Democratic Gov. Jerry Brown proposed a $131.7 billion state spending plan Wednesday, launching his final year of budget negotiations as he prepares to leave office.
Brown's proposal is up 5 percent from last year but includes little new spending on new programs. Once again warning that he believes a recession looms, Brown dedicated $5 billion toward the state's Rainy Day fund, more than is constitutionally required. He also proposed a new online community college program.
"It's not exciting, it's not funding good and nice things, but it's getting ready and that is the work of a budget," Brown said.
Notably, Brown's plan makes no changes related to federal tax changes out of Washington, which are expected to hit taxpayers in high-tax states like California the hardest. That's because Brown had to finalize his plan in December, before the federal changes were finalized. He said he expects to make revisions to his plan during ongoing negotiations with the Legislature. A final plan must be passed by lawmakers in June.
The spending plan also includes nearly $59 million in special funds and bonds, which are dedicated for specific purposes.
Republicans said the budget surplus shows Californians pay too much in taxes, with Assemblyman Tom Lackey of Palmdale saying it makes no sense that the state just raised gas and car taxes on drivers by $5 billion per year.
"In a perfect world, the surplus would be returned to taxpayers," added Assemblyman Jay Obernolte of Hesperia, the top Republican on the Assembly budget committee. In the alternative, both Republicans supported beefing up the state's reserve and limiting additional spending to one-time costs.
Brown's budget plan comes as California wages a multi-front battle with Republican President Donald Trump that has, so far, had little impact on the state's finances. California's tax collections over the past six months are billions above projections.
Last year, he signed a $125 billion budget that boosted payments for Medi-Cal doctors and dentists who provide care for the poor and increased funding for education and social services.
Brown has generally shied away from new ongoing spending that he says the state can't afford to sustain, preferring to use much of the state's higher revenue for one-time expenses like new state buildings or paying down debts for the pensions and health benefits of retired state workers.
His caution often puts Brown at odds with senior Democrats in the Legislature, who prefer to use the state's increasing inflow of tax revenues to lower college costs and strengthen the California's social safety net for the needy.
Assembly Democrats last month proposed $4.3 billion in new spending, including an expanded tax credit for the working poor and health coverage for immigrants living in the country illegally. They also proposed boosting reserves, including the state's Rainy Day Fund, by $3.2 billion.
Brown, who leaves office in a year, has focused much of his second stint as governor on stabilizing the state's long-term budgeting during a period of fiscal prosperity. Taking the reins as the state clawed out of the devastating Great Recession, he backed a ballot initiative that forced the state to save money and pay down debts.
He's presided over a stark turnaround in California's fiscal fortunes while warning that the next recession — and a steep drop in revenue — could be just around the corner. The state's budget has grown 45 percent since 2011, when he took office and includes more than $50 billion in additional revenue.
Here are summaries of the budget proposal in key areas:
California’s 114 community colleges could see their funding significantly improve if Brown’s budget proposal becomes final in the summer.
Last year, community college administrators asked for a $382 million funding increase for the coming fiscal year; Brown is proposing a $570 million increase.
One of the far-reaching parts of the governor’s plan for community colleges sets aside $46 million so community colleges can waive the tuition for first-time students taking a full-time class load. In fall 2016, the community colleges enrolled 275,000 first-time students. The waiver already exists at some California community colleges.
Brown has pushed for improvements to higher education through his budget plan by compelling institutions to make changes in order to receive funding increases. This budget is no different.
The governor is proposing a change in community colleges’ funding formula that relies on enrollment to one that rewards campuses doing a better job of registering underrepresented students and moving students quicker to graduation.
Under the proposal, a campus would continue to receive a base of funding tied to the number of students it enrolls and wouldn’t receive less than it did in the 2017-2018 academic year.
But additional funding would to go colleges based on enrollment of low-income students, such as those who receive the Pell grants and College Promise fee waivers. Campuses would also receive more funds if their students are completing a degree or certificate in three years or less.
