We must increase state budget reserves to head off recession

CONTRA COSTA COUNTY, CA — Following months of hearings, discussions and debates, my colleagues in the Legislature and I will work with Gov. Gavin Newsom this month to pass and finalize our state’s budget.

I’ve been working hard to ensure that we pass a budget that prioritizes both urgent concerns created by the COVID-19 health crisis and our long-term fiscal challenges.

The social and economic impacts of the pandemic have hit Californians – especially our most vulnerable – hard. Last year has reminded us all just how quickly our economic fortunes can change. This is why Assemblymember Tom Daly and I have authored a letter urging the governor to increase our budget reserves.

California’s state tax revenues are highly dependent upon gains from the sales of capital assets and compensation from stock grants, restricted stock units, stock options and bonus payments that the Governor’s Budget and the May Revision rightly characterize as “inherently unpredictable.”

Devastating recessions

When those resources dry up, they can do so in a big way. Too many families are still feeling the financial pain of the Dot-Com bubble burst in the early 2000s, which cost the state about $80 billion over three years, and more recently, the Great Recession, which cost the state about $115 billion over four years. These multi-year, devastating recessions proved to us that in the absence of sufficient reserves, the combination of volatile revenues from unpredictable sources is lethal to a budget that must provide predictable funding to public services.

California’s chief non-partisan financial analyst believes that the state will need $40 billion in savings to battle a moderate recession, and yet the governor currently only proposes $24 billion of reserves.

I’m proud that earlier this month 16 of my colleagues from across the state joined Daly and me in urging the governor to commit to our state’s long-term fiscal health and instead increase these reserves. Our schools, firefighters and local state health-care professionals are counting on us to be responsible stewards of state funds and to do all that we can to protect these critical programs from the draconian cuts of years past.

Protecting future generations

In order to safeguard the state from the volatility of Wall Street and keep future generations from being saddled with our debt, we must sufficiently save when we have the opportunity to do so. With the state’s multi-billion dollar surplus and the federal government providing $25 billion of one-time funds, there has never been a better time to save state revenues.

In addition to increasing our reserves, I’ve been outspoken about our need to use the budget to create jobs and revitalize our economy, support small businesses, address our housing and homelessness crises, and help organizations directly providing lifesaving services to those in need, such as family justice centers. It is my hope that we can use the budget to deliver real results and support for Californians and families across our state.

If you would like to learn more about my fiscal and budget priorities, or connect with me on matters that are important to you, please contact me at my Concord district office.

Reach Assemblyman Tim Grayson at (925) 521-1511. Visit or write the district office 2151 Salvio Street, Suite P, Concord, CA 94520