Capitol Alert

Jerry Brown’s new budget plan freezes UC tuition, offers new tax credit for poor

Gov. Jerry Brown unveils his revised budget on Thursday. It includes $6.7 billion more in revenue than his earlier spending plan.
Gov. Jerry Brown unveils his revised budget on Thursday. It includes $6.7 billion more in revenue than his earlier spending plan.

Gov. Jerry Brown presented a revised $115.3 billion general fund spending plan Thursday that includes hundreds of millions in additional money for the University of California in return for a tuition freeze on in-state students.

The pact between Brown and UC leaders announced Thursday follows a months-long standoff with UC President Janet Napolitano after the system approved plans to raise tuition. The pact, if approved by lawmakers, would increase UC’s base funding by 4 percent for each of the next four years as well as provide a one-time infusion of $436 million over three years to help pay down UC’s pension obligations.

Tuition for California resident students would be capped for two years while nonresident supplemental tuition would increase by up to 8 percent annually, under the terms of the deal announced just as Brown released his revised budget. UC also agreed to offer new employees after July 2016 a pension choice: Accept a defined contribution plan or a defined benefit plan capped at $117,000 per year. The current cap is $265,000.

“Now the University of California will turn to our state legislators for their much-needed support of the proposed budget and for funding to enroll more California students,” Napolitano said in a statement.

Compared to Brown’s January blueprint, Thursday’s revision reflects $6.7 billion in additional revenue through June 2016. Almost all of the money will go toward the constitutional funding guarantee for schools and community colleges.

But seeking to blunt months of criticism from liberal Democrats and social service advocates that Brown’s January proposal did too little to help the state’s millions of poor residents, Thursday’s plan calls for the creation of a state version of the federal earned income tax credit meant to assist low-income workers.

In addition, the revision steers $3.4 billion through June 2016 to a rainy day reserve and debt repayment fund approved by voters last November. The UC pension payment would come from the debt repayment fund.

Brown said the revised blueprint recognizes the state’s vastly improved fiscal condition, but said he refuses to commit to the type of ongoing spending commitments that plunged the state into red ink during the Great Recession.

“I don’t want to get caught in the jaws of the persistent fiscal instability of the state government of California,” Brown said. “The idea that when you get a little money, or a lot of money, for a few years that now you’ve reached Utopia is so demonstrably false as evidenced by the last 12 years.

“We have to learn from history and not keep repeating the mistakes,” he said.

Assembly Speaker Toni Atkins, D-San Diego, said in a statement that Brown’s plan “makes significant progress” on Assembly Democrats’ budget priorities. But she poured cold water on the governor’s deal with UC, saying an Assembly review of UC’s finances makes clear “further actions are necessary to ensure UC returns to a model that puts California students first and that more effectively uses the resources the state provides.”

The next spending plan also should include more money for the California State University system, “which has taken a more responsible approach to student fees,” the speaker said.

The Democratic governor’s plan generally drew compliments from Republicans. State Sen. Jim Nielsen, R-Gerber, the top Republican on the Senate budget committee, said Brown’s proposal “exceeded my expectations.” Nielsen said he agrees with Brown’s proposal to tap the debt repayment fund for the UC pension obligation payments.

“It’s a shot across the bow to the majority party. We don’t want a spending spree,” Nielsen said of legislative Democrats.

In a statement, Senate President Pro Tem Kevin de Leon, D-Los Angeles, said little about the proposed pact with UC. More needs to be done to help poor residents of California, he said, as well as the CSU system.

The proposed state earned income tax credit would benefit about 825,000 families at a cost to the state of about $380 million annually.

“It’s a straight deliverance of funding to people who are working very hard and earning very little money. In that sense I think it does a lot of very good things,” Brown said.

Sen. John Moorlach, R-Costa Mesa, who sits on the Senate budget committee, said he has concerns about such targeted tax credits. “I’m getting really nervous about how many credits we’re giving. It seems to be sort of a candy store deal around here,” he said.

The budget revision will open weeks of negotiations at the Capitol before adoption of a spending plan in June. The Democratic-controlled Legislature is expected to push Brown for additional spending. Among other measures, Democrats have advanced proposals to increase funding for child care, family leave and welfare.

Overall, Thursday’s revised plan contains $169 billion in total state spending, up from $164.7 billion in January. The total includes $46.9 billion in special funds and $6.8 billion in bond funds.

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