Winners and Losers in 2019’s State Budget

This year’s state budget debate is in the history books.  On Thursday, the Legislature’s liberal supermajority passed the main budget bill and some of the trailer bills required to implement the budget.

The 2019-20 state budget is also Gov. Gavin Newsom’s first opportunity to put his stamp on the state’s spending priorities.  After 8 years of having their priorities thwarted by the more fiscally responsible Jerry Brown, legislative liberals were eager to test Newsom’s fiscal resolve – pushing billions in new spending that former Gov. Brown rejected.

So, who came out on top in Gavin Newsom’s first budget battle?  Gavin Newsom, of course.

Legislators like to talk big about forcing governors to accept their spending demands.  But it’s really the governor who holds most of the cards in budget debates.  Enact a budget provision that he doesn’t like, and they’ll put their line item veto pen to work.

In the end, lawmakers eagerly accepted budget crumbs so they could claim victory on their top budget priorities.  An example of this is the Governor only agreeing to suspend the so-called tampon tax for 2 years, rather than the 10 years the Legislature originally wanted.

Here’s a few highlights of this year’s budget:

Water Tax – Gov. Newsom’s controversial proposal to impose a new $140 million water tax on California has been dropped in the final budget deal.  Instead, according to the Los Angeles Times, the programs he wished to support with the new tax will be paid for from Cap-and-Trade funds.  That we were in this pickle in the first place is a mystery.  Of course, we can afford to pay for $140 million in clean water programs without a new tax when the state has a $21 billion surplus.  In fact, our Kerry Jackson suggested as much in a February post.  Hey, maybe somebody at the Capitol learned something from reading Right by the Bay?

Health Care for Undocumented – One of the most controversial issues in this year’s budget is a proposal to expand eligibility for state Medi-Cal programs to undocumented immigrants.  The Legislature wanted to expand eligibility to all undocumented immigrants who qualified, at a cost of more than $3 billion annually, while Newsom only wanted to expand to undocumented immigrants between the ages of 19 and 25, at a cost of $98 million annually. In the end, Newsom won out.

But as PRI’s Sally Pipes recently told the Daily Signal, it’s taxpayers who are the big losers here.  “Paying for the health care of the undocumented in California is, in effect, a tax on people who are here legally. It would make California an even larger magnet for more illegal immigration into the state—putting incredible additional pressure on future state budgets,” she said.” 

Earned Income Tax Credit – Still being negotiated between Newsom and the Legislature is his plan to conform state tax law to the 2017 federal tax reform law and use the additional money to expand the Earned Income Tax Credit in California.  But all Californians could use some tax relief.  As my colleague Rowena Itchon wrote in May, “providing tax relief or benefits for select groups like parents with babies, parents with children under six, and women in their childbearing years leaves out the millions of Californians who are also struggling with the state’s high cost of living.”

Tim Anaya is Pacific Research Institute’s communications director.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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