News & Updates - Business Roundtable Responds to Governor Gavin Newsom’s May Revise

SACRAMENTO—Rob Lapsley, president of the California Business Roundtable, issued the following statement in response to the governor’s May Revision to the state budget, which was released today:

“The governor’s May Revise is both historic and ambitious in its overall revenues and spending. While the governor addresses important needs, especially in education, we believe that there are other areas that need further discussion with the Legislature before the budget is finalized in June.

“First, the May revise proposes to spend most of the current fund balance this fiscal year and to augment the projected $222 billion in revenues next year to fund all the governor’s proposals. As we are now facing massive inflationary pressures and increased economic uncertainties, we agree with the Legislative Analyst that the governor not draw down the state’s reserve funds to augment this year’s already historic budget.

“Second, we believe it is critically important to recognize the reality facing millions of working families and businesses throughout the state. While the governor provides temporary relief for permanent cost increases threatening to drive more working families into poverty and businesses out of the state due to the existing cost-of-living crisis, state agencies like the Air Resources Board are proposing to drive up the cost of gasoline and electricity and housing even higher. Surplus dollars can help soften those cost increases now, but when the economy slows, working families will be left paying bills they cannot afford. These upcoming policies need to be developed with the triggers and off-ramps that will protect working families and small businesses. While the budget focuses on temporary relief drawn from the state’s volatile budget surplus, the critically important need is to revisit the state policies contributing to these growing costs and instead provide more permanent answers to the state’s households and employers.

“Third, almost all states have now paid off their Unemployment Insurance Fund debt, with the latest results from the US Department of Labor show that an additional three states have done so in the last few weeks, leaving California—with 57 percent of the outstanding debt—as one of only six states still in arrears. The governor’s May Revise proposes $3 billion over two years towards debt reduction while there are legislative proposals to increase the debt reduction to $7.5 billion, which the statewide business community strongly supports. Keeping the UI Fund in a deficit status is not healthy for employees or employers, especially if we face an economic downturn in the near future.

“Lastly, the drought crisis demands action on more water storage. Our economy and way of life are not sustainable without it. We cannot conserve our way out of the crisis or keep food affordable without more storage. The decision yesterday by the coastal commission to kill a much-needed desalination plant in Orange County, which would have produced 50 million desalted gallons of water per day, clearly reinforces the need for a massive investment in storage that also includes the appropriate regulatory streamlining. To make this a top priority for California, the budget should include investments in additional water storage and incentives to ensure a safe, affordable and reliable water supply that can sustain future agriculture, housing and economic development. The state’s own climate programs have repeatedly warned about the risk of diminishing snowpack on state water systems that are designed for snow-related runoff rather than increased transitory and downstream storage to capture storm runoff.  Yet, those warnings have been ignored by a state water policy over the past several years that has had an over-reliance on water conservation in both good years and bad, reducing resiliency in the system and limiting the potential effectiveness of this measure now when it is needed the most.  While the budget proposes limited funds for water supplies, the May Revise surplus presents a one-time opportunity to make major improvements to the core water supply systems consistent with the state’s expectations for future water conditions, and ensure that this year’s looming water shortages do not become a recurrent issue. This approach would send a global message that California not only understands the challenges of climate change but is building the resiliency in our infrastructure to overcome it.”

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