Can California celebrate a revenue turnaround?

California's debt is shrinking, for now, thanks to voters who approved a tax hike and a growing economy.

With all the gloomy talk of fiscal cliffs and man-eating federal deficits, we wanted to take a moment to soak up a bit of fiscal good news that's come out of California this week. Yes, it's loaded with lots of caveats and cautious, don't-count-your-chicks-before-they-hatch language. But for the first time (!) in more than a decade, the state is projecting budget surpluses in the not too distant future.

And it’s about time. Because -- and I say this as a proud Californian -- over the past few years, this place has gotten fiscally embarrassing. We’ve become the butt of jokes and fodder for “How broke is California?” schtick on national T.V. 

Like the one courtesy of Jay Leno and Arsenio Hall a few months ago. My favorite part:

Leno: Why don’t you tell people how broke California is? We are $16 billion in debt.

Hall: The economy is so bad, wine country is now wine-in-a-box country.

California’s reputation had gotten so bad that even just random people were spending their valuable free time dissing the state’s budget woes in poorly recorded songs on youtube. Wait, you haven’t heard the chart-topper “Broke Ass California,” sung to the tune of The Eagles' “Hotel California,” posted by Wildeone47?

Well, Jay, Arsenio and Wildone47?  California’s been working on a snappy comeback for you. Let me quote from the annual report on California’s Fiscal Outlook report released this week by the non-partisan Legislative Analyst's Office. Ahem: "Assuming steady economic growth and restraint in augmenting current program funding levels, there's a strong possibliity of multibillion dollar operating surpluses within a few years."

OK, not quite as zingy.

“We're pretty dry-as-dust clerks out here,” admits Deputy Legislative Analyst Jason Sisney, who wrote the report. He says the projected surplus comes from three main things. California's slow but steady economic recovery. The state's already deep budget cuts over the last few years. And a set of temporary state tax hikes voted in last week, mostly on the wealthy.

Of course, there are caveats. The projected surplus could disappear if the nation goes over the fiscal cliff. Some economists worry the state’s new taxes could dampen the economic recovery. And Sisney warns if  lawmakers undo too many of those earlier cuts, “just as fast as things improve, they can change for the worse, too.” 

But I'm working on my "Just how rich is California?" jokes, just in case. I'm taking suggestions. If you've got one, please share  it in the comments.

About the author

Krissy Clark is the senior reporter for Marketplace’s Wealth & Poverty Desk.

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