$200 billion budget deal rejects health care, tax breaks for undocumented

SACRAMENTO – Gov. Jerry Brown and Democratic legislative leaders struck a $200 billion budget deal on Friday that rejected two proposals that would have expanded access to health care and tax breaks to undocumented Californians.

The budget sets aside enough money in reserves to fill the socalled Rainy Day Fund with a sum equivalent to 10 percent of general fund spending, almost $14 billion. It places another $2.2 billion in contingency funds for other unexpected emergencies, and creates two new reserve accounts that might provide flexibility in downturn.

That gives the state about $16 billion in total reserves, enough to weather a mild recession without severe cuts to government services, according to the Legislative Analyst’s Office.

Brown in a news release crowed about the reserves, noting the turnaround in the state’s fortunes since he took office during a severe recession.

“After detailed discussions, California is on the verge of having another on-time, balanced budget,” he said. “From a $27 billion deficit in 2011, the state now enjoys a healthy surplus and a solid Rainy Day Fund.”

One of the two proposals aimed at helping low-income, undocumented residents that did not make the cut would have offered Medi-cal coverage to undocumented young adults and seniors. Earlier this year, legislative Democrats wanted to open the program to all undocumented residents at a cost of more than $1 billion a year.

Brown and lawmakers also rejected an Assembly proposal that would have allowed undocumented residents to receive the state Earned Income Tax Credit. The credit is available to households earning less than $22,309 in adjusted gross income.

The agreement puts the Legislature on track to meet its deadline to pass a budget by June 15.

“California’s finances are on rock-solid ground,” Senate President pro Tem Toni Atkins, D-san Diego, wrote on Twitter. “Our budget is the strongest in a generation. It balances fiscal responsibility with social responsibility by investing in our people and guarding against the next downturn.”

Brown’s office projected an $8.8 billion surplus for the state budget year that begins July 1. The Legislative Analyst Office anticipates an ever larger surplus, projecting an additional $2.6 billion in revenue. The budget agreement adopts Brown’s projection.

California’s general fund is considered volatile – it can plunge by 20 percent in a recession – because revenue is heavily dependent on income taxes and capital gains. The reserves are intended to help the state avoid extreme cuts to government services in a recession.

Brown wanted to put almost all of the surplus into reserves and some one-time spending projects, such as refurbishing prisons, setting aside $100 million to build a California Indian Heritage Center in West Sacramento and seeding a new online community college program.