CA Legislature boosts budget up to $156 billion

Convinced that California’s fiscal crisis is effectively over, state Democrats led the state Legislature to pass a $156 billion budget.

They did so after a round of negotiations that left Sacramento just six hours away from missing the state’s constitutional deadline for passing a budget into law by midnight, June 15.

With a general fund more than $7 billion larger than last year’s, the new budget is California’s biggest ever. A victory for Gov. Jerry Brown, who was largely responsible for crafting the plan, the budget is now set to trigger debate over the results of its politically disputed expenditures. For Brown, the budget is part of a larger economic picture. With the “right kind of budget,” he told Democratic legislators, California’s credit rating could rise to the highest level in five years.

As it stands now, California’s borrowing costs are lower than they have been since 2008. Though profligate by the standards of Republicans in the Legislature, Brown’s budgetary moves over the past several years have convinced ratings agencies that the state has turned a corner from the bad old days of 2009, when California paid some bills by issuing IOUs. That year, California’s budget deficit reached $26 billion under Republican Gov. Arnold Schwarzenegger.

Added burdens

California’s recent budgetary surplus, however, has triggered a new round of argument over what to do with the cash flowing in. What’s more, not all of the budget’s line items were added by choice. Just last month, Brown issued a revised budget proposal reflecting California’s narrow margin between increased taxes and increased spending.

Thanks to Obamacare, for instance, Medi-Cal signups exceeded estimates by over 1 million — claiming half of the $2.4 billion in higher revenues pulled in by the state. Much of the other half was absorbed by “unanticipated” costs, ranging from drought relief to CalPERS payments, according to the San Jose Mercury-News.

Despite these and other liabilities, legislators voted in more spending than Brown had anticipated. Increased spending on preschool, favored by Sen. Darrell Steinberg, D-Sacramento, received a $265 million boost. Brown managed to negotiate that figure down from Steinberg’s goal of more than $1 billion.

High-speed rail

Brown’s resistance to Democrats’ most ambitious spending proposals did not, however, impact California’s high-speed rail budget, which remains a priority of Brown’s. Budgetary battles surrounding the train network have threatened to scuttle the project. Not only do Republicans fiercely oppose high-speed rail; courts have made Brown’s life difficult by barring the state from offering some $8.6 billion in bonds approved by voters for sale.

That’s significant in two ways. First, most of the train’s funding was intended to come from the bond sales; second, additional funding won’t come through if state and federal funding does not.

In an added twist, Brown’s earmarking of $250 million in cap-and-trade funds for high-speed rail came under pressure from Democrats and Republicans alike, albeit for different reasons. Some Democrats fumed over diverting money to a project likely to increase emissions well before contributing to any future net decrease. Sen. Fran Pavley, D-Agoura Hills, abstained from the most recent vote on the train — significant because she authored AB32, California’s sweeping carbon emissions law.

Pavley’s ambivalence reflects a much broader and deeper push to challenge the train on environmental grounds. In a dramatic new lawsuit filed in Sacramento Superior Court, plaintiffs allege the train’s freshly certified Environmental Impact Report falls below the standards of accuracy and comprehensiveness adequate to let train construction move forward. Plaintiffs want construction frozen until a new, legitimate EIR can be conducted and circulated for comment.

In that sense, the fate of California’s high-speed rail is out of Brown’s hands. So there’s little downside in him pushing now for robust budgeting. If and when the courts sink the project for good, the dollars Brown had allocated to the train would go back up for grabs.