California governor Jerry Brown has been taking a victory lap of sorts after putting forth a budget for fiscal year 2019 that would include a $6 billion surplus, a remarkable turnaround for a state that hemorrhaged red ink in the wake of the great recession.
Of course, much of that surplus arrived via a hefty tax increase, as well as a surfeit of revenue resulting from the stock market boom via capital gains taxes, so attributing this turnaround to fiscal probity might be taking things a bit far.
However, Governor Brown does get credit for at least temporarily righting what seemed to be a sinking ship. What’s more, he seems to realize that this surplus can easily disappear, and he has warned his potential successors to resist spending that surplus. What Brown is fully aware of is that even the most spectacular stock market increase is not enough to erase the state’s most pressing financial problem—namely, its underfunded government pension.
Currently, it has enough money set aside to cover just 68% of its future obligations—certainly far from the most indebted state (that would be my own state of Illinois), but still low enough to dismiss any notion that future stock market growth can remedy the problem.
Despite this, the California Public Employees Retirement System, or CalPERS, has put politics ahead of achieving a high rate of return by insisting that the boards of the companies it invests in adhere to various social and environmental practices.
It’s nonsense, of course, and it amounts to little more than an extension of politics into a realm that doesn’t have room for it.