Budget - Archive

When we wrote to you last month about our priorities we described the 2026 race for governor as “wide open,” but since then we’ve heard that Kamala Harris may run and that if she does, some candidates would make way for her. We hope the rumors aren’t true.

In early January Governor Newsom will present the Legislature with a proposed budget for the next fiscal year. The last budget dealt with a large deficit caused by excessive spending. To address that deficit, Newsom and the Legislature raided the Rainy Day Fund, borrowed money, shifted funds and deferred spending, steps that should be reserved for deficits caused by recessions, not by excessive spending.

The good news is that a tax increase measure has been pulled from the November ballot. The bad news is that Governor Newsom and legislative leaders announced a budget deal that draws from taxpayer reserves and thereby boosts pressure for a tax increase down the road.

Earlier this week a reporter asked me to comment about a bond under discussion in the Legislature. I responded that the costs of past obligations already crowd out spending on current programs…

Yesterday the Los Angeles Times published an article entitled Newsom called it a ‘gimmick.’ Now he’s using the trick to lower California’s massive deficit in which the Governor’s spokesperson defends the proposed budget and challenges readers to come up with their own solutions to the deficit. I have five such solutions to propose, all of which pertain to reeling in extraordinary patronage spending on public employees:

SACRAMENTO — With a windfall of cash five years ago, Gov. Gavin Newsom said he was doing away with a state budget “gimmick” one of his predecessors relied on to shave about $800 million off a deficit during the Great Recession.

Yesterday Governor Newsom, Senate President pro Tempore McGuire and Assembly Speaker Rivas confirmed they still intend to close the budget deficit in part by drawing half of the state’s budget reserves when they finalize the budget in June.

I’ve been trying to understand why Governor Newsom has proposed such a reckless budget. The only answer I can come up with is that he hopes to escape California before the consequences of that budget are suffered by being appointed to President Biden’s Cabinet should Mr. Biden be re-elected in November.

Despite a healthy national economy, California has a budget deficit that Governor Newsom proposes to close in the main by drawing on budget reserves, borrowing money, shifting funds, and deferring spending — ie, steps normally taken only during recessions.

Governor Newsom postponed the annual State of the State address scheduled for today, apparently (according to Politico) until the final results of Proposition 1 are known.

State taxpayers got more bad news this week when the State Senate released its proposed early action plan for addressing California’s budget shortfall in which we can find nothing of substance that differs from Governor Newsom’s plan.

Why have corporations, unions and associations put up more than $10 million that Gov. Gavin Newsom is using for state and national advertisements featuring him? The answer is that Newsom has delivered billions of state dollars to them.

Shohei Ohtani is the only major league baseball player who can hit and pitch at an elite level.

Perhaps he should manage California’s state budget, too.

The Newsom Administration is circulating a rebuttal to my criticism of the Governor’s Proposed 2024-25 Budget. As a reminder, that criticism is that Mr. Newsom proposes to draw on the Rainy Day Fund even though the country is not in a recession and doing so would seriously impair the state’s ability to preserve public services in a recession.

Lieutenant Governor Eleni Kounalakis and every other candidate for governor in 2026 should be paying very close attention to the Multiyear Forecast in Governor Newsom’s Proposed Budget.

Next week my students will start reading through Governor Newsom’s proposed state budget for the next fiscal year, which was released today. Before they do, I’ll be sending them a 2019 column from the LA Times entitled, “The one-day, $1-billion California budget gimmick that has lasted for almost a decade,” which is about a budgetary maneuver employed in 2009.

Last month, I wrote about the unique opportunity Governor Newsom has with his next budget to “reinvent government” as he called for in his 2014 book, Citizenville. Next week we will learn if he plans to do so.

Last week the Orange County Register published a lengthy article about California’s skyrocketing spending and budget deficit that included some comments from the Department of Finance and Legislative Analyst’s Office that might lead readers to conclude incorrectly that the governor and legislators don’t have authority over much spending. Some of the comments are non-controversial but some incorrectly imply a lack of authority over statutory spending, some are imprecise about funding sources, and some are striking in their omissions.

