Gov. Jerry Brown came to Los Angeles Tuesday to try to win support for his revised state budget proposal and “rainy day fund,” calling on legislators to spend the reserve funds wisely.
The state budget for the fiscal year starting July 1 totals $156.2 billion and includes $2.4 billion for Medi-Cal reform and $142 million for drought-response measures, such as firefighting, water management, wildlife preservation and food assistance.
Brown called on the state, school districts and teachers to work together to shore up the State Teachers’ Retirement System, which has a deficit of more than $70 billion.
At a news conference — one of three held around state — he displayed a chart showing dramatic variations in annual revenue from capital gains taxes in recent years and said some legislators believe the peaks are normal.
Brown said California was “in good shape” now, but urged fiscal caution.
“The fact that we have new revenues does not mean we are out of the woods,” Brown said.
The governor said the budget revision is good news for California and shows that the state can afford to enroll 1 million people in Medi-Cal, the health care plan for the poor.
“We can do all of that because we’ve made budget cuts, the economy is recovering, California is creating hundreds of thousands of jobs and we have the temporary tax of Proposition 30,” Brown said.
However, Chris Hoene, executive director of the nonpartisan California Budget Project said the governor’s revised budget is “a false choice between fiscal responsibility and reinvestment in public services and systems that are especially critical with so many Californians still recovering from the deepest economic downturn in generations.”
Because California’s finances are improving, Hoene said policymakers should “strike a balance” between paying down debt, saving for a rainy day and rebuilding core public services like CalWORKS and other programs “that help Californians find and keep jobs, high-quality child care and preschool, and services for low-income seniors and people with disabilities.”
The revised budget also drew criticism from Republicans and the head of the California Hospital Association and a mixed response from Los Angeles Unified School District Superintendent John Deasy.
Republican gubernatorial candidate, Neel Kashkari said “Brown is crossing his fingers and hoping for a roaring stock market to deal with California’s unfunded liabilities.”
“Hope is not a strategy,” said Kashkari, who served in several positions in the Treasury Department in the George W. Bush administration. “We need honest leadership and realistic forecasts to bring Californians together to solve our long-term fiscal challenges and rebuild the middle class.”
“Nothing in this budget revise will address California’s epidemic of unemployment, failing schools and crumbling infrastructure,” said Assemblyman Tim Donnelly, R-Twin Peaks, who is also running for governor.
Senate Republican Leader Bob Huff took exception with Brown declaring the existence of a budget surplus.
“When you have identified over $340 billion of state debt and unfunded liabilities, as the legislative analyst has, you cannot claim to have surplus revenues,” said Huff, R-Diamond Bar. “That debt load is nearly $9,000 for every single Californian.”
Deasy thanked Brown for “listening to our concerns about streamlining processes under the new local control funding formula.”
“His proposed changes should help mitigate the burdensome process for collecting alternative forms to verify income eligibility so that we can focus more attention on teaching and learning,” Deasy said.
Deasy said he wished the budget provided additional money for school districts to transition to the common core state standards “so that our students, teachers and parents are better prepared for this historic transition to quality standards.”
California Community Colleges Chancellor Brice W. Harris applauded the governor for boosting career technical education funding by $50 million.
“After years of trimming career technical education programs because of budget cuts, this $50 million increase will translate into more skilled workers and economic growth,” stated Harris.
C. Duane Dauner, president and CEO of the California Hospital Association, complained that the revised budget ”does not reverse looming retroactive Medi-Cal payment cuts to hospital-based skilled-nursing facilities.”
“The payment cuts to hospitals, along with those affecting physicians, dentists, pharmacists and other providers, may threaten access to care for millions of low-income and elderly patients,” Dauner said.
Last week, Brown reached an agreement in principle with the Legislature on the reserve fund, which still requires approval.
— require the state to bank large increases in capital gains revenues, which are the most volatile form of tax income;
— require supplemental payments to accelerate the payoff of the debts and liabilities;
— raise the dollar amount of the rainy day fund to 10 percent of the general fund revenue;
— allows withdrawals to be made from the fund when needed during recessions, within prescribed limits; and
— creates a reserve account for education to avoid future funding cuts.
The budget increases funding for K-12 schools and community colleges, and provides more money to the University of California and California State University systems — as long as they don’t increase student tuition and fees.
Revenue growth triggered a 2 percent raise for state workers who belong to 14 of the 21 state employee unions, the Sacramento Bee reported.
California has about $355 billion in long-term liabilities, including $217.8 billion in unfunded pension costs and $64.6 billion in deferred maintenance, according to the budget released in January.