Despite surging state tax revenue, Gov. Jerry Brown on Tuesday announced a spending plan for the coming fiscal year that is $1.2 billion lower than he projected in January. Actions by the federal government are at least partly responsible.
The forecast for growth of personal income is lower because the federal government did not extend a 2 percent payroll tax reduction. That reduced the projections for personal income growth for the coming year in half, to 2.2 percent.
The governor's budget document says the federal government spending cuts the so-called sequester also helped erode the budget projections for the fiscal year that starts July 1. Brown said the proposed budget he released in January did not anticipate the lower growth forecast or the depth of the federal government cutbacks, which he said are affecting the state's overall economy just as it was gaining strength after years of recession.
His general fund budget of $96.4 billion still invests heavily in education, thanks to a big haul of state tax revenue. Voters approved Brown's Proposition 30 last fall to increase the state's sales and income taxes.
Personal income tax receipts have been running $4.5 billion ahead of projections, but the governor's finance department expects the state to collect just $2.8 billion more than anticipated in the current fiscal year because of the effect the federal cutbacks will have in May and June, the last two months of the fiscal year. The state's education funding formula will send most of the extra money to public schools.
K-12 spending is projected to rise from $47.3 billion in the 2011-12 fiscal year, Brown's first budget since reclaiming the governor's office, to $66.5 billion in the 2016-17 fiscal year. His budget provides $1,046 more per student in the coming fiscal year.
The governor also is setting aside $1.9 billion to modify the state's K-12 funding formula by giving proportionately more money to schools with high numbers of lower-income students, English-learners and foster children. Brown's plan has been criticized even by lawmakers in his own party because some of the school districts they represent are wealthier and would not see as much extra money. Yet the governor has said that spending more on disadvantaged children is the right thing to do.
"Everybody's going to do better, but some are going to do considerably better,'' he said. He also proposed an additional $1 billion to help public schools implement more rigorous academic standards.
Brown, who faced a $25 billion deficit when he took office in January 2011, is maintaining a $1.1 billion reserve fund for unanticipated expenses and is on track to reduce California's debt to $4.7 billion by 2017, down from the $35 billion Brown inherited. He warned that future federal government actions, economic uncertainty and soaring costs to operate state prisons because of a federal court takeover underscore a need for fiscal discipline. "We have climbed out of a hole with the Proposition 30 tax, but this is not the time to break out the champagne,'' Brown said. "It's a call for prudence, not exuberance.''
Republican lawmakers generally liked that message. "Overall, a cautionary tone was a proper way to proceed when you have a recovering economy that's still fluctuating in revenues,'' said Senate Minority Leader Bob Huff, R-Diamond Bar.
Democrats, however, were more muted. Many of them want to spend the incoming tax revenue on safety net programs that were eliminated or greatly reduced during the recession, such as adult dental care for the poor and mental health care.
"With many Californians still out of work, this budget is not just about paying down debt and saving money for a rainy day. It is also about growing our economy and broadening opportunities for Californians to succeed through education and a better environment for small business,'' Assemblyman Bob Blumenfield, D-Woodland Hills, said in a statement.
He is chairman of the Assembly Budget Committee. Other highlights of Brown's revised budget plan include: Accepting the Medicaid expansion under President Barack Obama's health care reforms, which is expected to be paid fully by the federal government for the first few years. $48 million more for job training and subsidized employment opportunities under CalWORKs, the state's welfare-to-work program.
Increases of $500 million each to the University of California and California State University systems, with additional increases in each of the next four years to make higher education more affordable and efficient.
California's general fund spending hit a high of $103 billion before the recession and dropped to a low of $87 billion during the 2011-12 fiscal year, creating a multibillion gap between revenue and spending commitments that required lawmakers to enact deep cuts. Brown's budget proposal now goes to the Legislature, which has a June 15 deadline to pass a spending plan.