Assembly Democrats presented a 2014 budget agenda Wednesday that calls for using billions in projected new revenue to pay down debt and build an $8 billion reserve by 2017, while also proposing spending increases for California schools, hospitals and other programs.
The caucus plan comes three weeks after the Legislature’s nonpartisan fiscal analyst projected multibillion-dollar surpluses through mid-2020, the most optimistic fiscal outlook for the state since the dot-com bust more than a decade ago set off years of chronic budget gaps. Influential groups representing schools, social services and others already have called for restoring recession-era spending cuts, while Gov. Jerry Brown has urged caution.
Speaking to reporters, Assembly Speaker John A. Pérez called Wednesday’s blueprint a “conceptual approach” that will be fleshed out in upcoming negotiations with Brown and the Senate. He declined to put a price tag on many of the blueprint’s “investments,” and said a proposed $2 billion reserve in June 2015 – far below the $5.6 billion surplus projected by the legislative analyst – is only a “baseline” figure that will likely change.
Assembly Democrats, he insisted, would not repeat the mistakes of the late 1990s and early 2000s, when lawmakers locked in billions of dollars in tax cuts and new spending, only to have to slash programs, raise taxes and approve various gimmicks to bridge subsequent shortfalls.
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“What we need to do is build in long-term stability, which is why the more appropriate and responsible thing is to take these spikes, look at them as one-time or short-term funds, and spend them accordingly,” Pérez said.
Assembly Democrats said they want to put a rainy-day fund constitutional amendment on the November 2014 ballot. It would limit overspending in good years and offset cuts in bad years. The goal is to build a $8 billion reserve by 2016-17, an amount that mirrors the legislative analyst’s projected surplus that year.
Other goals are to pay off budgetary borrowing and debts to schools known as deferrals. The plan also includes expanding programs to reduce recidivism among former prison inmates. And the caucus wants to target extra money for higher education and early education, such as expanding transitional kindergarten to include all 4-year-olds and having children up to 3 years old covered by early-care programs.
The plan seeks to resolve a years-long fight between the state and the health care industry over Medi-Cal reimbursement for hospitals. Lawmakers cut reimbursement rates by 10 percent and the state and hospitals have been fighting in court ever since. Assembly Democrats want to restore the money, about $400 million, over several years.
Assembly Democrats’ proposal comes as Brown’s office puts the finishing touches on his budget plan, which will be released early next month, the start of an election year. Assembly Democrats will try to hold their two-thirds super-majorities and Pérez is running for state controller, while Brown is expected to seek re-election.
Department of Finance spokesman H.D. Palmer said the governor’s plan would focus on paying off past budgetary borrowing and building up a large reserve. Palmer declined to address the merits of any of the spending increases included in Assembly Democrats’ plan.
“We view any increase in revenues with an abundance of caution,” Palmer said. “To the extent that we realize additional revenue above the budget act, a good portion of that will be capital gain, which is the most volatile source the state receives. Those numbers can swing.”