Campuses would also be eligible for more funding if they are awarding more of the new associate degrees for transfer, which speed students through their two-year community college education and eases transfer to a four-year university.
Last year, California’s community colleges enrolled more than 2 million students. In addition to the 81,000 certificates and 139,000 degrees awarded, campuses transferred 106,000 students to four-year colleges and universities.
Five years ago, California school districts were finally emerging from a recession that forced widespread and brutal cuts. State K-12 funding was returning to pre-recession levels.
That year, 2013, Gov. Jerry Brown promised to drastically increase those funding levels even further. He set a target to increase K-12 education funding by an estimated $18 billion by 2020-2021. In exchange, the governor wanted schools to spend the new money on specialized services for three high-need groups of kids: English learners, foster youth and students from low-income families.
On Wednesday, after years of lurching closer toward that original school funding target, the governor announced his 2018-2019 budget proposal would include another $3 billion for K-12 education — enough to meet his goal two years early and fully fund the “Local Control Funding Formula,” a new system for funding K-12 schools he signed into law almost five years ago.
What remains unclear is whether schools are holding up their end of the bargain by spending on high-need student services — or whether state officials are doing enough to ensure that they do so.
Under the new “Local Control Funding Formula,” districts are supposed to detail how they're spending their extra state funding to benefit the three high-need groups. But some school districts, like Los Angeles Unified and Long Beach Unified, have come under fire from advocacy groups for instead spending the extra money on more general expenses.
The districts both serve large numbers of English learners, foster youth and low-income students, raising the question of how a program can be both “targeted” and broad-based at the same time.
Brown’s 2018-2019 K-12 budget proposes new, beefed up language designed to require districts to show a clearer link between how they spend their funding increases. But already, prominent education organizations — including EdVoice — have raised doubts about whether this new language will help.
ENVIRONMENTAL AND NATURAL RESOURCES
The budget proposal envisions $568 million less in general fund expenditures, but that shortfall is expected to be closed as part of $7.6 billion in money from special fund and bonds. All told, environmental and natural resource programs are expected to receive $9.8 billion in state and federal money.
In a conference call, John Laird, secretary of the California Natural Resources Agency, said that pool includes $430 million in state emergency funds to fight wildfires. Last year, the state spent $896 million in emergency funds fighting wildfires, Laird said. But he added the state would spend whatever is necessary to combat wildfires this year.
“There should be no ambiguity about that,” Laird said.
The budget proposal also discussed next steps in the state’s effort to combat climate change by reducing greenhouse gas emissions.
California has committed itself to reducing heat-trapping gases by 40 percent of 1990 levels by 2030. It’s expected that much of the reduction would come from the state’s “cap-and-trade” program, which requires polluters to buy permits to release emissions and then gradually lowers the amount they can emit.
The Legislature reauthorized the program last year, and this year it is expected to raise at least $1.25 billion in funds that will be available for appropriation. Brown plans to specify how that money will be spent during his State of the State address on Jan. 25.
Meantime, the budget proposal includes money from a bond initiative not yet passed by voters. Senate Bill 5 looks to raise $4 billion for a variety of natural resource and environmental projects. But first it must be approved by voters in June.
The budget envisions $1 billion of those bonds would be available this year to fund improvements to state parks, restoration work on the Salton Sea, coastal protections and safe drinking water programs among other initiatives.
Education is the only portion of the state budget larger than the cost of California’s health expenditures. Health programs make up more than 21 percent of the state budget, totaling $28.3 billion in state general fund dollars. Brown’s proposal represents a 5.6 percent increase in this area over the last budget.
Brown expects that changes in federal funding for health programs, like Medi-Cal, is shifting the cost of those programs to the state’s tab. The budget lines for those health programs could change in later revisions.
