California could fare worse from economic collapse than from COVID-19 itself

At City Journal, Joel Kotkin looks at what California faces due to the economic impact of the COVID-19 lockdown, lack of spending restraint, and likely catastrophic revenue downturn.

Here is an excerpt:

The coronavirus-induced recession will make clear how tenuous California’s financial condition has become. The state’s much-touted $21 billion operating-budget surplus is likely to disappear entirely under the weight of declining revenues and rising welfare costs. Since March, California’s chronically underfunded unemployment-insurance claims grew by 1.6 million filers.

Coupled with a drop in revenues, expanding demand for services will prove catastrophic. More than two-thirds of California cities have no funds set aside for retiree health care and other retirement expenses; the budgets of 12 of the 15 largest cities are in the red. The state overall owes $1 trillion in pension debt, notes former Democratic state senator Joe Nation. Truth in Accounting in 2019 placed California, despite the tech boom, 42nd in fiscal health among the states.

Read the whole article!

Kotkin, the presidential fellow in urban futures at Chapman University, includes a clarion call for reform: “The current crisis presents an ideal time to readjust California’s regulatory environment, to the benefit of its citizens.”

My own 2¢: start by ditching AB 5.