Brown’s budget: A carrot-and-stick approach for $139 billion in spending

Saying California’s chronic multi-billion dollar shortfalls are over for at least the next five years, Gov. Jerry Brown presented a $139 billion budget Thursday that increases spending for public schools by nearly $3 billion and for higher education by $600 million.


“California came through probably 15 years of great fiscal difficulties. Some of it by overspending. Some of it by tax reductions that we really couldn’t afford. And a lot of it by the Great Recession,” the governor said at a Capitol briefing.


Overall spending by Brown is $9 billion more than this year’s $130 billion.


But there are strings for those at the receiving end of the dollars. And one major suprise: Money intended for ‘green energy’ programs, as voters decreed in Proposition 39, is going to schools.


The third budget presented by the 74-year-old Democratic governor is the first in a decade in which tax revenues collected cover the state’s spending commitments. Although not by much.


Brown’s budget shows cash coming in exceeding checks going out by less than $900 million. He wants to add a $1 billion reserve, more than two-thirds of it generated by maintain a fee on hospitals and taxing managed care plans operating within Media-Cal, the state’s health care program for the poor.


“Right now, for the next four years, we’re talking about a balanced budget. We’re talking about living within our means. This is new. This is a breakthrough,” Brown said.


(Ed’s Note: For the official budget document, click here.)


Brown said that balance stems from  “tough cuts” and the willingness of Californians to temporarily increase their taxes by passing Proposition 30 in November.


Several economic risks imperil that balance, Brown said. Chief among them is the speed of the state’s economic recovery and actions by the federal government that could increase state costs, particularly in the area of health care.


Brown says those risk demand maintaining fiscal restraint.


“I accept and embrace my role of saying ‘no,’ “ he said. “Fiscal discipline is the fundamental predicate of democratic governance.”


Brown also cautioned: “The deficit is gone. The Wall of Debt remains.”


Borrowing by the state – more than $11 billion in deferred payments owed to public schools – to staunch the flow of red ink from the general fund totaled almost $35 billion in July 2011, Brown says.


It will be reduced to under $28 billion this year and, according to his spending plan, cut to $4.3 billion by June 30, 2017.


While Republicans praised Brown’s fiscal restraint, they complained that he wasn’t devoting as much new tax revenue from Proposition 30 to public schools as he pledged during the campaign.


“Funding for education in the governor’s budget is $2.7 billion higher than this year and Proposition 30 adds $7 billion in new revenue,” said Sen. Bill Emmerson, a Riverside Republican who is the vice-chair of the upper house’s Budget Committee.


In November, the Legislative Analyst predicted the state would face a $1.9 billion hole in the fiscal year beginning July 1.


Brown’s budget says California won’t – at least in his budget plan.


The chief causes for Brown’s budget not containing a projected shortfall is that he repays loans from other pots of state money used to balance the general fund more slowly than the analyst and anticipates collecting $560 million more from the elimination of redevelopment agencies two years ago than the analyst predicts.


Interest on state bond debt jumps from $4.9 billion to $5.8 billion, Brown’s budget says.


The nearly 18 percent increase is because fewer bonds were sold last year to accommodate the sale of $1.9 billion in bonds for commuter rail improvements slated for this year.


Voter approval of Proposition 39, which halts a tax break for large companies headquartered both in state and out, hands Brown $1 billion in new revenue, spread over two fiscal years.


The initiative requires that 50 percent of the money be spent on projects to conserve energy or expand the use of alternative energy sources.


Brown proposes to give all $450 million of Proposition 39 generated revenue to schools and community colleges in the next fiscal year – and for the four years following as well.


The money would be used so districts cane “reduce their current utility requirements and expand the use of renewable energy resources.”


Lowering utility costs will “assist schools and community colleges in recovering from budgetary reductions implemented over the past five years,” the budget summary says.


That $450 million earmarked for energy efficiency is part of the $2.7 billion increase for public schools Brown touts in his budget proposal.


Brown’s increased spending for the University of California and the California State University system is a good example of his approach to budgeting:


There’s new money but he wants it spent as he directs.


To help accomplish his agenda, he wields a verbal and financial carrot and stick.


His budget summary praises the two institutions saying “a quality, affordable system is critical to the future of the state.”


UC and CSU are rewarded. Spending would rise for UC by $279 million and $317 million for CSU, under Brown’s plan.


The Democratic governor even pledges to give UC and CSU another 5 percent increase the following fiscal year and 4 percent increases in the two years after that.


There are strings:


“All institutions will be expected to sue these increases to implement reforms that will make available the courses students need and help them progress through college efficiently, using technology to deliver quality education to grater numbers of students in high-demand course, improving course management and planning, using faculty more effectively and increasing use of summer sessions,” Brown says in his budget summary.


In a nutshell, he told reporters he would press UC regents and CSU trustees to “deploy your teaching resources more effectively.”


The Democratic said he would be attending upcoming regent meetings to make his case but said he would listen more than talk, noting his predilection for the former at a regents meeting in November.


Brown also spends money to implement several bills he signed into law last year.


Almost $1 million and two now jobs are proposed to cover the “start-up” costs of regulating the use of driverless – so-called “autonomous” — vehicles on California’s roads and highways.


Significantly more expensive is adding 82 new jobs and spending $153 million to implement changes in the state’s byzantine workers compensation insurance system wrought by Brown’s signature on a bill that says it will boost benefits to injured workers by some $860 million while lowering employer costs by $1 billion.


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