Gavin Newsom likes to use the power of government to manage life in California but when it comes to paying for the way government directs those changes he offered a dose of reality when he rejected a number of legislative bills that required money. Newsom wrote over and over in his veto messages that the issues raised by bills and the associated costs should be prioritized in the budget process. The most emphatic expression of that attitude was his veto of SB 5.

The bill by Senator Jim Beall would have moved $200 million a year in property tax revenue (gradually rising to $2 billion by 2029) away from education to help local governments fund affordable housing.

Cities liked the idea evidenced by the 102 cities that sent letters backing the bill. The cities were part of a broad coalition in support that included housing interests and labor, which expected to see a growth of jobs when governments funded the building projects.

Education groups, including the California Teachers Association, were opposed. They feared that education would be shorted funds during an economic downturn.

The state is required to backfill any property tax funding loss to schools. However, while amendments to the bill intended to hold schools harmless, in a recessionary period the mechanism would have required legislative action, which is not guaranteed.

Moving property taxes away from schools could have been another weapon in the coming war over property tax increases for education, but opponents of SB 5 saw the bill as a more immediate threat.

Other concerns on the bill included the issuance of debt when bonds were levied against the new money stream and the establishment of a new government affordable housing committee given the responsibility of approving or denying local agency plans for projects funded by the program.  Funding mechanisms are complex enough as is for citizens to follow.

There was hope that the senate bill carried a precedent away from the usual way of doing business in building projects that favor union construction but assembly amendments to the bill defined which projects receive exemptions from skilled-and-trained labor requirements.

The larger issue is Newsom’s concern with the budget. 

Homelessness and housing is the major issue on the minds of Californians according to recent polling. Furthermore, the governor pledged to confront the problem by leading the way to build 3.5 million new housing units in the state. Yet, economic reality and budget concerns were paramount for the governor and he vetoed the bill. With an economic downturn overdue, Newsom realized in his veto messages on SB 5 and other legislation that one thing government can’t do is veto the laws of economics.