Capitol Alert

Five things to watch for in Jerry Brown’s budget proposal

California Gov. Jerry Brown, waits to answers questions during a news conference where he announced a budget agreement last June. Brown will release his latest budget proposal Thursday.
California Gov. Jerry Brown, waits to answers questions during a news conference where he announced a budget agreement last June. Brown will release his latest budget proposal Thursday. rbyer@sacbee.com

Gov. Jerry Brown will release his budget proposal for the coming year Thursday, amid a strong state economy and fiscal experts’ predictions that tax revenue will continue to surpass estimates from last June.

If Brown’s past budget proposals are any clue, the Democratic governor will warn that it all could quickly go south.

The fourth-term governor’s spending plan is unlikely to include big new policy proposals. But there still will be areas that interests with a stake in state spending will be scrutinizing Thursday.

Here are five of them:

Revenue and reserves

The current budget approved last June essentially used the revenue assumptions in Brown’s revised May budget. Through December, though, personal income tax revenue – the largest source of money for the state general fund – was running about $1.3 billion higher, based on preliminary numbers by the nonpartisan Legislative Analyst’s Office.

Brown’s budget will include its own revenue estimates by his Department of Finance. Based on recent history, the administration’s numbers will be lower.

Revenue predictions will underpin negotiations on how much more the state can spend. They also will determine what lawmakers need to set aside in a voter-approved fund designed to pay down state debt as well as cushion against future drops in revenue.

How much will that be? In November, the analyst’s office estimated that lawmakers will need to put another $2.2 billion into the reserve for 2015-16, for a total of $5.9 billion. Brown’s proposal will include its own estimate for the reserve.

The environment

Fresh off his trip to international climate talks outside of Paris last month, Brown could seek to build on the momentum of the climate deal reached there to further efforts in his own state.

Brown has focused increasingly in recent months on a class of pollutants that, unlike carbon dioxide, remain in the atmosphere for a relatively short period of time. These pollutants, including methane, black carbon and fluorinated gases, are so potent that removing them from the atmosphere could significantly slow the pace of climate change, scientists say.

Methane has come to the forefront in California with a massive natural gas leak in Southern California. Brown, who visited with residents near the site this week, could propose additional funding for state efforts to curb methane emissions from dairies and other sources of so-called short-lived climate pollutants.

The budget also could address a holdover from last summer: deciding how to spend more than $1 billion in revenue from the state’s cap-and-trade program, in which polluters pay to offset carbon emissions.

Health care and social services

The administration, lawmakers and health plans continue to be deadlocked on Brown’s proposal to expand a tax on health plans to help generate about $1 billion for Medi-Cal.

Republican critics say the new tax would saddle millions of health plan customers with higher costs. But administration officials have warned that the lack of a replacement tax would force offsetting health care cuts in the governor’s budget.

Democrats and Republicans alike, though, have questioned the need for a revamped tax in light of predictions of higher-than-expected revenue. Still, any additional money for Medi-Cal would mean less would be available for other spending increases sought by lawmakers.

Advocates for the poor have continued to lobby Brown to scrap the state rule that caps maximum welfare grants for families.

Roads and highways

Last January, Brown called for additional transportation funding and convened a special legislative session to address California’s dilapidated roads. Days before lawmakers left town for the year, Brown proposed a mix of taxes, fees and cap-and-trade money that he said would generate about $3.6 billion annually.

But Republicans have vowed to reject any plan that includes a tax increase, and negotiations remain on idle.

Brown could use his budget proposal to outline a new path forward.

Schools and universities

Schools were big winners in last year’s spending plan. A combination of complex state budget laws, including California’s voter-approved school-funding guarantee, meant that almost all new revenue went to education.

Funding increases for schools likely will be less pronounced during the coming budget year. The analyst’s office recently estimated that schools’ minimum guarantee will grow by almost $3.6 billion, to about $71.5 billion in the next fiscal year.

Public universities also fared well in last June’s plan, which capped months of hard feelings between some lawmakers and the University of California after UC leaders voted to raise student fees unless the system got more money from the state.

UC adopted a budget last November that would increase resident enrollment by 10,000 students through mid-2019. By adding 5,000 students, the system will receive a $25 million incentive included in the current budget. UC will need more money from the state to pay for the remaining 5,000 slots over the next few years.

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