Gov. Jerry Brown’s $170.6 billion spending plan released Jan. 7 spreads plenty of money around, but comes with a warning: Another recession is coming, maybe not this year or next, but soon enough.
Legislators and lobby groups seeking larger slices of the budget – and they all want more – ought to pay attention. There will be a surplus in the 2016-17 fiscal year, but recessions hit on average every five years. A moderate recession could result in a deficit of between $29 billion and $43 billion, the Department of Finance estimates.
To head off the crisis that surely will come, Brown proposes to funnel another $2 billion into the rainy-day fund, raising it to $8 billion. And in his budget news conference, Brown blasted proposed initiatives by public employee unions to extend what supposedly was a temporary income tax surcharge, due to expire at the end of 2018. He said the proposals contained a “fatal flaw” in that they would abolish the requirement that the state maintain its rainy-day fund.
The governor’s shot across the bow didn’t go unnoticed. This week, tax-extension proponents re-wrote their initiative to include deposits into the rainy-day fund.
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The governor’s proposed budget offers increases for several social and health programs intended to help the poor. Monthly payments for aged, blind and disabled people would increase, and there’s a $130 million increase in spending to care for the developmentally disabled.
Brown provides enough so the California State University and University of California systems won’t raise tuition. Public schools would receive $71.6 billion from the $122 billion general fund, which is filled with revenue from income, sales and corporate taxes.
California would spend $10,591 per public school student in 2016-17. Not to be facile, but the state Department of Corrections and Rehabilitation would consume $10.5 billion, a $326 million increase from this fiscal year when the per-inmate cost was almost $64,000. It should be clear to all that prison reforms implemented by Brown (realignment) and approved by voters (Proposition 47) are not shaving costs.
Amid the plenty, weighty issues remain. The California State Teachers’ Retirement System has an unfunded liability of $72.7 billion that will take 30 years to pay down at the current pace. Public employee retiree health care will cost $2 billion in the coming year and has grown by 80 percent during the past decade.
Democrats, who control the Legislature, can approve the budget by a simple majority. But Republicans have clout because taxes require two-thirds votes.
Brown is pushing anew for a gasoline tax and vehicle fee hikes to repair long-neglected highways. He also proposes to use $500 million from the state’s cap-and-trade program by which polluters pay for their emissions, and save $100 million by streamlining Caltrans. Republicans probably will seek more from Caltrans, which has not been a model of efficiency for many years.
Republicans also must approve a revised version of the tax on health care plans. Otherwise, there will be cuts of about $1 billion on health spending. We urge Republicans to embrace it.
There’s enough to go around in 2016 and 2017. The trick will be to make sure there’s something left when the next downturn hits, as it surely will.