled making growth their top priority. The public doesn’t share the Capitol crowd’s sense of self-satisfaction.

The public seems to know that there’s more to a great comeback than a state budget that is balanced provided we all ignore billions of dollars in debts and liabilities and forget about California’s nation’s-highest poverty rates.

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