Budget, and big surplus, unveiled
Governor wants to hold on to much of state’s $8.9B savings for next economic downturn
SACRAMENTO >> Despite news that California’s projected surplus has swelled to nearly $9 billion, Gov. Jerry Brown preached fiscal caution Friday as he unveiled his last-ever budget proposal, a $137.6 billion plan that sends much of the windfall to state savings accounts.
“We’re nearing the longest economic recovery in modern history, and as Isaac Newton observed: What goes up must come down,” Brown said. “This is a time to save for our future, not to make pricey promises we can’t keep. I said it before and I’ll say it again: Let’s not blow it now.”
The debate consuming the Capitol today — what to do with $8.9 billion in extra cash — is a marked departure from the dilemma facing the governor when Brown returned to office in 2011 with a $27 billion budget deficit. But Brown, who won voter approval to raise sales and income taxes after taking office, said he crafted his latest spending proposal with the next economic downturn in mind: to buffer the state when the economy slumps.
Brown has proposed saving $5.8 billion of the surplus, roughly two-thirds, and spending $2 billion to tackle a $20 billion backlog of maintenance projects, including levees in need of repair. The remaining money would be used to help local governments grappling with increasing homelessness and to pay for mental health services, the state’s earthquake early warning system and voting equipment upgrades.
In the aftermath of a devastating fire season, Brown also is calling for nearly $100 million more to be spent on wildfire prevention.
The final budget presentation by the four-term governor started on a playful note. Before it began, reporters were treated to an eclectic mix of moneythemed tunes including Destiny’s Child’s 1999 hit “Bills, Bills, Bills.” When Brown took the stage, he was briefly accompanied by his wife, Anne Gust Brown, and their new puppy, Cali — “the newest member of our team.”
Then, in characteristic fashion, Brown gestured to bleak charts highlighting the state’s volatile tax revenues and pushed for saving much of the surplus.
“Revenues have grown since January, but so have expenditures,” Brown said, noting that “the longest economic recovery ever was 10 years and we’re getting very close to that.”
Anyone hoping that a $9 billion surplus — up from the $6.1 billion projected in January — would translate into a windfall for California’s public universities, affordable housing development or health care might be disappointed by Brown’s budget plan. But the blueprint unveiled Friday is hardly the final word. For the next five weeks, Brown will negotiate with lawmakers in both chambers who want to see far more spent on the state’s pressing challenges: cities grappling with homelessness, strained public university systems, and working parents without access to affordable child care, among other concerns.
Pending proposals from lawmakers include an infusion of revenue to expand the state’s health care system, $1.5 billion in emergency funding to cities and counties overwhelmed by the homelessness crisis, and more spending than the governor has proposed for child care programs and public universities.
“During this final stretch of budget negotiations,” California State University Chancellor Timothy White said in a statement, “the university community will continue to reinforce to California’s lawmakers that sufficiently funding the CSU is the key to the state’s prosperity.”
Brown’s budget plan holds the line at the 3 percent budget increase proposed
in January — contingent on a tuition freeze — at both Cal State and the University of California. Instead of more operating cash, it gives each university system a one-time influx
of $100 million to tackle sorely needed maintenance projects. His January proposals to increase funding modestly for MediCal, Cal Grants, child care, In-Home Supportive Services and foster care reform, among other programs, did not change, despite the bigger surplus.
The governor’s office noted that spending on K-12 education and community colleges, which sank to $47.3 billion in 2011-12 at the depth of the last economic downturn, is expected to reach a record $78.4 billion in 2018-19, an increase of $31 billion, or 66 percent, in seven years.
The biggest change from the January plan is a proposed $2 billion boost in infrastructure spending. Also, following the most destructive wildfires in state history last year, Brown’s new budget significantly increases funding for programs aimed at reducing fire danger across the state. The governor proposes spending $96 million — in addition to $160 million that was part of Brown’s January budget plan — on expanding fire crews, thinning forests in the Sierra, where the drought killed 129 million pines, cedars, firs and other trees, and on controlled burns in oak woodlands and other forests, along with other fire prevention programs.
“Our conditions this year are tracking very similar to where we were last year,” said Ken Pimlott, chief of Cal Fire, the state’s firefighting agency.
With rainfall this winter in much of the Bay Area at about two-thirds of the historic average and only about a third of average in Southern California, Cal Fire already has responded to more fires so far in 2018 than last year at this time, Pimlott noted, 974 compared with 560. The additional money will allow the state to reduce fire risk on 500,000 acres a year through 2023, compared with 250,000 acres a year before, he added.
Lawmakers have until June 15 to pass the budget or have their paychecks withheld. They will be attuned to Brown’s signals, as the governor has the authority to veto any items within their plan.
While some Democrats will advocate for more spending in the coming weeks, others are pushing in the opposite direction. A group of lawmakers calling themselves the “California New Democrats” have introduced a bill to create a new state savings account “to weather the state’s boomand-bust revenue cycle.”
Some Republican lawmakers challenge the notion that California has a budget surplus at all, given the state’s debts and obligations. “I’m hard-pressed to accept the conventional wisdom that California has a ‘budget surplus’ of a few billion dollars,” Assemblywoman Melissa Melendez, R-Lake Elsinore, said in a statement Friday, “when the state is staring down more than $200 billion in outstanding debt and liabilities.”
The governor’s office noted shortly before releasing the budget that although “a lot has changed” since his first $9 billion budget proposal 43 years ago, “the guiding principles in today’s revision haven’t.” It posted a photo of Brown in 1975, during his first stint as governor, holding up his budget — a spending plan roughly the same size as today’s expected surplus.
“Within these principles — of balance, need and scrutiny,” Brown wrote 43 years ago, “I have tried to write a budget that responds to California’s future.”