Jerry Brown proposes $170 billion budget that bolsters reserves, school spending

Gov. Jerry Brown unveiled a $170.6 billion state spending plan Thursday that reflects billions of dollars in new revenue, proposing that much of it go to K-12 schools, the developmentally disabled, and the blind, elderly and disabled.

But the fourth-term governor, who took office amid a recession that gutted state finances, highlighted the possibility of another economic downturn to refute calls for permanent spending increases. The budget includes several hundred million dollars in one-time spending and diverts several billion dollars into reserves.

“Everybody thinks when they’re up here, it’s all wonderful. That’s what they thought before the dot-com, and that’s what they thought before the mortgage meltdown,” Brown said, pointing to budget revenue charts. “And so here we are again.”

The spending plan formally opens months of budget negotiations at the Capitol, an annual exercise characterized in recent years by conflict between Brown and the more liberal, Democratic-controlled Legislature about how much money to spend on health and human service programs.

The budget would increase school spending to $10,591 per student, more than $3,600 higher than what it was at the tail end of the recession.

But he expressed reservations about a $9 billion bond measure to pay for school and community college facilities, suggesting he will seek intervention in the Legislature to develop an altnerative measure.

“It gives rich districts the same amount of money as poor districts,” he said. “It says, ‘Hey, if you’ve got your application ready, you’ll be first in line, and that will favor the more affluent and the more resourced districts. So I think you need some reform, and that’s another area to work with the legislature to come up, I think, with something far more reasonable.”

In addition, the current budget shifted $3.7 billion into the rainy-day reserve approved by voters in November 2014. Thursday’s plan would shift $2 billion more into the reserve, plus an equivalent amount for debt payments. That would increase the fund’s balance to $8 billion by June 2017.

The budget includes more than $80 million for the state’s network of regional centers, which arrange services for people with autism and other developmental disabilities.

In addition, the plan would increase payments for the blind, elderly and disabled from $889 per month for individuals to $906, and from $1,496 per month for couples to $1,527, effective in January 2017.

Brown re-introduced major proposals for which he failed to secure funding last year: A multi-billion plan to fund road repairs and a modified expansion of a tax on health plans to help generate about $1 billion for Medi-Cal.

An earlier health plan tax proposal from the administration foundered last year amid opposition from health plans and legislative Republicans opposed to tax increases. An existing tax expires June 30.

Brown said his new health plan tax would pull in $1 billion in federal matching dollars, as well as generating additional money to help pay for in-home care workers and programs for the developmentally disabled. It will require the votes of at least several Republican lawmakers, who are pushing for increases to developmentally disabled funding.

“I know it’s a heavy lift,” Brown said, adding later, “There’s no deal.”

Unlike last year’s health plan tax proposal – which would have hit the industry with several hundred million dollars in increased costs that likely would have been passed on to millions of Californians – the new proposal would net the industry $90 million, Director of Finance Director Michael Cohen told reporters. The proposal would offset corporate and gross premium taxes paid by the plans, he said.

The transportation proposal is expected to be in line with the mix of taxes, fees and cap-and-trade money that Brown proposed last year to generate about $3.6 billion annually for roads.

The governor’s proposal comes amid ongoing improvement in the state budget since the last recession, likely leaving Brown and lawmakers with more money to quibble over.

The nonpartisan Legislative Analyst’s Office projected in November that the state will end the current fiscal year, in June, with $7.9 billion in reserve, $3.3 billion more than lawmakers expected last year.

Though much of that surplus will go into a voter-approved reserve account, advocates for the poor have already urged the state to raise supplemental income payments to the elderly, blind and disabled. Supporters of developmentally disabled people want more money to restore recession-era cuts to programs affecting them.

In a pre-budget salvo earlier this week, Senate Democrats proposed a $2 billion bond to build homes for homeless people with mental illnesses and said they will push for $200 million in general fund revenue over four years to pay for rent subsidies for homeless people.

Since returning to office in 2011, Brown has largely resisted the most expensive social service program expansions legislative Democrats have proposed.

Anthony Wright, executive director of Health Access California, lamented Brown’s unwillingness to propose greater restorations to cuts made during the recession.

For many poor Californians, he said, “The California comeback doesn’t feel like it.”

This story was originally published January 7, 2016 at 12:06 PM with the headline "Jerry Brown proposes $170 billion budget that bolsters reserves, school spending."