Gov. Jerry Brown signed a state budget Monday that uses a slice of California's revenue surplus to boost assistance for the poor and send more money to universities but keeps other new ongoing spending commitments to a minimum.
In negotiating with Democratic legislative leaders on the $122.5 billion spending plan, Brown secured a commitment to boost the state's rainy day fund, pay down debts and use cash instead of debt for building maintenance and construction.
Using billions for savings and one-time purposes is a victory for the Democratic governor, who warns repeatedly that California's current budget surpluses are based largely on capital gains income of wealthy taxpayers. That revenue will quickly plummet during economic difficulties, he says, forcing the state to take back money approved during the boom times.
In releasing his budget proposal last month, Brown suggested he'll be judged on how well the budget weathers the next recession. His predecessors saw their popularity plummet when they were forced to accept steep spending cuts, he said.
"I don't want to repeat these errors, because we had two governors who were riding high. And paradoxically, that very moment when everyone's feeling the best is the very moment when the recession is about to hit," Brown said. "So instead of pulling back in the last two recessions, the state of California accelerated its spending and therefore made the budget cuts all the more painful."
Brown negotiated the spending plan with Assembly Speaker Anthony Rendon, D-Paramount, and Senate President Pro Tem Kevin de Leon, D-Los Angeles.
The budget includes a $2 billion additional deposit in the state rainy day fund on top of the $1.3 billion contribution required by the state constitution, bringing the total balance to $6.7 billion. The budget also includes a regular reserve of $1.75 billion to cushion against a drop in revenue. Another $2 billion was earmarked for deferred maintenance and state building construction.
Brown also secured $270 million in bonds for jail construction, though he would have preferred to use cash. Democratic lawmakers fought unsuccessfully to cut the jail funds that they say would be better spent on rehabilitation programs.
Lawmakers agreed earlier in the year to reserve $240 million to fund future health care costs for state workers once they're retired, a priority for Brown.
However, Brown has made little progress in his quest to raise taxes or fees to fix crumbling highways.
And despite his reluctance to bless new ongoing spending, Brown gave in to several priorities for Democratic lawmakers, including an expansion of state-funded day care that will eventually cost $500 million a year. He also agreed to repeal a welfare policy known as the maximum family grant, which denies additional aid to families that have more children while receiving aid, at a cost of more than $220 million a year. A special account will take over the long-term cost, limiting the general fund hit to the next three years.
The spending plan was approved by lawmakers June 15 with only one Republican vote. GOP lawmakers said the budget sets the state on the course for deficits despite Brown's effort to limit costs that continue from year to year. They also criticized the lack of funding for road construction.
Brown said last month that the state will see a budget shortfall of $4 billion by 2019 unless voters in November decide to renew temporary tax hikes on the rich. The nonpartisan legislative analyst disagreed with that finding, projecting budget surpluses in each of the next four fiscal years even if the tax hikes expire.
The budget raises vehicle registration fees from $70 to $80 a year starting in April, to generate $400 million a year for the Department of Motor Vehicles, California Highway Patrol, Air Resources Board and other departments.
Brown and legislative leaders agreed to set aside $400 million for low-income housing, assuming lawmakers and Brown can agree on a plan to bypass construction review processes in certain neighborhoods. The policy has drawn strong opposition from neighborhood activists who fear it will allow developments that change the character of their communities.