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PD Editorial: Temptations of a brighter budget picture

California tax revenue rises and falls like the tide, driven up and down by the gravitational force of the world's ninth-largest economy.

After several years stuck in a deep trough, the tax tide is swelling once again.

In January, revenue from income, corporate and sales taxes beat budget projections by $4.3 billion and topped last year's receipts by nearly $7 billion. It was the biggest January in a decade, according to the state controller's office.

One strong month doesn't make a windfall.

It is, however, consistent with numerous projections of a rosier fiscal outlook for the state, resulting from a recovering economy and temporary income and sales tax increases approved by voters in November.

What's harder to predict is whether state officials will resist the temptation to spend now without any thought about the next downturn.

In the not-too-distant past, budget surpluses became justification for costly new programs, most notably enhanced pensions for public employees, and hefty tax cuts, specifically the vehicle license fee.

Inevitably, the economy slowed and the revenue tide receded, yet pensions and other permanent spending commitments remained. When the "temporary" reduction of the vehicle license fee was rescinded, Gov. Gray Davis was recalled and the tax cut was restored.

Five years later, the economy collapsed, revenue tanked, and more people qualified for Medi-Cal and other public assistance programs. Many people sensibly asked why the state hadn't salted some of the surplus away for hard times.

With the tide rising again, it's time to revisit that question.


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