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Saturday, Jun 3, 2023

A Christmas Wish: Restrain Yourself

Christmas came early for California! The state’s Legislative Analyst Office projects that the state will have a budget surplus of almost $10 billion a year by the 2017-2018 fiscal year if current spending and revenue policies remain the same. By the end of the next fiscal year, the reserve should total $5.6 billion. This news is worth some holiday cheer, considering California’s recent history of structural deficits. And certainly our state legislators are preparing their policies and recommendations for the 2014 legislative session with this growing surplus in mind – particularly freshman elected officials hoping to make their mark in Sacramento with a popular new program or initiative. However, the Valley Industry & Commerce Association has a request: Make “restraint” your New Year’s resolution. Hold off. Calm down. There is no need to immediately allocate every new surplus dollar. The legislative analyst echoes our sentiments in its report: “We suggest giving high priority to building a strong reserve and paying off the budgetary liabilities accrued over recent years,” the report states. “We also believe the state should begin setting aside funds to address the growing unfunded retirement liabilities noted above.” California’s healthy budget situation stands to be our biggest asset as we try to grow California’s business community. Businesses considering relocating will now look at our state as a possible choice, thanks to its robust budget. What will ruin our rise back to an actual “Golden State” is an immediate influx of costly, permanent regulations and programs that eat up that surplus before spring. Those actions send a message to onlookers in other states that California hasn’t learned our lesson about paying for existing obligations before creating new ones. Year in and year out, VICA’s members choose pension reform as one of our priorities, because these gigantic obligations hinder the state’s ability to grow and make legislators desperate for more revenue through business-unfriendly, industry-specific taxes. Considering the fact that California Public Employees Retirement System (CalPERS) reported being underfunded by more than $50 billion, a combination of paying off obligations and reforming the current system will reign in that deficit in the coming years. However, the state cannot grow and improve by solely sitting on a rainy day fund. VICA recommends that any new expenditures focus on what brings in jobs and economic development: one-time infrastructure projects. The U.S. State Department estimates that every $1 billion spent on infrastructure creates about 18,000 jobs. Funding major, necessary infrastructure projects across the state would create a huge infusion of jobs – just what California needs as its unemployment rate sits at double what it was in 2007. One in 20 Californians live in the San Fernando Valley and yet this region lacks a connective and efficient public transit system. Economists and environmentalists are bracing for an earthquake that completely impales the state’s weak water transportation system, which will severely hurt commerce in the Valley and elsewhere. If your legislators carefully allocate funds to fixing these large structural issues, they will be creating successful programs that create jobs and improve the quality of life for Californians. And importantly, these projects do not create permanent obligations for the state, which means the state will not be strangled with even more annual obligations in the event of another Great Recession or worse. The positive ramifications of the projects will continue, but the state’s financial duty will not. California’s reputation for business does not just lie in its regulatory climate, tax rates and incentives – although those are all important. If a business is making the decision to set up shop in California, employers and employees want to know that the state is fiscally healthy with a strong infrastructure. The Valley Industry and Commerce Association (VICA) is a business advocacy organization based in Sherman Oaks that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.

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