In 2013, then-Lieutenant-Governor Gavin Newsom published a book entitled “Citizenville” in which he argued for a government that kept pace with changes elsewhere in society. Asserting that “we must inject a more innovative, entrepreneurial mind-set into government,” Mr. Newsom wrote that “we simply cannot have a government that relies on bureaucracy and maintaining the status quo.” I hoped his vision would be realized. But a decade later, half of which Mr. Newsom has presided over as governor, California’s bureaucracy is bigger than ever, residents would be hard-pressed to point to a single innovation, and the status quo is still the status quo.

General Fund Expenditures Per Capita have climbed 63.9% since Governor Newsom took office, growing at more than twice the annual rate at which those expenditures grew under Governor Brown (10.4% vs. 4.7%):

Last Wednesday, the Commerce Department reported U.S. GDP grew at a 5.2% clip in the third quarter. The next day, Governor Newsom told a debate audience that the economy is “booming.” But Friday, California’s Legislative Analyst’s Office said that state tax revenues are falling far short of forecasts. When combined with General Fund spending that has grown more than 50 percent over the last five years, the drop in revenues portends another large budget deficit for California.

Dear Legislators,

This week the Biden Administration announced that personal income rose 0.4% in April, consumers increased spending sharply, U.S. economic activity is at its highest pace in more than a year, and the unemployment rate is at an envious 3.4 percent.

Yesterday the Legislative Analyst’s Office (LAO) released its Multiyear Budget Outlook through fiscal year 2026-27, forecasting $52 billion of deficits over that period.

We couldn’t agree more with Legislative Analyst Gabe Petek that it’s best to solve the deficit without using reserves, which are already woefully short of the amounts needed to protect essential services in the event of a recession.

The Legislative Analyst’s Office (LAO) has forecast a budget shortfall of $25 billion for Fiscal 2023-24 even if a recession does not occur.

We scratched our heads Friday when — despite a steep fall-off in the stock market and a first quarter contraction of the US economy — we learned the May Revision of the Governor’s Proposed Budget expects rosy tax revenues for the 2022-23 fiscal year commencing July 1. After reading the document, we learned how that happened:

Earlier this week DOF released the Governor’s Proposed Budget for the fiscal year starting July 1. At 400 pages it takes time, a process we have now completed. Some initial thoughts follow:

Tomorrow the CA Department of Finance will release the “Governor’s Proposed Budget” for the 2022-23 fiscal year that commences July 1. At nearly 300 pages, it is one of two documents providing deep insight into the state government.* I’ve been reading them for nearly two decades now and offer a few tips:

In January, the 2022-23 Governor’s Budget will be made public, after which public hearings will commence, followed by public distribution of the May Revision to the Governor’s Budget and public enactment of the budget by June 30. Guess what’s not public during that period? Political donations from beneficiaries of budget spending.

Dear Legislators,

We enjoyed reading the Senate Budget Plan and Assembly Budget Blueprint for 2022-23. These items stood out to us:

Dear Legislators,

In January the Department Of Finance will issue the Governor’s Budget for 2022-23. No section will be more important than the Stress Test, which forecasts revenue losses in the event of a stock market decline such as in 2001-3 and 2008-9.

Dear Legislators,

The Legislative Analyst’s Office is filled with talented people who occasionally take on impossible tasks. Take LAO’s recent Fiscal Outlook for Schools in which it boldly predicts that “capital gains revenue [will be] strong in 2022‑23.” I can’t predict the stock market next week much less next year but unlike the state I’m not depending on it to finance schools that require stable annual funding. If I did, I’d keep loads of cash on hand. That’s because the annual performance of stock markets looks like this:

California needs at least $100 billion of reserves. Don’t take our word for it. See page 245 of the Governor’s Budget:

From January through June last year, the California Legislature held hearings about a proposed budget for the 2021-22 fiscal year that allocated the majority of $300 billion of spending to healthcare corporations and government employees who — during that very same period — made political donations to lawmakers that weren’t disclosed until July 31, a month after the budget had been signed into law.

