Lezlie Sterling / lsterling@sacbee.com

Gov. Jerry Brown talks Thursday about his proposed budget, which calls for cuts and new revenue to bridge a projected $9.2 billion deficit through June 2013.

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Jerry Brown budget plan cuts welfare, threatens deeper cuts if taxes fail

Published: Friday, Jan. 6, 2012 - 12:00 am | Page 1A
Last Modified: Tuesday, Feb. 26, 2013 - 8:16 pm

Gov. Jerry Brown released a new budget Thursday that would slash health and welfare programs for the poor and ask voters to pump nearly $5 billion back into education through higher taxes.

Brown framed his $92.6 billion spending plan as an either-or decision dependent on his $6.9 billion initiative to increase taxes on sales and the state's high earners.

If voters approve his taxes, he suggested, the state could begin paying down years of debt and reverse recession-era cuts to K-12 schools, which have stuffed more students into classrooms and shortened the instructional calendar to save funds.

"With the tax program, we will eliminate the budget deficit finally, after years of kicking the can down the road," Brown said.

If voters reject his plan, schools may have to cut deeper and prolong a patchwork of borrowing to maintain operations.

For K-12 schools and community colleges, the tax measure would provide nearly $4.8 billion more than they received this fiscal year, roughly a 10 percent increase. Department of Finance Director Ana Matosantos suggested losing that money if voters reject taxes would be "equivalent to" cutting three weeks of school, though education experts believe such drastic measures would be unnecessary.

If the taxes fail, the governor proposed $200 million cuts each to the University of California and California State University systems, which have relied on substantial tuition hikes to offset state reductions in recent years.

Brown also suggested eye-opening ideas such as eliminating lifeguards at state beaches and cutting 1 in 5 state park rangers. Each of those cuts would save $1 million, a relatively small amount in a $92.6 billion general fund.

"This budget proposal is the largest ransom note in California political history," said Dan Schnur, director of the Jesse Unruh Institute of Politics at the University of Southern California and a former GOP strategist. "Brown is essentially telling voters to either support his initiative or there's going to be three fewer weeks of school next year.

"There's no guarantee of success, but this is probably the most politically viable course he could take to build support for the initiative."

Brown waved off suggestions that his plan was designed to curry favor among voters for his tax proposal. He suggested it was merely an arithmetic exercise.

"These numbers emanate from the bowels of the Finance Department bureaucracy, and as those emanations flow into the Governor's Office, then I get them," he said.

The Democratic governor scrambled Thursday to unveil his budget plan five days early after it was inadvertently posted on his Department of Finance website.

Even without his higher taxes through 2016, Brown described an improving fiscal landscape as the recovering economy provides more tax dollars and the state maintains cuts to higher education, health care and social services.

The Department of Finance estimated that the state faces a $9.2 billion deficit over the next 18 months, substantially less than the $26 billion gap he described last January and smaller than the $12.8 billion gap the nonpartisan Legislative Analyst's Office forecast in November.

Republicans criticized Brown for his tax hike plan, noting that the state deficit is already shrinking on its own as the economy recovers and tax revenues increase. Without higher taxes, Brown estimates the structural deficit would shrink to $1.9 billion in 2015-16, though that would mean continued borrowing and recession-level funding for public programs.

With or without the taxes, Brown asked lawmakers for $4.2 billion in cuts, including $946 million to welfare-to-work and $447 million to subsidized child care.

The welfare cut would save money in part by eliminating grants for parents who don't meet federal work requirements after 24 months, compared with 48 months now. The governor also called for a $71 family reduction – from $463 to $392 – in average monthly grants to children whose parents are no longer eligible for welfare-to-work.

Frank Mecca, executive director of the California Welfare Directors Association, said welfare recipients are struggling to find jobs in an economy with high unemployment.

"Twenty-four months isn't enough time, and there aren't enough jobs," Mecca said. "I mean, if we thought people could do it, we wouldn't be saving a billion dollars."

Brown also proposed saving $679 million by shifting 800,000 residents eligible for both Medi-Cal and Medicare into managed care medical plans. They currently rely on "fee-for-service" plans that give them more control over their medical providers.

Anthony Wright of Health Access California warned that the proposal affects patients with significant disabilities. He suggested the Brown plan would constrain their ability to see specialists necessary to treat their conditions.

Brown wants the Legislature to enact most of his budget cuts by March because it takes at least three months to install them.

But Democratic leaders have dismissed his call for early action. Given the trend of growing revenue, they do not want to make cuts now, only to find out that more money rolls in this spring when income taxes are paid.

"Why would we make cuts that are going to harm people and harm the economy in March when in fact in May there's a … probability that the deficit number is going to be less?" said Senate President Pro Tem Darrell Steinberg, D-Sacramento.

The school funding piece is the most convoluted, as usual in state budgeting.

If voters approve his tax measure, K-12 schools and community colleges would receive nearly $4.8 billion more than they do in the current fiscal year, for a total of $52.5 billion in state and local tax revenues.

Even without taxes, schools are owed about $2.4 billion more this year because of growth in state revenue and past promises made by state leaders. If the taxes fail, Brown proposes erasing that $2.4 billion for classrooms through an accounting maneuver that counts school bond debt payments toward what the state owes education. Two education lobbyists said that would be legally questionable.

It would leave K-12 districts with roughly the same amount they get this school year. But school advocates say they would have to borrow more money to keep programs at their current bare-bones level because of how the state delayed past payments.

Districts also face growing labor costs each year, while they have already cut school days, laid off teachers, delayed building maintenance and eliminated art and music programs to make ends meet.

The California State Association of Counties board voted today to drop a competing ballot initiative that would have asked voters to protect about $6 billion in annual state funding. The state sent counties a host of responsibilities last year, most notably incarcerating lower-level offenders. Brown's tax proposal would protect that money, and he asked them to step aside to avoid confusing voters.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Kevin Yamamura

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