Restoring Balance, Reinvesting in the Future: The California Budget in 2013

As we embark on 2013, California faces a moment of unique opportunity. The state’s economy is beginning to rebound from the Great Recession, while the significant new revenues approved by voters this past November have California poised to emerge from years of severe budget deficits.

The key word here is “poised,” as the Legislative Analyst’s Office (LAO) projects the state to face a $2 billion deficit this year, with future budgets moving into the black by 2014-15. The good news is that a $2 billion shortfall pales in comparison to the deficits of the past decade, which means that we are not likely to see the kinds of deep programmatic cuts made in recent years. The bad news is that the state is digging out of a deep hole, with revenues still significantly short of pre-recession levels. For the current fiscal year (2012-13), General Fund revenues as a share of the state’s economy are down by almost one-sixth from prior to the start of the Great Recession.

Meanwhile, other serious challenges remain. Poverty and long-term unemployment are high. The gap between high- and low-wage earners has widened dramatically over the past generation. In addition, the deep budget cuts of recent years have frayed the social safety net and battered other public systems and services that underpin a strong economy and a high quality of life.

So, while there are signs that California is turning the corner and emerging from the Great Recession and its impacts, the near-term outlook for many families and communities remains tenuous. State leaders, advocates, and stakeholders around the state will confront challenging trade-offs in 2013 between ensuring fiscal stability and reinvesting in the future.

Turning the corner. Restoring balance. Reinvesting in the future. These are themes that will run through the California Budget Project’s work during 2013 and beyond, as we seek to foster a budget policy debate that is broadly inclusive and fact-based. We often remind people that budgets are about values and priorities. The list of items needing to be prioritized is perhaps longer than a $2 billion deficit will allow: investing in education, health care, workforce development, infrastructure, and other public programs and services that position the state for a robust recovery and long-term economic growth.

A multiyear, balanced approach that accounts for 2013 budget realities while drawing on options on both the revenue and spending sides of the ledger will be critical to maintaining stability in the state’s fiscal situation and fostering a bright economic future for California.

— Chris Hoene