In case you hadn’t noticed, we gave you a lengthy respite from our missives while the Legislature and Governor negotiated the budget for the fiscal year starting July 1. Through June 10 we had supplied legislators, you and reporters with several notes describing the need to dramatically boost budget reserves.

How its leaders plan to use the money says a lot about its politics

Recently California has been running a lottery to encourage vaccinations against covid-19. Those who have received their jabs can enter to win prizes, including holidays, gift cards and ten grand-prize cheques of $1.5m each. California has also recently won a windfall of its own. Instead of an expected $54bn budget deficit because of the covid-19-induced recession, a roaring stock market combined with a federal stimulus has produced a surplus of more than $100bn.

Wayne Morse was one of only two US Senators to vote against the Gulf of Tonkin Resolution in 1964 expanding military action in Vietnam. It takes guts to oppose party leadership. This week California saw similar courage when nearly a third of Democratic members of the California Legislature called for budget reserves greater than those proposed by the governor and legislative leadership.

If we are reading the laws about school reserves correctly, California’s K-12 schools are being set up for a fall of epic proportions unless schools or the state save much more from surging revenues.

Dear Legislators,

As you know, in nine days you must pass a budget. Based upon the Legislature’s Version of the State Budget submitted by Budget Committee chairs, as of now you are on track to make a big mistake.

Dear Legislators,

With your deliberations over the 2021-22 Budget, you are about to make a most consequential decision. Below is a chart of General Fund Revenues and Transfers from the beginning of the last decade. The blue columns are closed fiscal years. The green column is for the current fiscal year, which closes June 30. The yellow column is the amount projected by the Department of Finance for the next fiscal year, which starts July 1.

Dear Legislators,

The first sentence of LAO’s Multi-Year Budget Outlook published yesterday comes with an important disclaimer:

Dear Legislators,

The 2020 Budget Act you enacted 11 months ago forecast the S&P 500 to be at 2,060 in the first quarter of 2021. But because the S&P 500 closed the quarter at nearly twice that level and CA tax revenues are correlated with stock markets, revenues are way ahead of forecast. When it comes to revenue projections, no state flies more blindly than California.

Dear Legislators,

24 months ago, California’s Department of Finance forecast $151.8 billion of revenues in 2022-23 from the three largest sources:

Dear Legislators,

We have reviewed the May Revision to the Governor’s Proposed Budget for the 2021-22 fiscal year, which starts July 1. Our views are summarized below:

Several people have asked for our reactions to reports about the May Revised Budget. We won’t have a response until after we’ve read the official document to be released tomorrow. Meanwhile, two items should not come as a surprise to anyone familiar with California’s budgets. One is the projection of a large surplus, which reflects the tight relationship between capital gains and CA’s tax revenues. The other is the state’s anemic level of financial reserves, as demonstrated by the insufficient role they were able to play in solving the deficit a year ago when the state projected revenues to decline as a result of the pandemic. More than 80 percent of that solution had to come from cuts, borrowings, federal funds and other sources:

As usual, DOF’s latest Monthly Finance Bulletin is filled with data of relevance to your responsibilities:

We have a lot of friends in the CA State Senate but we take issue with their recent assessment that “a decade of responsible budgeting enabled California to endure the recession.” That isn’t factual. Here’s how the 2020–21 Budget they enacted last June closed a forecasted pandemic-related deficit…

The internet has made it easier than ever to access primary sources. Eg, the CA Department of Finance issues a Monthly Finance Bulletin that’s packed with valuable data, such as:

The California Department of Finance’s latest Monthly Finance Bulletin is out and as usual packed with valuable data, including:

The Governor’s Budget projects deficits down the road but that’s no reason not to enact worthy programs with savings from eliminating unworthy programs, and especially those contributing to the structural deficit to which Governor Newsom refers in his budget message.

As Congress debates the next Covid-19 relief package for state and local governments and schools, it should note that the Golden State is currently leaving billions of already-approved federal dollars on the table.

Dear Legislators,

Nearly half of San Diego’s $86 million budget deficit appears to be attributable to a failure to access federal and state dollars.

