Dear Legislators,
California needs at least $100 billion of reserves. Don’t take our word for it. See page 245 of the Governor’s Budget:
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“Revenue losses in this recession forecast would total over $100 billion (an average of over $30 billion per year) for three years, continue with more years of revenue declines in the range of $30 billion, and lead to a permanently lower revenue base compared to the current forecast.”
But the state reserves only $25 billion. If you still think that’s enough, peek at the Governor’s 2020 May Revision, when officials thought plunging revenues as a result of COVID-19 would produce a $54 billion deficit.
Just as you require bridges to be constructed to withstand earthquakes, you should require the budget to be built to withstand financial earthquakes. Because the state’s General Fund revenues rise and fall with stock markets, this is what those earthquakes look like:
Schools, Medi-Cal and other programs require steady funding but the stock markets California relies upon for revenues are not steady and $25 billion in reserves is not enough. You should set aside surplus revenues until there’s at least $100 billion in the bank.
