01/13/2014 by Justin Ewers
Why the governor’s budget makes California Economic Summit even more important
Gov. Jerry Brown presents his 2014-2015 proposed budget last week. (Photo Credit: CalChannel)
There is a reason so much attention was paid last week to the Governor’s budget proposal—and it isn’t just because the state, after nearly a decade of struggling to pay its bills, is finally projecting multi-billion surpluses, a promising sign of a long-awaited economic recovery.
The truth is, the Governor’s proposed budget is one of the few times every year voters can find out what, exactly, the plan is. For most Californians, what happens the rest of the time in Sacramento is mysterious business—with thousands of bills introduced, months of horse-trading over matters great and small, and little sense of how The Big Issues, from paying for schools and maintaining public safety to protecting the environment, all fit together.
California Forward joined the partnership behind the California Economic Summit in 2012 partly out of a desire to change this state of affairs. For the last two years, the Summit has brought together regional leaders to craft a comprehensive approach for driving economic prosperity across California—and to make sure the state’s efforts do, in fact, fit together in ways that support all of the state’s regions.
This year’s budget proposal, with its $155 billion spending plan for taking on state challenges by paying down debt and making investments in education and infrastructure, represents an important down payment toward prosperity. It also offers an array of opportunities for engagement by those who want to keep their regions competitive—without sacrificing workers or the environment.
“The Governor’s proposals respond to many of the priorities regional leaders say are necessary to restore upward mobility and grow good-paying jobs,” Jim Mayer, president and CEO of California Forward, said this week.
What the budget and Summit plan have in common
These shared principles are readily apparent in a comparison of the budget with the Summit's own emerging prosperity strategy for the state, a seven-point plan that includes a range of creative approaches for advancing Californians' highest priorities—from finding new ways to pay for road repairs and build affordable housing to the complex task of training a 21st-century workforce and generating a new wave of manufacturing jobs in the state.
"We're heartened to see the Governor and Summit share so many of the same ideas. We are working to coordinate the hundreds of volunteer experts and advocates to move the best ideas forward," Mayer said. "In this way, the Summit is making critical connections between employers, civic leaders, and state and local officials. The Governor and the Legislature will play a critical role in driving investments in physical infrastructure and a skilled workforce, in particular."
How the Summit's seven-point plan aligns with proposals in the Governor's budget:
INFRASTRUCTURE: Ensuring the state's water and transportation systems have the capacity to handle a growing population remains one of the Economic Summit's top priorities. Perhaps more than any other initiative, the governor's infrastructure proposals largely echoes the Summit's own recommendations, with the administration and Summit both emphasizing the urgent need for investment. The budget aligns with three Summit proposals, in particular:
- Focus on results: As the Summit plan proposes, the budget calls for focusing the state's infrastructure investments on results. Specifically, the budget uses a recent "zero-base budget" review to propose a variety of ways to tie Caltrans programs more closely with program goals, including a plan to use a tool to develop more predictable budgets.
- Build confidence: The administration's 5-year infrastructure plan puts a number on how much it will cost to maintain the state's existing infrastructure assets in the coming years—$65 billion. And while it doesn't outline a strategy for closing the entire gap, the size of the target alone is an important first step in educating the public about the urgent need for infrastructure investment.
- Ensure adequate revenue: The budget echoes the Summit's calls for ensuring the infrastructure system has adequate revenue. It proposes a $1.7 boost to transportation spending, an $815 million funding package for deferred maintenance projects, and $100 million for a range of investments to support SB 375 sustainable communities strategies. The budget also includes a "water action plan" that would invest $619 million in expanding water storage and improving drinking water quality. In perhaps its biggest infrastructure proposal, it also suggests a replacement for the now-defunct local Redevelopment Agencies—detailing plans to provide more authority to an existing local investment mechanism, Infrastructure Financing Districts, to allow cities to raise money for local infrastructure projects.
