Offering a brief glimpse of his new spending plan, Gov. Jerry Brown said Tuesday he will propose a "live-within-our-means" budget on Thursday that spends more money on higher education and K-12 schools in the next fiscal year.

"We're proposing increases in education at the higher level and in K through 12," Brown said at a news conference in which he rejected court-driven mandates to further cut the prison population. "If people think it's a better investment to divert that money to prisons, they can try. But I'm going to fight it.'

The nonpartisan Legislative Analyst's Office said in November that it expected California to boost spending on K-12 schools by $2 billion, or 3.7 percent, from $53.8 billion to $55.8 billion next fiscal year. Under current law, the state is also supposed to give each state university system a $125 million increase after passage of tax initiative Proposition 30.

The governor is expected to suggest that the additional K-12 money go toward reducing delayed payments to school districts, a form of borrowing via past accounting tricks. The governor gave a nod to that Tuesday, saying, "We've got to pay down the wall of debt."

Despite proposed increases in education spending, Brown suggested other areas of the state budget wouldn't be so fortunate, even naming areas such as state-subsidized child care and the court system, both of which have endured significant cuts since the recession. The state's court administrator said last month that Brown plans to cut the judicial system by $200 million in his January budget.

"Most people want to spend more money than the state has, and I will tell you 2013 is the year of fiscal discipline and living within our means," Brown said. "And I'm going to make sure that happens."

"By the way, living within our means means we don't get everything," Brown added. "People want to have more child care, they want to have more people locked up, they want to have more rehab, more, more, more. More judges, more courtrooms. We have to live within our means."

Brown still hopes to save money by restricting state tax credits in high-unemployment areas designated as enterprise zones. Two years ago, the governor wanted to eliminate the zones, the same way he targeted redevelopment agencies. The program is designed to spur employers to hire workers from distressed areas, but Brown has said it is subject to abuse.

The state spends an estimated $700 million annually on enterprise zone tax credits, according to the state Department of Housing and Community Development.

Brown's administration is drafting new regulations that would limit an employer's ability to claim tax credits for workers hired long ago, according to HCD spokesman Colin Parent. The rules could take effect by the next fiscal year.

While that would presumably reduce the $700 million spent on enterprise zones – and help the state's bottom line – Parent would not say Tuesday exactly how much the budget stands to benefit from curtailing "retroactive" tax credits.

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