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2014 State of the State: A Boom or Bust Cautionary Tale?

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January 23, 2014

While briefly celebrating California’s “comeback” from years of severe financial instability and recession, Governor Jerry Brown delivered a tempered State of the State address this week that was peppered with strong calls for prudence and fiscal discipline.

On the bright side, the Governor applauded the high points of the state’s recovery: “A million new jobs since 2010, a budgetary surplus in the billions and a minimum wage rising to $10 and hour!” But he cautioned, “We are not out of the woods yet.”

Brown cited the monumental long-term debt that California is strapped with: “over $100 billion of pensions owed to state workers, teachers and judges; tens of billions needed to cover retiree health care; and $65 billion needed to maintain and keep our roads, buildings and other infrastructure in sound repair.”

Those things, and the unknown - future risks like natural disasters and the uncertain costs of the Affordable Care Act prompted Brown to warn lawmakers not to go back to the days of out-of–control spending.

“Boom and bust is our lot and we must follow the ancient advice, recounted in the book of Genesis, that Joseph gave to the Pharaoh: Put away your surplus during the years of great plenty so you will be ready for the lean years which are sure to follow,” he said. “Fiscal discipline is not the enemy of our democracy but its fundamental predicate. To avoid the mistakes of the past we must spend with great prudence and we must establish a solid rainy day fund.”

As in last year’s address, Brown spoke of the principle of subsidiarity, defining it as the idea that a “central authority should have a subsidiary function, performing only those tasks which cannot be performed effectively at a more immediate or local level.” He used the examples of the Local Control Funding Formula for California schools and also prison system’s “realignment,” programs as examples of subsidiarity successes.

The Governor discussed environment issues, including serious drought California now faces and the implications of climate change, which may bring about more extreme weather events in the future.

What Governor Brown failed to mention in his address is the fact that California has the worst poverty rates of any state, at 23 percent. And of the 50 states, California ranks 44th with one of the worst unemployment rates. 8.7 percent Californians are unemployed – but in some areas of the state that number skyrockets to 28 percent.

He closed his speech with hints of the human impact of a long suffering economy:

“Yes, California is a leader in so many ways. But, the dangers and difficulties we face can never be taken lightly. We still have too many struggling families, too much debt, and too many unknowns when it comes to our climate. Overcoming these challenges will test our vision, our discipline and our ability to persevere. But overcome them we will and as we do, we will build for the future, not steal from it.”