SACRAMENTO, CA— Following the release of the Legislative Analyst’s Office (LAO) report, Understanding $100 Billion in Spending Growth: Causes and Fiscal Implications, the California Budget & Policy Center (Budget Center) issued the following statement from its executive director, Chris Hoene:
“California’s budget is a reflection of our values, and the spending growth documented in the LAO’s latest report tells a story of state leaders starting to make good on their promise of a California for all. Reversing course would harm millions of Californians and undermine the state’s economy and fiscal stability.
“The main reason spending has grown in recent years is that the state has kept up with rising costs driven by inflation, the COVID-19 pandemic, an aging population, and other factors beyond state leaders’ control. During this period, the state also made modest gains in meeting the affordability challenges of Californians by making investments long neglected since the Great Recession. Among those:
- More Californians living with disabilities received vital care and support through In-Home Supportive Services and developmental services programs.
- Families in deep poverty received higher CalWORKs grants.
- Children gained access to additional child care slots, allowing their parents to get to work or finish school.
- Child care providers received modest increases to their pay, supporting the sustainability of this essential workforce
- More Californians with low incomes were able to access affordable health coverage and life-saving treatments through Medi-Cal.
- More college students received aid to make higher education possible.
“Without these investments, more Californians would be rationing life-saving prescriptions, losing access to in-home care, and wondering where their next meal will come from.
“The LAO is right that California faces a structural imbalance: spending has grown faster than revenues. That’s because the world has changed dramatically since 2020. Prices have risen. The cost of health care, housing, and energy continues to surge. California’s aging population is growing, and with it the need for more costly care.
“Yet California’s tax code remains unchanged — leaving the state trying to meet the needs of a modern economy with a revenue and governance structure frozen in the past. Seventy percent of the spending growth the LAO identifies was driven by simply sustaining existing services, not creating new ones. California just kept up. And even that has not been enough to meet the needs of Californians.
“Modernizing California’s finances won’t be easy, but there is a path forward.
“Policymakers can start by approving AB 1790, a common-sense bill currently moving through the Legislature that would close the ‘Water’s Edge’ loophole, preventing large corporations from shifting profits into offshore tax havens and generating $3-4 billion per year for California’s communities.
“More broadly, profitable corporations must pay their fair share in state taxes. Right now, nearly half of California corporations pay only the minimum $800 tax, while some of the world’s wealthiest companies — headquartered here in California — sit on billions in tax credits that help them avoid paying state taxes.
“The state’s structural budget deficit should not be solved by making Californians worse off and our state less affordable. Instead, state leaders should do the hard work of modernizing a tax system stuck in the past to meet today’s and tomorrow’s realities. This is especially urgent as the federal government continues to abandon its responsibility to care for everyday people.”
“In the coming years, state leaders and voters should also address the disco-era spending cap that limits how much California can raise and invest in its communities.”
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About the California Budget & Policy Center:
The California Budget & Policy Center (Budget Center) is a nonpartisan research and analysis nonprofit advancing public policies that expand opportunities and promote well-being for all Californians.