Every January, governors in California are required to propose a budget (“Governor’s Budget”) for the next fiscal year commencing July 1. Governor’s Budgets provide detailed views of state finances but also are a mixture of fiction, facts and Kabuki. The principal fiction takes the form of projected General Fund revenues, about which planners have little idea since ~70 percent are from personal income taxes significantly dependent upon unpredictable capital gains from a tiny number of taxpayers during a 12-month period that doesn’t even start for nearly six months.* Projected expenditures are more factual but only on a cash basis. The Kabuki is that Governor’s Budgets are just political starting points. The budget will be revised in May, after which the Legislature will have until June 15 to pass a final budget that must be enacted by June 30.

November General Fund tax revenues came in 30 percent above forecast. Through the first five months of the fiscal year, revenues now exceed forecast by $14 billion. Despite the pandemic, 2020 calendar year tax revenues are running ahead of 2019:

We can’t help but notice all the press about Governor Newsom’s acknowledged mistake in attending a dinner that didn’t meet state guidelines for gathering during COVID-19. We tend to be forgiving about such personal mistakes that have little to no bearing on the daily lives of Californians, which are much more affected by policy and performance.

October General Fund tax revenues came in 37 percent above the 2020–21 Budget Act forecast, according to the latest Finance Bulletin from the California Department of Finance. Revenues through the first four months of the current fiscal year now exceed forecast revenues by $11 billion.

The San Francisco Chronicle reports that S.F. DA Chesa Boudin says his department is understaffed and overwhelmed by caseloads. There’s a fix, as we illustrated last June. That fix would eliminate an unnecessary subsidy and free up $120 million. Boudin’s entire budget is $74 million. The most expensive group of beneficiaries of the subsidy are retired police. Several elected officials, including Vice President-elect Harris and State Senator Wiener, are entitled to the subsidy as a result of their service as employees. They don’t need it, especially after the creation of Covered California.

The internet has made it easier than ever to get to primary sources such as government budgets. That’s one reason we encourage members of the GFC Network to skip intermediaries and just go direct.

A recent article in the New York Times about election results in California included the following sentence (italics added by me): “A measure that would have raised taxes on commercial landlords to raise billions for a state that sorely needs revenue also seemed on track for defeat.” The reporters did not provide support for their assertion — which they expressed as a fact — that California “sorely needs revenue.” They should do so. Meanwhile, here are six potentially relevant facts (sources in parentheses).

Earlier today the State of California finally issued a Comprehensive Annual Financial Report for the June 30, 2019 fiscal year that ended 488 days ago, the last state to do so. The Securities and Exchange Commission requires big companies to file within 60 days. CAFR’s tell much more than government budgets; e.g., some California budgets have treated borrowings as revenues and ignored expenses through payment deferrals or debt issuances. Still, CAFRs aren’t perfect. Usually the pension and other post employment benefits (OPEB) liability measures in California’s CAFRs are from the prior fiscal year. If that’s also the case this year, that would mean those liability measures are from 853 days ago. Still, we’re glad to see the CAFR and eager to dive in.

Yesterday, LA’s City Administrative Officer announced the city’s budget deficit could reach $400 million to $600 million by the end of the current fiscal year.

To say we are disappointed in the 2020–21 budget passed on Friday by the State Legislature would be an understatement. It’s bad enough they did not use this moment to reform retirement spending that’s unnecessarily draining $25 billion per year from schools and state services and billions more from local services. Even worse was to include non-budgetary matters in the budget but leave off the table the elimination of Last In, First Out (LIFO) layoffs of teachers, especially for districts that struggle to recruit quality teachers.

Much less than meets the eye.

So far as we can tell, there’s much less than meets the eye to the side letter arrangements negotiated with CCPOA and SEIU in connection with furloughs. The CCPOA side letter agreement imposes a furlough day per month but a bit less than half of the savings is given back to employees via suspension of employee contributions to OPEB (Other Post Employment Benefits), and since OPEB is not being eliminated or reduced and thus the state is still on the hook for the future OPEB benefits to which the suspended contributions relate, the suspension of employee contributions is therefore a borrowing by the state, the interest cost on which equals the discount rate applied to OPEB obligations. The SEIU side letter agreementemploys the same sleight-of-hand with different parameters.

