Brother, Can you Save a Dime?
While California has seen a surge in new revenue, now is not the time to overspend on new or expanded programs. The reason: California’s state revenues are notoriously volatile. Historically, revenues rise quickly in California during good times and fall severely during bad times.
California’s coffers are flush now, with much of the General Fund revenue—$70 billion or 66% of total General Fund revenues—coming from the state’s highly progressive personal income tax. Of that amount, $10.5 billion or 10% of total General Fund revenues is from one of the most volatile tax sources—capital gains. If we have learned anything from the past two decades it’s that the Legislature cannot rely upon rosy revenue projections of temporary boons to fuel massive spending hikes, as another recession and another revenue crash is always looming around the corner.