Rising concerns over California’s estimated $68 billion deficit threaten to drown out voices for solutions. We champion problem solvers. Let’s not lose sight of the lifeboat looming on the horizon: a coming flood of nearly 180 billion federal dollars that can be channeled into local investments to keep vital community programs afloat.
Cuts to these education, job training, broadband, health care, child care, and other essential programs are almost certain at the state level from our current levels. Yet even if California’s total budget for the next fiscal year were reduced by $68 billion, the projected deficit would still be $30 billion higher than in 2018, according to data from the Legislative Analyst’s Office (LAO).
Policymakers would do well to rethink their approach to closing the gaps before more high-wage earners (who support California state revenues by paying higher income taxes) jump ship. We don’t necessarily need more money; our state budget has increased by nearly $100 billion since 2018. We need our leaders to champion financial sustainability.
We urge policymakers to maximize the money available by investing federal dollars in areas that prevent the state from having to fully fund key programs. Projects receiving state support should have a “stretch” target to ensure the money is allocated correctly, making them fiscally regenerative and sustainable. Investments must be one-off and the program must generate revenue to sustain itself without recurring government commitments.
Communities will need to decide the “how” based on what best suits their specific needs and policy needs. We believe there are solutions such as community development corporations, which can be a public-private partnership model in which for-profit subsidiaries make profits and then use those profits to provide community support.
Another area the BizFed Institute is involved in is the California Jobs First program. The CJF could be a pilot for the broader model we are considering for dual-purpose grant applications. We can get value for dollars invested while ensuring equitable community development and supporting our community organizations with recurring revenue, meeting investment goals and reducing long-term state funding needs.
Finally, our local private foundations can impact investors in such projects through innovative approaches to finding new funds to unlock these investments and provide sustainable returns. These examples show that a holistic, dual-bottom line approach is financially sound and benefits residents seeking a better quality of life.
Our leaders must act quickly as the pace of California’s exodus of top-paid workers accelerates, particularly in coastal metro areas. Census data reveals that a growing share of people moving to California are low-wage earners. It’s a new dynamic. California’s previous budget deficits have been partially offset by a steady influx of high-wage workers. Smooth sailing is impossible if we fail to adapt to changing winds and chart a new course.
We face a unique challenge and a pivotal moment for state leaders to modernize their budgeting approach. The next change of elected officials in the National Assembly and the Senate is unprecedented. We need new ideas and leaders willing to see things differently. Voters should demand innovative solutions and that their leaders take on these challenges as collaborative co-captains.
With the help of deeply connected umbrella organizations like the BizFed Institute, policymakers can partner with leading unions, businesses, community organizations, educational institutions, and private foundations to develop solutions durable.
Stephen Sachs is President of Sachs Management, Inc. and a member of the Board of Directors of the BizFed Institute. Kevin Harbor is president of the BizFed Institute.
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