Unnecessary spending on retiree health care is crushing the Golden State.

California has asked Washington for $14 billion in Covid-related support, in addition to the $8 billion already provided by the CARES Act. But because the state, with an annual General Fund of $150 billion, incurs more than $24 billion of annual expenses for pensions and other post-employment benefits (OPEB)—including post-employment subsidies for health insurance—a big chunk of the federal disbursement won’t go to schools, hospitals, or roads.

Before running for office, US Senator Kamala Harris was employed for 13 years as an attorney by the counties of Alameda and San Francisco, which provide expensive insurance subsidies to retired employees such as herself. In the case of San Francisco during the years Ms. Harris worked there, those lifetime benefits extend to employees who worked only five years. Known as OPEB (Other Post Employment Benefits), the subsidies were rendered largely redundant after enactment of the Affordable Care Act and middle class subsidies by the State of California yet San Francisco continues to run an OPEB program that costs a fortune — SF spent $180 million last year — and the most expensive beneficiaries of which are public safety employees who can retire at age 50 with pensions equal to 90 percent of their final compensation.

To assist deficit-reduction deliberations, Govern For California commissioned an actuarial analysis of an alternative plan design for the City and County of San Francisco Postretirement Health Plan, which is an other postemployment benefit (“OPEB”) for retired city employees.

The California Legislature is considering $2.5 billion of cuts to child care, adult dental care, hospitals, parks, courts, social services and preschools. Instead, lawmakers should cut $2.5 billion of unnecessary insurance subsidies for retired state employees. 

Teachers working for the San Francisco Unified School District could be paid more if the school district took advantage of federal and state subsidies. The district incurs annual expense of more than $70 million — more than $15,000 per active teacher — to provide unnecessary health insurance subsidies to retired employees. The district pays that expense with a combination of cash and debt, which is how the district has accumulated more than $700 million of extra debt. The subsidies are known as “OPEB” (“Other Post Employment Benefits”) and are provided on top of pension benefits.

Earlier this month Sacramento City Unified School District authorized 11 teacher layoffs to help address a $27 million deficit. But those layoffs are unnecessary. SCUSD should lay off an unnecessary expense instead.

Some of you have asked for an estimate of the savings California could realize from reforming OPEB (Other Post-Employment Benefits) subsidies of retired employee health insurance.

1. You have the power to change OPEB. See page 136 of the state’s Comprehensive Annual Financial Report:

The City of San Francisco spends more than $400 million per year — 14x the city’s spending on Children, Youth and Their Families, 4x Recreation and Parks, and 2x Homelessness and Supportive Housing — to unnecessarily subsidize health insurance for retired city employees. Referred to as “OPEB” (“Other Post Employment Benefits”), SF’s OPEB subsidies are multiples of those provided by cities in adjoining states:

Having served in California’s state government during two difficult budget periods (2003–4 and 2009–10) and on the Volcker-Ravitch State Budget Crisis Task Force in 2012, I have participated in and studied many bad and good state budget practices. Some takeaways:

Governor Newsom’s Revised Budget proposes cuts to programs in the event more federal COVID funds are not provided. We propose a solution that would free the 10 programs below and improve the state’s structural deficit without jeopardizing the financial security of retired state employees.

Many of you have asked for our view of Governor Newsom’s request for $14 billion of additional federal support.

Recently California joined with Colorado in asking the federal government for more COVID-related financial support for states but the two states have very different needs for the money.

Last year the University of California spent $1.3 billion unnecessarily to subsidize health insurance for retired employees (dollars in millions)…

School budgets will be a big issue facing legislators upon their return to Sacramento.

Yesterday, Los Angeles Mayor Eric Garcetti warned of employee furloughs to help meet an anticipated $600 million revenue shortfall. Before LA furloughs workers providing important services, the city should save up to $300 million per year by emulating the City of Glendale in reforming and means-testing a subsidy currently provided to retired employees.