The governor expressed confidence that Washington lawmakers will continue to fund the Children’s Health Insurance Program (CHIP). California parents who are low-income, but make too much to qualify for Medi-Cal, still wait to see whether Congress will fund CHIP through fiscal 2018-2019.
Eighty-eight percent of the cost of the program was covered with federal dollars to the tune of $2.7 billion a year. A late 2017 extension of CHIP funding will bring California to the end of March, but with only 65 percent of the cost covered by Washington. That could drop to 50 percent without a federal renewal.
The governor vows to address any CHIP shortfall in the May revised budget. The Golden State estimates 32,000 children and pregnant women could be cut from the program if Congress doesn’t come through with CHIP funding.
The governor’s budget includes about millions in new spending to carry out a package of 15 bills passed by the Legislature last year to address the state’s shortage of housing.
These bills include efforts to streamline the approval process for new homes and to incentivize municipalities to meet housing production goals set by the state.
California needs 180,000 units of housing annually to meet demand, but has only been producing 100,000 units on average over the last eight years, according to the governor’s office.
Of the new funding, $3 million from the general fund will go to the Department of Housing and Community Development. More resources will come from an estimated $258 million in expected revenue from a new real estate transaction fee created by Senate Bill 2, combined with proceeds from a $4 billion housing bond that will be put before voters in the November 2018 election.
This was proposed under Senate Bill 3, which sets aside $3 billion to support the development of subsidized housing for lower-income households and $1 billion to help veterans purchase homes.
The budget proposal’s authors caution that despite the new revenue, the state has a long way to go toward addressing its scarcity of affordably priced housing.
Between 2005 and 2015, the state added just 328 units for each 1,000 new residents. That’s led to increasing housing costs — California home prices are more than double the national median of $250,000 — forcing people to live in more crowded conditions, further afield from their jobs or in the streets.
Advocates for California's poor said Brown's proposed budget does little to restore cuts to anti-poverty programs made during the recession.
"We're on a crisis path in terms of child and family poverty in the state," said Michele Stillwell-Parvensky of the Children's Defense Fund-California. "What we've been seeing is the gains in economic growth really going to people on the top."
Stillwell-Parvensky did applaud a new home visitation program for families receiving welfare in the budget proposal, but said there's little else in the way of new investments in combating inequality.
Brown, who has taken criticism each year of his tenure for failing to do enough for California's poor, defended his legacy Wednesday.
"We've done a lot," Brown said. "California is doing two or three times doing its share compared to other states. But the capitalist economy, whether it's in China, Russia, England or California, is generating inequality."
Brown said any major investments in anti-poverty would require new revenue, like voter-approved taxes.
But state Sen. Holly Mitchell of Los Angeles, chair of the Senate Budget Committee, said she planned to push for social safety net programs during budget negotiations.
Specifically, state supplements to federal social security payments and CALWorks (cash welfare for families) could go up, she said.
"From my perspective, this is the beginning of the state budget dance, where the Legislature will weigh in on where we think it's most important to invest in Californians and invest in programs that Californians rely on to survive," Mitchell said. "The process has just begun."
Under the governor’s proposed budget, prison spending would go up about 1 percent to nearly $12 billion. Most of increase will cover previously negotiated salary increases for prison guards and other employees of the California Department of Corrections and Rehabilitation.
Prison spending would eat up about 8 percent of the general fund – down from 11.4 percent five years ago. The drop can be attributed largely to a dramatic reduction in the prison population from a high of 163,000 in 2006 to about 127,000 today. The population fell because of a federal court order to reduce overcrowding, which helped spawn Propositions 47 and 57 and other policies that reduced prison sentences.
Still, Brown’s proposed budget would take prison spending in California to an all-time high. That frustrates John J. Bauters of Californians for Safety and Justice, the group behind Proposition 47 and other reform measures.
“What’s really troublesome about that kind of heavy spending on prisons is how little it translates to actually keeping Californians safe in the long run,” Bauters said in a statement. The budget will prevent California from investing more in mental health, drug rehabilitation and other programs – and “resolving the crises in our communities that give rise to crime,” he said.
