Revenue spike may fuel budget battle between Brown, progressives

by Chris Reed | January 2, 2018 4:00 am

The November forecast,[1] conducted by the Legislative Analyst’s Office, of state revenue running $7.5 billion higher than expected in 2018-19 has set the stage for perhaps the most pitched budget fight between Gov. Jerry Brown and the Legislature since Brown returned to the governor’s office in 2011.

Progressive Democrats in both the state Assembly and Senate are eager to broadly expand public services. Brown, however, has spent his second go-around as governor emphasizing the dubiousness of adding permanent new spending programs when state revenue is so volatile[2] because of its dependence on income and capital gains taxes paid by the very wealthy.

The governor warns that even a moderate recession could lead to a loss of $55 billion in revenue over three years. Given that revenue plunged $30 billion in one year at the start of the Great Recession, the memories of the budget carnage under Gov. Arnold Schwarzenegger are fresh, especially the huge cuts in K-12 education spending.

But the California Nurses Association and its legislative allies are signalling they’re ready[3] for another full-on push for a single-payer health care system. Assembly Speaker Anthony Rendon, D-Lakewood, continues to ask proponents how such a system could be funded, given that its estimated annual cost of $400 billion is more than triple the state’s current general fund budget of $125 billion. He effectively killed[4] Senate Bill 562, the CNA-backed single-payer measure, last session, perturbed that advocates refused to offer clear explanations of how it would be funded.

Universal free preschool, health care for undocumented sought

The next most costly initiative on the table is a long-discussed proposal to provide universal free preschool to 4-year-olds. Many Democrats share former Assembly Speaker Darrell Steinberg’s view[5] that it should be first on the list of any new state programs. Steinberg’s 2014 proposal would have cost an estimated $2.5 billion a year. More recently, the Common Sense nonprofit advocacy group has been lobbying[6] for a more ambitious program than Steinberg’s with a price-tag of at least $5 billion a year.

Assembly Budget Committee Chairman Phil Ting, D-San Francisco – the lawmaker who so far has issued the most comprehensive proposed budget – wants to spend $4.3 billion of the $7.5 billion in additional revenue expected by the LAO, with the remainder going to the state’s rainy-day fund.

Ting’s most notable proposal is to provide Medi-Cal health care to undocumented immigrants up to age 19, at an annual cost of about $1 billion after smaller initial outlays. He also wants to increase college scholarships, restore cost-of-living increases for state benefits going to the aged, blind and disabled, and increase access to child care. Ting’s plan also calls for an expansion of preschool, but with a plan that’s less far-reaching than Steinberg’s proposal.

Under the California Constitution, the governor must present a budget for the fiscal year starting July 1 by Jan. 10. In May, after the state Department of Finance updates its revenue and expenditure forecasts, the governor’s office issues a revised budget.

Brown made few concessions during the last budget cycle. In May, he ignored the then-loud push for a dramatic expansion of state health care, but he did agree [7]to increase salaries for child care providers and to continue funding a joint state-counties program meant to ease access to health services for seniors and low-income families.

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