Return our taxes and fix infrastructure

It’s been a decade since Gov. Jerry Brown faced a $27-billion budget deficit, which prompted him to take a number of extraordinary steps including lobbying for a massive tax increase and shuttering the state’s revenue-draining redevelopment agencies. Brown must no doubt be envious of the financial situation faced by his successor.

On Friday, Gov. Gavin Newsom announced a $97.5-million budget surplus — driven by record post-pandemic profits enjoyed by the tech industry. California’s steeply progressive, capital-gains-dependent tax structure results in periods of boom and bust. Brown had to deal with tough bust-related choices, while Newsom gets to enjoy a windfall.

For perspective, the state’s surplus is larger than the entire general-fund budgets of 46 states. The governor announced the unprecedented surplus as he unveiled his record-setting $300.7-billion spending plan. In doing so, Newsom sounded many of the right notes — but he ultimately is missing a generational opportunity.

As the Mercury News reported, the governor “argued that California needs to ready itself for a stock market bust by putting $23.3 billion in a rainy day fund and using the vast majority of the surplus on one-time spending.” Echoing Brown, who always cautioned against creating continuing spending programs in the midst of a boom, Newsom reminded reporters of the previous dot-com bust.

That’s good as far as it went, as is his plan to return some gas-tax money to car owners. Some progressives in the Legislature don’t like that the money is earmarked only for car owners, which is a bizarre complaint given that car owners are directly paying for the high price of gasoline.

Unfortunately, Newsom would spend tens of millions of dollars on employee raises, construct a new park in Stanislaus County and provide direct rental assistance to Californians. Even the sensible infrastructure-building priorities — including an $8-billion electricity reserve to cushion against blackouts and a $1.6-billion drought-resistance measure — have little to do with actual infrastructure building.

As the newspaper noted, the latter “is proposed for grants to reduce water consumption, but Newsom did not devote money this year to building new reservoirs.” As usual, much of what this administration terms “infrastructure” is not really about infrastructure. The funds often go to various environmental and other social-spending efforts.

Simply put, the governor and Legislature will spend every cent California taxpayers send them in a variety of ways — some good, most middling and others that are outright wastes of money. But think of the missed opportunities. California could revamp its tax structure to provide permanent tax relief, thus signaling its seriousness about business retention.

It could also fix the bulk of its water problems, by providing funding for Sites Reservoir, expanding water recycling and investing in other long-planned water-infrastructure projects. The California Policy Center estimates that the state could entirely revive its water system for $77 billion. We’re not suggesting that California do that all at once, but the surplus provides a hefty down payment — something that should interest all of us during times of water rationing.

Furthermore, California could return some of it to the people who overpaid, pay down its pension debts and other unfunded liabilities, upgrade its freeway infrastructure and prepare itself for a growing future. Instead, it will spend most of the money on one-time giveaways, but there’s still time to change course.