The Washington Post’s masthead reads “Democracy Dies in Darkness” but sometimes democracy dies in plain sight in Sacramento, where unverified assertions are often employed to justify billions in spending, cover up accounting frauds, shift blame for undue political influence, and more.

Last Friday, Governor Newsom released a budget proposal for the next fiscal year for the legislature’s consideration. Our comments on the principal spending items of interest to the GFC Network are below…

California’s constitution requires the governor to submit a proposed budget (the “Governor’s Budget”) for the next fiscal year to the state legislature by January 10. The Governor’s Budget sets the table for discussions with the legislature, which must pass a budget by June 15, and is must-reading for anyone who wants to dive deep into California’s governance, as is a review of past budgets that may be accessed here. Such a review would disclose a number of interesting items…

Further to our recent opinion piece about state and local government accounting, a reader asked for an illustration of a state budget ignoring costs. California’s treatment of insurance subsidies provided to retired state employees (known as “Other Post-Employment Benefits,” or “OPEB”) provides one such illustration.

Imagine your business could treat borrowings as revenues, avoid cost recognition by not paying expenses and report less debt than actually owed.

Fortunately, accounting for private-sector enterprises doesn’t enable such activities. But accounting for state and local governments does, and with big consequences.

Here’s one way we look at General Fund spending in the context of what the legislature can and cannot do…

Today the legislature passed AB 74, the state budget for the 2019–20 fiscal year, which starts July 1. Governor Newsom is expected to sign it. Here’s our summary view.

Last week Governor Gavin Newsom released the “May Revision” to the 2019–20 budget he initially proposed in January. The May Revision kicks off negotiation with the legislature over the budget for the next fiscal year, which commences July 1.

Last year, in his final budget as governor, Jerry Brown proudly proclaimed a new policy to encourage the state’s 114 community colleges to pay more attention to how their students are faring.

Proposals to increase federal taxes are very much in the national news lately. Some of the proposals are designed to expand programs but many are about income or wealth redistribution. In contrast, tax increases at the state level of government are usually about expanding programs or addressing deficits. That’s because states provide ~90 percent of domestic government services and have balanced budget requirements while the federal government provides few services and isn’t required to balance its budget.

If I had one wish for 2019 it would be that journalists and elected officials cite original sources of information about K-12 spending in California, a subject about which far too many too often cite unauthoritative sources.

The Democratic Caucus in the California State Assembly has published a video praising the 2018–19 state budget and in particular the $16 billion in reserves the state now has set aside in preparation for the next downturn in state revenues. That praise is well deserved.

Yesterday my political party (Democratic) incorrectly tweeted that California was “paying down debt.” Nothing could be further from the truth.

One giant leap for the next generation.

Earlier this year the City of Palo Alto’s Finance Committee hired an independent actuary to produce a budget scenario reflecting a more realistic return on pension assets than the unrealistically-high return assumed by CalPERS, the city’s pension fund manager. As explained here, unrealistically-high assumed rates of return allow governments to artificially suppress upfront (“Normal”) pension costs for current services at the expense of larger costs for citizens down the road who didn’t receive the benefit of those services. The independent actuary reported that a realistic assessment of Palo Alto’s Normal Cost is $8 million higher than CalPERS’s assessment.

Most everyone knows the names of the two people vying to be California’s next governor. Hardly anyone knows the names of the two people who more than anyone else will affect the success or failure of the next governor.

On May 11 California Governor Jerry Brown released the May Revision to his proposed budget for the next fiscal year, which starts July 1. It’s a must-read for anyone who wants to understand California’s budgets.

Lunch isn’t free.

California’s General Fund operates like a waterfall. Programs protected by constitution (principally K-12, community colleges, and debt service on General Obligation Bonds), statute (principally Medi-Cal, the state single-payer health insurer for low-income Californians) and contract (principally pensions and subsidies for retired employee health insurance) get first dibs on tax revenues. Only after those programs are satisfied do funds become available for unprotected programs such as UC, CSU and courts.