WORKFORCE: To meet the demands of an evolving economy, the state needs to better prepare more skilled workers for high-priority, well-paying jobs. In 2012, the Summit focused on developing partnerships between existing workforce training programs and regional industry—supporting the passage of several key pieces of legislation and state actions that promoted these partnerships. This year, the Summit is focused on expanding career-technical education in high-demand fields—especially science, technology, engineering, and mathematics (STEM).
The governor's budget boosts to this effort, increasing investment in schools by $10 billion this year alone and setting aside additional funds to cover the costs of operating career-tech programs, in particular. After attending the Summit, Assemblymember Al Muratsuchi (D-Torrance) also committed to carry legislation to advance the Summit's ‘shared investment' approach to supporting career-tech programs.
ADVANCING MANUFACTURING: Though manufacturing has long been a cornerstone of the state's economy, California lacks a statewide strategy either for connecting large and small manufacturers with regional workforce pipelines—or for promoting exports and investments in fast-growing manufacturing sectors. The Summit plan proposes to do both, promoting a statewide campaign to raise awareness about manufacturing, while also seeking ways to make the state's regulations a competitive advantage for manufacturers.
Acknowledging that manufacturing is growing "at a slower rate" than other sectors, the budget outlines plans to administer a new sales tax exemption for manufacturing equipment purchases valued at up to $200 million per business—a tax incentive expected to boost the manufacturing sector more than the Enterprise Zone system it replaced last year.
REGULATIONS: California has a reputation as a complicated place to do business—with uncertainty about everything from the state's environmental rules to the process businesses must go through to get a permit. In 2012, the Summit focused on legislation (SB 617) requiring a regulatory impact analysis of major new regulations, while pushing for a statewide conversation about updating CEQA. To advance manufacturing and other growth industries, this year's Summit plan proposes working with the governor's office to review a small group of targeted regulations to look for opportunities to remove steps or better use technology for tracking.
The governor's proposed budget embraces SB 617, in particular, outlining the Department of Finance's new standards for reviewing proposed agency regulations—part of an effort to drive what the budget calls "a comprehensive discussion of the quantitative and qualitative costs and benefits of a regulation."
CAPITAL: To drive investment in local economies, businesses and entrepreneurs must have access to capital. In 2012, the Summit worked closely with the California Financial Opportunities Roundtable—a group of statewide leaders from financial institutions, economic development organizations, and government agencies—to produce an "Access to Capital" guidebook that serves as a one-stop resource for those seeking capital. This year, the Summit plan focused on the importance of identifying examples of capital intermediaries that can close gaps in access to capital in regions across California. The governor's budget does not make any specific proposals to support this activity.
WORKING LANDSCAPES: As California continues to grow—the state's population is expected to pass 50 million in the next thirty years—it will only become more important to develop sustainable approaches to managing the state's working landscapes, from farmland and ranches to forests and wetlands. The Summit has proposed a range of proposals to better manage, and regulate, this steady source of diverse jobs (from agriculture to energy production) and vital natural resources (including clear air and wildlife habitat).
The governor's budget would support this work in a variety of ways: It directs $100 million to the Strategic Growth Council for a range of investments in SB 375 sustainable communities strategies—including "agricultural land preservation." The budget's water plan also would invest more than $600 million in wetlands, flood control, and other areas critical to the state's working landscapes.
HOUSING: It costs a lot to own a home in California, and the state must take steps to ensure it has an adequate supply of housing to meet the needs of a growing workforce. The Summit plan proposes a variety of different approaches for making housing more accessible—from new financing tools and policy incentives to regulatory changes and zoning updates.
The budget does not provide a permanent source of funding for affordable housing—one of the Summit's goals—but it does support the development of affordable housing in a range of other ways, through its $100 million in sustainable communities plans, in particular, as well as its proposed replacement for Redevelopment Agencies, which would dramatically expand the types of projects cities can currently fund, including affordable housing.