State Budget

May 13, 2014

Jerry Brown urges budget restraint amid massive Medi-Cal expansion

Gov. Jerry Brown, moving to blunt calls for increased spending ahead of budget talks this spring, warned Tuesday that the state faces $1.2 billion in unanticipated costs from California’s vastly expanding roll of Medi-Cal recipients.

Gov. Jerry Brown, moving to blunt calls for increased spending ahead of budget talks this spring, warned Tuesday that the state faces $1.2 billion in unanticipated costs from California’s vastly expanding roll of Medi-Cal recipients.

The Democratic governor appealed for “restraint and prudence,” even as he released a budget revision that reflects $2.4 billion more than expected in revenue through June 2015.

Brown said much of the new money will be required to expand the state’s version of Medicaid to cover about 30 percent of California’s population. Officials estimated that 1.4 million more people are enrolling in Medi-Cal than projected earlier this year in the push to implement the federal health care overhaul.

“I’m proud we did it,” Brown said of the controversial program’s expansion in California, “but we have to also take into account that this thing is growing.”

The revised plan’s release marks the start of a rush of budget negotiations at the Capitol, with legislative Democrats and their liberal allies preparing to lobby the governor for more money for everything from in-home supportive services to transitional kindergarten and higher education.

Brown gave little ground in his revised budget, keeping largely intact a January plan that includes modest social service increases and billions of dollars to address long-term debt.

“There are many good ideas in health care, in schooling, the environment, prison reform, the court expansion,” Brown told reporters at the Capitol. “But we only have so much money.”

In his revised budget, Brown introduced a 30-year plan to pay off an unfunded liability estimated at $74.4 billion in the California State Teachers Retirement System. The plan would have the state, school districts and teachers all increase annual contributions, starting with about $450 million more in the first year.

Brown also proposed $142 million more in drought-related expenses than the $687 million he proposed in January. Courts would get $60 million more than the $100 million increase Brown included in his earlier plan. Responding to widespread complaints about the state’s botched handling of unemployment claims, Brown proposed adding $67.6 million – including $46.6 million from the general fund – for more staff and overtime at the Employment Development Department.

The administration said the money would mean all claims for unemployment benefits will be processed within three days, questions submitted online will be answered in five days, and 95 percent of eligibility determinations will be made “in a timely manner.”

“I’ve taken a middle path that invests in the important priorities, but creates a rainy-day fund, pays down current debts and long-term liabilities,” Brown said.

But Brown’s $156.2 billion spending plan left out many of his liberal allies’ priorities, most significantly a push by legislative Democrats to expand the state’s pre-kindergarten education program.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, and other lawmakers have proposed letting every 4-year-old in the state attend pre-kindergarten classes, at an estimated cost of nearly $1.5 billion by full implementation in 2019-20. Brown did not rule out signing a budget that includes money for the program, but he has expressed little enthusiasm about it. Referring to the program’s supporters, the governor said they believe the extra year of education would make everything “hunky dory.”

Steinberg was silent on the budget Tuesday, with his office saying he would comment today. In the lower house, Assembly Speaker Toni Atkins, D-San Diego, praised elements of Brown’s budget plan but said in a prepared statement that lawmakers will “look to expand opportunity” in areas of child poverty, higher education, transportation and affordable housing.

Frank Mecca, executive director of the County Welfare Directors Association of California, said the final budget agreement should include more funding for the state’s most vulnerable residents. One of the proposals his organization wants to see in the budget is money to provide more services to help sexually abused children, which would cost an estimated $18 million to $20 million in the first year.

“If we cannot provide for our most endangered children, but we have enough money for a large reserve, I’d suggest we haven’t done everything we need to do,” Mecca said.

The revised budget’s release follows the announcement last week that Brown and legislative leaders had reached agreement on a major component of the annual spending plan, a rainy-day fund measure that, if approved by voters, would set aside 1.5 percent of general fund revenue every year, plus revenue from capital-gains taxes in especially lucrative tax years.

The measure would replace a reserve measure already on the Nov. 4 ballot but criticized by public employee unions and, in recent weeks, by Republicans who acknowledged problems with its wording.

Tension between Brown and more liberal elements of his party over spending has been heightened by the rebounding economy and the state’s improving budget outlook. State Sen. Holly Mitchell, D-Los Angeles, said Brown’s budget does too little to help California’s children and its poor. With the economy improving, she said, “If not now, when?”

At a rally for in-home supportive service programs at the Capitol immediately after the budget revision’s release, Assemblywoman Lorena Gonzalez, D-San Diego, said, “I’m for the rainy-day fund, but we also have to spend some money, too.”

Brown has proposed reducing what he calls the “Wall of Debt,” or budgetary borrowing, by about $11 billion this year, and his revised plan includes $100 million to begin paying down another part of that debt: the more than $900 million-and-growing-with-interest the state owes counties, cities and special districts for the costs of complying with state laws from before 2004.

Under state law, that mandate debt is supposed to be paid off by 2021. But the state hasn’t paid anything in recent years.

Under Brown’s revised plan, counties would get 73 percent of the $100 million in the budget year beginning July 1, with cities getting 25 percent. The rest would go to special districts. The proposal leaves it up to local officials to decide how to spend the money, but the administration suggests it be used for public safety programs and to carry out the 2011 realignment of lower-level offenders to local responsibility.

Brown’s plan calls for paying off the rest of the mandate debt by June 2017.

The governor maintained one of the most controversial features of his January budget proposal – using money polluters pay to offset carbon emissions to prop up California’s high-speed rail project. Brown proposes using $250 million in cap-and-trade revenue to help finance the $68 billion rail project, while dedicating one-third of the fund’s revenue to the project in future years.

Some environmentalists have said money should be used for other projects, while the nonpartisan Legislative Analyst’s Office has raised legal questions about the funding shift.

Brown, who is running for re-election, traveled to Los Angeles and San Diego to promote the budget plan after releasing it in Sacramento.

His Republican opponents in the governor’s race, Tim Donnelly and Neel Kashkari, both criticized the budget proposal. But Brown has become a moderating force in the Democratic-controlled Legislature, and Republican leaders, though critical of Brown’s high-speed rail plan, were overall receptive to his budget proposal.

Assembly Republican leader Connie Conway of Tulare said the “toughest job” for Brown will be “his own party, and how they try to slice and dice” the budget plan.

Conway said, “Now the real games begin.”

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