Lawmakers are facing a Sunday deadline to pass a $108 billion spending plan that will meet Gov. Jerry Brown's demands for a rainy day fund and paying down debt while allocating some of the surplus to programs benefiting lower-income Californians.
Brown also scored a significant victory in securing ongoing cap-and-trade funding for California's high-speed rail project, which has been beset by legal and financial challenges.
Late last week, Brown and Democratic leaders of the Senate and Assembly agreed to the main points of the budget for the fiscal year that will start July 1. Lawmakers were scheduled to convene late in the afternoon to take up the main bill and companion legislation ahead of the state's constitutional deadline for passing a balanced budget.
Under a voter-approved initiative, lawmakers lose their pay if they miss the deadline.
"The leaders of the Legislature have worked very hard to build a solid and sustainable budget that pays down debt, brings stability to the teachers' pension system and builds at long last a reliable rainy day fund,'' Brown said in a statement Friday.
Republicans, whose support is not required because it takes just a simple majority to pass the budget, said the Democratic budget includes spending on new programs even though much of the surplus is due to temporary tax increases approved by voters two years ago.
"This budget is not the fiscally disciplined plan that California needs,'' said Peter DeMarco, spokesman for Senate Republicans.
The budget adheres to the governor's original proposal to put $1.6 billion into the state's rainy day fund and pay down debts, leaving a $460 million reserve. Lawmakers last month replaced a rainy day fund measure on the November ballot with a version that will set aside revenue of up to 10 percent of California's general fund and dedicate money to paying down the state's massive debts and liabilities.
That includes a long-term plan to begin paying down nearly $74 billion in unfunded liabilities for the California State Teachers' Retirement System.
The budget scheduled to be voted on Sunday also includes $250 million from the so-called cap-and-trade fund for California's $68 billion high-speed rail project, a priority of Brown's.
In future years, 25 percent of cap-and-trade revenue would go to the rail project, 40 percent will go toward water and energy efficiency programs, natural resource conservation and cleaner transportation, and 35 percent will go for public transit and affordable housing projects that help reduce greenhouse gases.
Democrats were able to negotiate modest spending increases in social services for the poor.
Starting next spring, the maximum aid allowed under California's welfare-to-work program, known as CalWORKS, will increase by 5 percent. And after intense pressure from unions and Democratic lawmakers, in-home workers who care for low-income seniors and people with disabilities will be eligible for overtime pay.
The University of California and California State University systems will receive an extra boost of $50 million each if the state receives more money from property taxes than expected, plus $100 million for deferred maintenance projects.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, pushed for expanding early education programs and secured $264 million for preschool and day care for low-income families that eventually will cover half of all 4-year-olds in the state.
Even though Democrats and social service advocates had pushed for more, Steinberg said the budget will "make significant restorations in key areas.''
"I look at it this way: It's a much better period for California than it was five years ago,'' he said in an interview Friday.
Brown resisted restoring a 10 percent cut in reimbursements to doctors and hospitals treating patients enrolled in Medi-Cal, the state's health insurance program for the poor. Health advocates say the cut makes it harder for low-income patients to access doctors and specialists.