Dan Walters

Opinion: California’s revenue gains may be a budget problem

April is the most important month for the state budget, due to its over-reliance on personal income taxes, and every indication points to a strong flow of revenues. But it creates a political problem for Gov. Jerry Brown.

Scarcely a day passes without the Legislature’s budget subcommittees hearing emotional pleas for more aid from advocates of health, welfare and other services for the poor.

Those pleas have drawn sympathy from liberal Democratic legislators, but state law and Brown’s own predilections would direct virtually all of the extra cash into schools and community colleges, debt repayment and reserve funds.

Brown’s proposed 2015-16 budget, unveiled in January, forecasts that revenues for the 2014-15 fiscal year would be $2-plus-billion more than assumptions when the current budget was adopted last June.

However, through March, 2014-15 revenues were running $1.1 billion above even that upgraded estimate, and the Legislature’s budget analyst, Mac Taylor, believes they could be even higher and continue to expand in 2015-16.

The upbeat revenue estimates assume that the state’s economy continues steady growth and that there’s not a precipitous decline in the stock market.

The latter is important because the largest sources of state revenue are taxes on the state’s highest-income residents, whose incomes are heavily weighted toward profits from stocks and other investments.

Taylor told legislators in an analysis earlier this year, “Additional revenues in 2014-15 will go largely or entirely to schools and community colleges.”

Taylor reiterated that warning in another report Tuesday, adding that the law could even require cuts in non-school spending in 2015-16 to give schools their legally mandated state aid.

Meanwhile, the state is also likely to get, and perhaps spend, an extra $1-plus-billion in “cap-and-trade” fees on carbon-generating industries and motorists, according to Taylor’s most recent estimate. And those who want the money, which is supposed to be spent on carbon-reducing programs and projects, are already lining up.

April’s revenue numbers will set the stage for Brown’s “May revision” of his 2015-16 budget and his subsequent negotiations with legislators over a final version to go into effect July 1, with health and social services the biggest issues to resolve.

So is there any money available to meet the rising crescendo of demands from advocates for the poor, who say they suffered disproportionate cutbacks during the recession?

Were Brown willing to reconfigure the school aid formula a bit or cut back on reduction of debt, one of his pet causes, there might be some money for “investing,” as the Capitol’s inhabitants call spending.

It would be, however, a hard sell to a governor determined to leave behind a clean balance sheet when he departs in 2019.

Call The Bee’s Dan Walters, (916) 321-1195. Back columns, sacbee.com/dan-walters. Follow him on Twitter @WaltersBee.

Related stories from Sacramento Bee