By ONME Newswire
(SACRAMENTO)—Last week, Governor Gavin Newsom announced his January budget proposal and solutions to balance ongoing and increased investments with a $22.5 billion shortfall.
“With our state and nation facing economic headwinds, this budget keeps the state on solid economic footing while continuing to invest in Californians – including transformative funding to deliver on universal preschool, expand health care access to all and protect our communities,” said Governor Newsom. “In partnership with the Legislature, we’ll continue to prioritize the issues that matter most to Californians while building a strong fiscal foundation for the state’s future.”
Despite the slowdown impacting the state’s economic and revenue outlook this year, the state’s commitment to building reserves and budget resiliency over the last several years enables the 2023-24 state budget proposal to sustain key investments reflecting the values and priorities of Californians. This includes major funding to transform California's burdened education system, address the homelessness crisis and housing affordability, increase health care access, tackle the climate crisis, keep Californians safe and expand economic development and growth across the state.
Rob Lapsley is president of the California Business Roundtable, a non-partisan organization comprised of the senior executive leadership of the major employers throughout the state. He believes California is going to have to tighten its wallet and reevaluate budget priorities without taxation.
“For the first time, this governor and Legislature are managing a budget process that reflect deficits rather than surpluses. Now, we face a period of major revenue uncertainty as the primary driver of our job growth and taxes – the high-wage tech sector in Silicon Valley – is going through a downturn. In addition, personal income taxes, corporation taxes, and retail sales are all down as well. We support the governor in his continued investment of one-time revenue in one-time costs,” said Lapsley.
California is currently suffering an influx of job loss in the technology sector which was booming during the COVID-19 pandemic due to stay-at-home orders; everyone was home, forced to use technology to survive. As reported in the San Francisco Gate, more than 47,000 people have been laid off across 252 San Francisco Bay Area technology companies in 2022, according to Layoffs.fyi, a site that has tracked a vast majority of the tech layoffs that have taken place since 2020. That’s nearly 30% of all the layoffs listed on the site globally, Roger Lee, its creator, pointed out. The largest tech companies issuing layoffs throughout 2022 include Salesforce, Elon Musk’s Twitter and, most severely, Meta, which cut 11,000 positions in its first-ever reductions at the end of last year. Microsoft just notified the SEC of thousands of upcoming layoffs they will have to implement in the next coming months.
Also, Lapsley said they want to ensure that Californians do not have to endure new taxes or penalties to make up for deficit.
“In addition, last week the Legislative Analyst issued his report reflecting the unprecedented increases in revenue $132 billion from 2011 to 2022. This report reinforces the governor’s approach to manage the current budget more efficiently and with greater accountability without calling for new major tax increases. The last thing Californians can afford is more taxes, taxes disguised as penalties, or increases in fees which will only further increase the cost of living and doing business. We look forward to working with the governor and Legislature as the state’s fiscal picture becomes clearer in May to ensure California families and businesses do not pay for the state’s budget deficit,” Mr. Lapsley concluded.
NEWSOM: INVESTING IN CRITICAL PRIORITIES TO THE STATE
The governor’s budget proposal includes ongoing and new funding to address the state’s out-of-control homelessness crisis.
Fentanyl is a humanitarian crisis that affects families and businesses alike. We support increased funding to address this crisis head-on.
The governor continues to commit critical dollars to infrastructure. We stand committed to support investments that will create a resilient goods movement economy.
The governor rightly acknowledges that the state’s fiscal outlook is unpredictable and is right to be conservative in his January Budget while the short and long-term impacts of the economic slowdown, especially in the tech sector, have not been fully realized.
California Business Roundtable California Budget Proposal Concerns:
INCREASING COSTS FOR THE BUSINESS COMMUNITY AND FAMILIES
While the governor’s budget appears to not increase taxes, there are several proposals that will increase the cost of living and doing business in the state.
The governor’s oil windfall profits tax proposal will increase costs not just for drivers, but for groceries, diapers, and other essentials.
The governor is proposing to reduce debt payments to the state’s Unemployment Insurance Fund, creating an even more significant cost burden for all businesses. This lack of funding amounts to the largest tax increase on California businesses in state history and may permanently destabilize the fund.
Special fund revenue is paid for by businesses and consumers through myriad taxes, fees, and other charges. In the past, “loans” from these special funds have never been repaid by the state, but rather have been backfilled by additional costs on businesses and consumers.
UNDERSTANDING REVENUE VOLATILITY AND NEED FOR FLEXIBILITY
The governor rightly recognizes the volatile structure of the progressive tax structure. In fact, only 13,000 taxpayers account for over a quarter of the state’s personal income tax revenue.
High-wage tech jobs, which sustained the budget during the COVID recession, have been disproportionately impacted by the current economic slow-down.
The governor’s budget rightly relies on telework to reduce costs. We have long advocated for the same flexibility in the private sector the state now gives to public employees, which will help allow lower-income Californians and small businesses take advantage of this cost-saving option.