Gov. Jerry Brown’s revised budget for 2018-19 predicts general fund revenues will be 30 percent greater than 10 years ago yet key services will receive less money than they did back then.

Retirees subsidized at expense of active teachers.

School funding in California is at record levels…

General Fund tax revenues in Governor Jerry Brown’s proposed budget for 2018–19 are expected to be 32 percent higher than ten years ago yet the same budget proposes only 9 percent more spending for California State University than ten years ago.

Agonizingly slow progress in fast changing times.

In 1968 Latino students walked out of public high schools in East Los Angeles in protest of unequal educational conditions. 50 years later what has changed? CA’s Latino graduation rate has improved but unequal conditions and poor educational outcomes persist and graduating students are often unprepared for college. That’s in significant part because billions of dollars are being diverted from classrooms, too many under-performing teachers are spared from dismissal, and pay and support isn’t differentiated for teachers in high poverty schools.

California’s largest health care system is a state-run single-payer system (“Medi-Cal”) that covers the state’s 13 million poorest residents, a population greater than all but four states. Service is terrible. Despite spending of $100 billion per year, appointments are hard to get, emergency room visits are up, there’s little indication of greater healthiness, and there’s even evidence than uninsured patients do better in some cases. Yet the California Legislature has not seriously tried to fix it. Indeed, in a twist worthy of parody by George Orwell, a Select Committee in the legislature recently proposed changes to other and even better-performing parts of the health care system but, with a single exception, not to Medi-Cal! Meanwhile, all that unproductive Medi-Cal spending is also crowding out funding for the needy, courts, parks, the University of California and California State University.

San Francisco has a $10 billion budget yet — until now — the only professional financial analysts covering the city have been rating agencies like Moody’s. But because rating agencies care only about San Francisco’s ability to service debt, the payment of which is senior to public services, that means no one has been looking out for the public.

City takes two steps towards transparency.

On February 26 the Palo Alto City Council voted 9–0 in favor of a proposal to uncloak negotiations with the city’s public employees. The next step is to meet and confer with public employee unions, which is required under current state law. (You read that right. As explained here, under current state law the taxpayers of Palo Alto are not permitted to observe negotiations about their largest expenditures without the consent of the recipients of those expenditures.) Stay tuned.

Schools are open but shelves are barren.

Everyone can see the federal shutdown is reducing some public services but California legislators are turning a blind eye to their state’s own shutdown. Public schools in Los Angeles, Oakland, San Francisco, San Diego, San Jose and other urban centers are providing just a fraction of full services, resulting in understaffed classrooms, underpaid teachers, and fewer arts, science, math, and other classroom offerings. One result is that the poor and minority students that make up a large share of those urban districts underperform poor and minority students in other states that spend much less per student.

But California needs 500 percent.

Governor Jerry Brown’s 2018–19 budget proposal prudently calls for filling the state’s Rainy Day Fund to its constitutional capacity of $13.5 billion. Doing so will “soften the magnitude and length” of budget cuts occasioned by the next recession, of which Brown reminds us there have been ten since World War II.

Actions speak louder than tweets.

Today California legislators are tweeting quotations from Martin Luther King. They should compare the objectives expressed in their tweets with the state of affairs for their constituents, starting with the six million children in California public schools and the 14 million customers of the state’s single-payer health care system.

LBJ, Trump and Nancy Skinner.

Viewers of Steven Spielberg’s new film The Post are being reminded of the murderous lies told by the Johnson Administration as it ramped up the war in Viet Nam. While today’s media is more capable of catching lies as they occur, most focus on high profile deceivers like Donald Trump. But deception isn’t limited to the Oval Office. There’s plenty in Sacramento too.

Five pro-citizen issues should be on the agenda when the California Legislature reconvenes tomorrow…

On January 10 Governor Jerry Brown will present his proposed budget for the 2018–19 fiscal year. That budget will not reflect financial reality. That’s because state and local governments operate under accounting rules that enable untruthful financial reporting. For example, Brown’s last proposed budget in January 2017 ignored expenses of $16 billion, as explained here, here, here and here. Those unreported expenses magically became debt, none of which was presented to citizens for their approval.