What Newsom's First 100 Days Portend for His Future
Today marks California Gov. Gavin Newsom’s 100th day in office – an insignificant media-driven landmark for many an elected official, but for Newsom a window into what lies ahead for the 40th governor of the Golden State.
His short tenure has been long on big shiny objects. He’s addressed such thorny matters as California’s housing shortage, a dysfunctional capital-punishment process (Newson’s imposed a moratorium on the death penalty), how utilities pay for wildfires, plus a downscaled approach to a high-speed rail project that’s financially and schematically flawed.
And there’s been no shortage of grandiloquence.
The new governor has equated his job to a higher purpose in life. (“The choices we make will shape our future for decades,” Newsom pontificated in his inaugural State of the State address. “This is about the bond between us as human beings.”)
And he literally has gone out of his way – all the way to El Salvador – to trash the man whose job he covets. (“Right now you have a president that talks down to people, talks past them, demoralizing folks living here and their relatives in the United States,” Newsom told reporters during his first foreign trip as governor. “I think it’s important to let folks know that’s not our country – that’s an individual in our country who happens at this moment to be president.”)
For now, the question regarding Newsom isn’t what he’s done in the first 100 days. Rather, it’s how the first 100 hours of this week with affect the state’s fiscal health.
Mid-April is a time when California governors turn to antacids – the April 15 tax deadline providing proof of whether the state will have the revenue needed to slake its spending thirst.
In Newsom’s case, it’s a big bottle of Nexium. The $209 billion budget he introduced in January (California’s fiscal year begins in July) predicted $19.9 billion in April revenues. Three-fourths of that sum is anticipated from personal income taxes due earlier this week. For the next budget to stay on course, income tax net receipts of more than $3 billion had to have been received yesterday – as one reporter calculated, that meant more than $2 million every minute of the day.
What California’s governor presides over isn’t so much a fiscal house of cards as it a stacked revenue deck. Eight years ago, in the first year of Jerry Brown’s second stint as governor, 53% of the state’s general fund revenue came from personal income taxes. Today, its closer to 70% percent – with half of that revenue covered by just 1% of California’s taxpayer base that earns at least $500,000 annually (it pays a top marginal rate of 12.3%, plus an additional 1% charge on incomes over $1 million).
The result, fitting for a nation-state once governed by a former bodybuilder, is a barbell economy – extreme wealth on one end, limited income on the other (according to the state’s Legislative Analyst’s Office, households making $50,000 or less make up nearly 60% of tax filings but just 2% of revenue).
That strongman, of course, was Arnold Schwarzenegger, who ran the Golden State from 2003-2011. Like Newsom, the “Governator” trotted out an ambitious agenda. But Arnold quickly encountered a harsh reality: as a middle-of-the-road Republican, he had few natural allies in a State Legislature dominated by partisan extremes.
Schwarzenegger’s choice: bypass the legislative process by going straight to the voters. He did just that in a November 2005 special election, trying to convince the public to buy into a series of reform initiatives – capping spending, restricting teacher tenure, redrawing legislative districts, depoliticizing union dues. It proved to be too heavy of a weight: All of Arnold’s measures were soundly rejected.
Schwarzenegger regained his political footing, but it came at a price: He never again bet the house on initiatives; rather than do reformist end-runs around the Legislature, he sought get-along, go-along common ground with the Democratic majority (most prominently on climate change, to conservatives’ chagrin).
Nearly 15 years later, it’s Newsom’s turn to see how ballot initiatives may shape his future. At least three revenue measures could wind up on California’s November ballot next year: taxing commercial properties (revisiting 1978’s Proposition 13); taxing corporations with incomes exceeding $10 million (from 8.84% to 10.84%-14.84%); and taxing those Californians who make the mistake of dying (the state would collect 40% of estates worth more than $3.5 million, or $7 million for married couples, phasing out at the current federal exemptions of $11.4 million for individuals and $22.8 million for couples).
These revenue raids aren’t of Newsom’s making, but they do fit into his and his fellow Democrats’ plans for expanded government. The corporate hit, for example, would devote an estimated $5 billion annually to early childhood and other programs and educational programs. The estate tax, estimated to generate $500 million to $1 billion a year, would go to “programs and services that directly address and alleviate socio-economic inequality and build assets among people who have historically lacked them” (i.e., wealth redistribution).
Rolling the dice on initiatives as Schwarzenegger did may not be Newsom’s preferred style of governing. But should California’s economy slow down, it may be the governor’s best means of funding expansive government.
Nor is it the oddest aspect of this governor’s political existence – certainly not as odd as the notion of Newsom, for all the Trump-bashing, needing a second Trump term. Otherwise, Newsom will have to wait another eight years to seek the presidency (perhaps this has come up in conversations with his ex-wife, who’s dating Donald Trump Jr.).
It just goes to show: You don’t have to be a movie star to live a complicated California existence.