Brown has said the state continues to increase prison spending because of the federal court’s order to improve medical care for inmates. In addition, he’s said the state needs to continue to staff and operate 34 prisons.
As the various reform measures take full effect and fewer people are sent to state prison, Brown projects California will end the practice of sending more than 4,000 inmates to private prisons in Mississippi and Arizona by fall 2019.
The budget does contain over $64 million in savings attributed to Proposition 47 — the most of any year yet. That money will be redirected to community-based crime prevention programs like drug and mental health treatment.
The governor’s budget includes $4.6 billion in new transportation spending funded by the first full year of revenues from the transportation funding package known as Senate Bill 1. The legislation increased gas and diesel taxes starting last November and imposed extra vehicle registration fees on drivers at the beginning of this year to raise an estimated $55 billion over 10 years.
The package was passed last year to address the state’s $59 billion backlog in road and bridge repairs.
Allocations for the transportation revenues are determined using formulas established in the law, with $2.4 billion split evenly between repairs to state highways and local streets. The remainder will help fund bridges, local transit operations and construction, and walking and biking projects.
Starting this year there are also special funds set aside for projects to address especially congested commute routes and corridors used heavily for trade. The state is currently taking proposals from local governments that want to draw from the funds and will award the dollars later this year.
The transportation funding could be affected by a Republican-led effort to reverse the new gas taxes and vehicle fees. Organizers are now collecting signatures to try to get a repeal measure on the November 2018 ballot.
You can find projects in your area that are currently under construction or will begin soon at this Caltrans website.
This year’s budget has advocates of early childhood feeling optimistic.
“This budget seems to reflect a cease-fire from previous years where we entered into the January budget either with cuts or significant policy proposals that had great concerns from the field,” said Erin Gabel, deputy director of external and governmental affairs with First 5 California.
Unlike last January, when the proposed budget included slashes to preschools slots and cuts to funding for early care and education, this budget fulfills agreements outlined in previous years to expand access. The proposal adds nearly 3,000 slots for full-day state preschool, fulfilling a three-year agreement. And it increases the rates by 2.8 percent for reimbursements that providers who contract with the Department of Education receive for each child in their program.
The budget also sets aside $167 million for a competitive grant program that would provide one-time support to school districts and programs looking to expand early care and education for infant, toddlers and preschoolers in low-income areas and regions with little access to care.
Acknowledging prenatal health and family supports, there are funds set aside for home visiting programs for first-time parents on CalWorks, the state’s welfare-to-work program. And with a nod to building the workforce, child development credentials got a mention as a priority subject area for the proposed online community college program.
“It has a holistic approach really that appreciates that young children need multiple types of investments to really enable them to thrive,” said Kim Pattillo-Brownson, vice president of policy and strategy at First 5 LA.
While applauding the investments as a great starting point, advocates are quick to acknowledge that access still lags below pre-recession rates and much more funding is needed for the state’s two million residents under the age of five. There are 67,000 fewer slots for subsidized child care and preschool than in 2007-08, according to the California Budget and Policy Center.
“I always worry about who’s going to take care of the kids in the future if the pay isn’t there for the providers to be able to sustain themselves. They’re also the working poor,” said Cristina Alvarado, executive director of the Child Care Alliance, which has ten member agencies in L.A. County.
Alvarado hopes that, in the future, there will be more support for the working families, living in poverty who are not part of the state’s welfare program. She says while the 10 L.A. County agencies in CCALA are about to serve 7,000 children from those families through subsidized slots, they have a waitlist of 46,000.
KPCC's Michelle Faust, Meghan McCarty Carino, Adolfo Guzman-Lopez, Rina Palta, Stephen Gregory, Josie Huang, Frank Stoltze, Priska Neely and Kyle Stokes contributed to this story.
This story has been updated.