After Raising Taxes, California Expects Budget Surplus In 2014

California Gov. Jerry Brown (D)

Since the Great Recession, California has epitomized the fiscal problems facing states. Its economy was ravaged by the housing crisis, and its budget gaps swelled into the tens of billions of dollars. Even before the recession, the state often struggled to balance its budget, hamstrung by legislative rules that made it nearly impossible to increase taxes.

Gov. Jerry Brown (D) took tax increases to the voting public in November, though, and voters approved multiple tax increases for 2013. After years of spending cuts and with billions of dollars in new tax revenue coming in, Brown now expects the state to have a budget surplus this year. The expected $851-million surplus would be just the second for the state in the last decade, the Los Angeles Times reports:

After years of red ink, Gov. Jerry Brown said on Thursday that California’s $96.7-billion general fund is now poised to end next year with a surplus, thanks to years of deep budget cuts and billions in new taxes approved by voters last year.

We achieved the position we’re in because of tough cuts … and then the people voted for taxes,” he said. “We broke the logjam by going to the people.”

Proposition 30, the tax increase on the wealthiest Californians voters approved in November, is expected to raise $8.5 billion in revenue, bringing balance to the billions in spending cuts Brown had already approved to close California’s budget gap. The tax increases and the budget surplus will especially benefit California’s school system, which will receive a $2.7-billion budget increase in 2013 and more than $10 billion in increases by 2016. Medi-Cal, the state’s health care system, will also receive increases aimed at implementing Obamacare.

In Washington, President Obama has pushed for a similar balanced approach to deficit reduction. Thus far, 75 percent of the $2.4 trillion in deficit reduction that has been enacted since 2011 has come from spending cuts, and Republicans are refusing to consider further tax increases in future deficit reduction packages. Without tax increases in future deals, the ratio of spending cuts to tax increases could reach as high as five-to-one, according to the Center on Budget and Policy Priorities. But if California is any evidence, combining tax increases and spending cuts can bring balance to the budget while also allowing lawmakers to avoid cuts to education, health care, and other important programs.