Gov. Jerry Brown and legislative leaders reached agreement Monday on major elements of the state budget, including a compromise on Brown's controversial proposal to shift more money to poor and English-learning students.
The proposal, which had been criticized by wealthier, suburban school districts, gained leadership's support after Brown modified it to spread more money to school districts statewide.
In a major victory for Brown, Democratic leaders agreed to base the state's annual spending plan on the governor's relatively conservative economic forecast for the coming year. He proposed a $96.4 billion budget in May.
Legislative Democrats had urged about $2 billion more in spending on state services and programs after the state's nonpartisan legislative analyst projected higher tax revenues.
The agreement reached Monday includes commitments to spend more in the future on mental health services and college student aid priorities of Senate President Pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez, respectively as well as additional funding for California's welfare-to-work program, CalWORKs.
The additional funding, however, remains less than many Democrats hoped. Even as they accepted Brown's lower revenue estimate, Democratic lawmakers said they could call for additional spending in January if Brown's projections prove overly conservative.
"It doesn't close the door on anything," said Sen. Mark Leno, D-San Francisco, chairman of the Assembly and Senate joint budget conference committee.
In reaching an agreement on his school financing proposal, Brown is poised to achieve a school funding overhaul he has sought since campaigning for office in 2010. It will dramatically change how the state finances the education of more than 6 million schoolchildren, not only shifting money to disadvantaged students but eliminating most of California's categorical funds money that can be used for only certain purposes.
But the budget compromise appears to have required movement by Brown on the state's "wall of debt," the reduction of which he often has ballyhooed. The Democratic governor would reduce by about $650 million the amount of money he proposed last month to give schools to pay down debt owed under Proposition 98, California's school-funding guarantee.
"The Legislature is doing their job and doing it well," Brown said in a prepared statement. "It looks like California will get another balanced budget and, very importantly, educational funding that recognizes the different needs of California's students."
According to documents circulated by legislative leaders to school districts Monday, all districts would receive additional base revenue under the compromise, with per-pupil grants increasing by $537 above the sums proposed by Brown. Total funding for the education overhaul would increase by about $200 million next year under the compromise.
"The compromise provides additional funding for an 'economic recovery payment' to ensure that virtually all districts get back to their 2007-08 state funding levels, adjusted for inflation," the documents said.
Matching funding to the 2007-08 level is significant to districts because that was their highest funding year, prior to the state's budget crisis.
Under the compromise, districts would receive an additional 20 percent of their base grant for low-income and English language learners. Brown had proposed a 35 percent supplemental grant for such districts.
Districts also could qualify for more money if at least 55 percent of their students are poor or learning English. The threshold Brown previously proposed was 50 percent.
According to documents released to the districts, no district would receive less next year than it does currently. Implementation of the changes would be stretched out an additional year under the compromise plan to eight years, rather than seven.
"It's as much a good solution for school finance reform as it is a (good) political solution to get a number of districts on board that considered themselves losers" under Brown's plan, said Kevin Gordon, a longtime education lobbyist. "It's a good compromise."
It was unclear how willing rank-and-file Democrats would be to embrace the agreement, or how much wrangling might remain before budget votes in each house later this week.
Bob Blattner, an education lobbyist, said the formula would leave poor students in relatively wealthy districts with less funding than they might otherwise receive. He said the agreement is more an exercise in political compromise than education policy.
"As a budget item, it's not bad at all," Blattner said. "Unfortunately, it's also doubling as the biggest education policy bill of our generation, and it's extremely disappointing as that."
Legislative Democrats were poised in the budget agreement to receive about $206 million to improve mental health services, including about $142 million in one-time general fund money next year.
The budget compromise also calls for a partial restoration of Medi-Cal adult dental benefits, with $16.9 million in general fund money in the coming fiscal year and $77 million the following year.
Assemblyman Bob Blumenfield, D-Woodland Hills, said that in Medi-Cal funding and other service areas, "It may not be as much as we wanted but it is in the right direction."
Anthony Wright, director of Health Access California, a nonprofit advocacy group, said the compromise budget continues to provide too little funding for safety-net programs.
However, he said, "We're pleased about the dental restoration, however partial and delayed. It's a big relief to 3 million Californians who had their dental coverage cut."
In the Assembly, Pérez gained the administration's endorsement of a scholarship program to offset tuition and fees at public universities and community colleges by as much as 40 percent for students whose families earn less than $150,000. The program would not start until the 2014-15 fiscal year, with costs that year of $107 million and total costs capped at $305 million upon full implementation four years later.
The compromise also included about $51 million in non-general fund money in the coming budget year to bolster CalWORKs grants, increasing to about $150 million the following year.
The agreement appeared to resolve a conflict over the use of about $450 million in funding from Proposition 39, which changed the way multistate corporations are taxed, to finance energy efficiency projects in public schools.
Brown had proposed to distribute the money broadly to schools based on attendance, while Proposition 39 proponents had lobbied to distribute it on a competitive basis to schools in poor areas.
Sen. Kevin de León, D-Los Angeles, said in a prepared statement that the compromise involves a "poverty-weighted allotment" of Proposition 39 funds to each school district based on attendance, with the state requiring districts to apply for project funding and to demonstrate energy savings.
The budget deal followed weeks of negotiation between administration officials and legislative staff. Brown, Steinberg and Pérez met at least twice Monday before the budget committee hearing.
Last year, lawmakers sent the main budget bill to Brown on June 15, the constitutional deadline after which lawmakers would have forfeited pay.
Steinberg said as he left Brown's office that only insignificant issues remain to be resolved.
"This is so different than the last four years," Steinberg said. "And even though all budget negotiations are complex and difficult, I'd take this one eight days a week."
As the Assembly and Senate joint budget conference committee took up elements of the agreement Monday night, Sen. Bill Emmerson, R-Hemet, said the compromise is a better budget plan than either Assembly or Senate Democrats produced on their own. However, he said he was disappointed lawmakers were being asked to vote on items for which formal language has not yet been produced.
Call David Siders, Bee Capitol Bureau, (916) 321-1215. Follow him on Twitter @davidsiders.