Capitol Alert

Jerry Brown’s $171 billion budget proposal bolsters reserves, school spending

Jerry Brown on pot and guns

Gov. Jerry Brown offers a thought about marijuana and guns. (Video courtesy Cal Channel)
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Gov. Jerry Brown offers a thought about marijuana and guns. (Video courtesy Cal Channel)

Gov. Jerry Brown, issuing a $170.6 billion state spending plan Thursday, proposed billions of dollars in new funding for schools, climate change programs and services for the elderly and disabled.

But the fourth-term governor, who took office amid a crippling recession, repeatedly warned of the possibility of another economic downturn, rejecting calls for more robust spending increases. Brown also criticized ballot measures seeking to extend temporary tax increases he championed in 2012, faulting them for exempting revenue from Proposition 2, the budget reserve voters approved in 2014.

“That, in my judgment, is a fatal flaw,” he said.

That, in my judgment, is a fatal flaw.

Gov. Jerry Brown, on ballot measure proposals to extend Proposition 30 tax increases that skirt the rainy-day fund

The spending plan formally opens months of budget negotiations at the Capitol, an annual exercise characterized in recent years by conflict between Brown and the more liberal, Democratic-controlled Legislature about how much money to spend on health and human service programs.

Brown’s proposal would increase school spending to $10,591 per student, more than $3,600 more than at the tail end of the recession. But Brown expressed reservations about a $9 billion bond measure to pay for school and community college facilities, suggesting he will seek to negotiate an alternative with the Legislature.

The bond measure, Brown said, favors wealthy districts over poorer ones because “it says, ‘Hey, if you’ve got your application ready, you’ll be first in line,’ and that will favor the more affluent and the more resourced districts.”

The budget release serves as a reflection of the governor’s priorities, and Brown on Thursday reintroduced two major proposals for which he failed to secure funding last year: a multibillion-dollar plan to fund road repairs and a modified expansion of a tax on health plans to help generate about $1 billion for Medi-Cal.

Brown, a longtime champion of environmental causes, also proposed using cap-and-trade revenue – money polluters pay to offset carbon emissions – to fund programs to reduce petroleum use in motor vehicles. The proposal comes less than a month after Brown returned from international climate talks in Paris and revisits a legislative defeat Brown suffered on petroleum last year.

Gov. Jerry Brown unveiled his budget proposal Thursday. Republicans rejected his calls for tax increases, while Democrats wanted more social services spending. (Video clips courtesy CalChannel)

As part of a $3.1 billion spending plan for cap-and-trade, Brown proposed $1 billion to reduce emissions in the transportation sector, including funding for mass transit and incentives for zero-emission vehicles.

The road-repair package Brown offered Thursday is in line with the mix of taxes, fees and cap-and-trade money he previously proposed to generate about $3.6 billion annually for roads, including a $65-per-vehicle highway user fee.

But Brown overhauled his health plan tax after his initial effort stalled amid opposition from health plans and legislative Republicans opposed to tax increases. An existing tax expires June 30.

In an effort to win Republican votes and the support of health plans, Brown cast the tax plan Thursday as a net gain for the plans and promised increased funding for the developmentally disabled if it is approved.

Brown said his new health plan tax would draw $1 billion in federal matching dollars, while generating additional money to help pay for in-home care workers and other programs. Any increase, though, would require the votes of at least several Republican lawmakers.

“I know it’s a heavy lift,” Brown said, adding later, “There’s no deal.”

Unlike last year’s health plan tax proposal – which would have hit the industry with several hundred million dollars in increased costs that likely would have been passed on to millions of Californians – the new proposal would net the industry $90 million, Director of Finance Michael Cohen told reporters. The proposal would offset corporate and gross premium taxes paid by the health plans, he said.

The budget includes more than $80 million for the state’s network of regional centers, which arrange services for people with autism and other developmental disabilities, and would increase payments for the blind, elderly and disabled.

Assembly Speaker Toni Atkins, D-San Diego, called funding for people with developmental disabilities “one of the most critical needs we must address” and said the health plan tax “needs to be done now.”

“The community has waited long enough,” she said.

The governor’s proposal comes amid ongoing improvement in the state budget since the last recession, leaving Brown and lawmakers with more money to quibble over.

The nonpartisan Legislative Analyst’s Office projected in November that the state will end the current fiscal year in June with $7.9 billion in reserve, $3.3 billion more than lawmakers expected last year.

Brown included billions of dollars in one-time spending in his plan. State parks, which were starved for cash during the recession, would receive some of the $500 million set aside for parks, levees and other maintenance work at state public works around California. Schools would get a one-time increase of $1.2 billion to use however they want.

The budget is the second since California voters approved a new reserve fund meant to cushion sharp swings in revenue and spending. Brown on Thursday proposed shifting $3.5 billion into the reserve, $2 billion more than required by Proposition 2.

“Everybody thinks when they’re up here, it’s all wonderful. That’s what they thought before the dot-com, and that’s what they thought before the mortgage meltdown,” Brown said, pointing to budget revenue charts. “And so here we are again.”

Everybody thinks ... it’s all wonderful. That’s what they thought before the dot-com, and that’s what they thought before the mortgage meltdown.

Gov. Jerry Brown

Even before the budget’s release, activists were urging the state to restore recession-era cuts to programs affecting the state’s neediest people.

Sen. Holly Mitchell, D-Los Angeles, said Brown “doesn’t fundamentally understand that people are suffering and how they’re suffering. He doesn’t get it.”

(Brown) doesn’t fundamentally understand that people are suffering and how they’re suffering. He doesn’t get it.

Sen. Holly Mitchell, D-Los Angeles

In a pre-budget salvo earlier this week, Senate Democrats proposed a $2 billion bond to build housing for homeless people with mental illnesses and said they will push for $200 million in general fund revenue over four years to pay for rent subsidies for homeless people.

Brown said that bond proposal is something that addresses a “real need” and that he will “look at that.”

Since returning to office in 2011, Brown has largely resisted the most expensive social service program expansions legislative Democrats have proposed.

Sen. Jim Nielsen, R-Gerber, praised Brown for his cautious approach on Thursday.

“He is admonishing his Democratic colleagues to be restrained and prudent,” Nielsen said, “and that’s where we need to be.”

Anthony Wright, executive director of Health Access California, lamented Brown’s unwillingness to propose greater restorations to cuts made during the recession.

For many poor Californians, he said, “the California comeback doesn’t feel like it.”

David Siders: 916-321-1215, @davidsiders The Bee’s Alexei Koseff contributed to this report.

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