Budging the Budget 

One of the most minuscule budges of the governor’s touted “good news” budget was $450 million over three years to partly close the $70 billion underfunded portion of the California State Teachers’ Retirement System. That comes to $150 million per year, which reduces the liability by an infinistesimal 0.002 percent of the pension fund shortfall. However, this would increase to $5 billion per year mainly from higher contributions from teachers in future years. But such contributions first would require agreement by the powerful California Teachers Association and California Federation of Teachers unions. Brown announced another “good news” part of the budget is that Medi-Cal funding has been increased by $1.2 billion, or 4 percent of the $29.6 billion Medi-Cal line item. That increase would plug an expected 45 percent increase in recipients. The California Healthline news site reported:

“California officials had estimated that one million to two million additional residents would enroll in Medi-Cal through the end of 2014, but about 1.9 million consumers already had registered for the program by the end of March and an additional 900,000 applications are pending.

“The state is responsible for paying half the cost of new Medi-Cal beneficiaries who qualified for the program before the Affordable Care Act went into effect. California Department of Health Care Services spokesperson Anthony Cava said the state still is determining how many of the new Medi-Cal beneficiaries were previously eligible.”

The number of Medi-Cal recipients now comes to about 30 percent of all Californians. That confirms the U.S. Census Bureau’s study released last November that, when cost-of-living is taken in to account, California has the country’s highest poverty rate, at 23.8 percent of residents.

Rainy-day fund

Brown’s budget also includes his well advertised “rainy-day fund,” which would set aside  $1.8 billion for a contingency reserve. That comes to 1.67 percent of the General Fund budget. However, for the first 15 years of the rainy-day fund,  half of the annual revenues set aside will go to paying down what Brown calls the Wall of Debt. So that will water down the “rainy day” fund even more. In addition, any portion of capital gains taxes collected that exceed 8 percent of General Fund revenues would go towards the rainy-day fund. For fiscal year 2014-15, that would mean any capital gains revenues higher than $9.3 billion. So if Silicon Valley has a really great year and state capital gains revenues come to $10.3 billion, as projected, then an additional $1 billion would go into the rainy-day fund. But the question is whether the Legislature and the governor have the will to not spend the money. In 2004, Proposition 58 created the Budget Stabilization Account of 3 percent set asides per year from the General Fund and the Special Fund for Economic Uncertainties.  These two funds have been on the books for years but the willingness to save instead of spend hasn’t been there.

Drought relief

The governor proposes increasing by $142 million funding authorized under Senate Bill 103 for emergency drought programs. SB103 is the State Budget Act of 2013.  So the $142 million is a fudged carryover of money shifted from the 2013 budget. Back in February, Brown mostly just redefined $687.4 billion in pre-existing programs and federal fund transfers as a “drought aid package.” Of that, 81 percent came from prior water bond funding, 7 percent from FEMA programs, 5 percent from shifting state cap and trade air pollution taxes collected from large industries to drought relief projects, and 2 percent from prior Assembly Bills 21 and 118.

Trudging the Budget

Brown’s budget would reduce the $14.8 billion remaining of what he calls the Wall of Debt by 2017. However, that reduction does not address the entire $340 billion in debt , deferred payments, and other liabilities tallied by the Legislative Analyst.                    Figure INT-02: Budget Plan Would Eliminate the Wall of Debt

“SACRAMENTO — While lawmakers begin discussing ways to fix California’s cash-strapped teacher pension system, another long-term financial problem continues to fester.

“The cost of providing healthcare to retired state workers is $64.6 billion more than state leaders have set aside to pay, an increase of $730 million from the previous year.

“The new numbers, calculated as of last June, were released by state Controller John Chiang on Thursday. …

“State workers become eligible, after 10 years on the job, to receive taxpayer-funded healthcare for life. The state picks up an even bigger share of the cost after 20 years of employment. 

“California pays the cost of retiree healthcare directly out of the annual budget. That’s much different from how it handles state pensions, which are largely funded by investment returns on gigantic pension funds.”

New role for ‘watchdog’: civic arsonist

Now let’s revisit what Mac Taylor said last November: At a legislative hearing, he opened his analysis of the state’s fiscal picture by declaring there was a“strong possibility of multibillion-dollar operating surpluses within a few years.”

Yeah, if you ignore CalSTRS’ gigantic and growing shortfall, and unfunded retiree health care, than the state is doing just fine.

And if you leave out what happened that one summer in Hiroshima and Nagasaki, Japan didn’t suffer too much in World War II.

Incredible. How does Mac Taylor sleep at night? He’s a civic arsonist.

SB 359 is by state Sen. Ellen Corbett, D-San Leandro. It approved a loan for $30 million to help finance low-income residents to transition away from older, higher-polluting vehicles. The bill also supports two state incentive programs for electric-drive cars, trucks and buses.

SB 459 is by state Sen. Fran Pavley, D-Aguora Hills. It requires the state to provide a voucher for a new alternative-fuel vehicle. The voucher would be given to low-income car owners who could not pass a smog test on their existing vehicle.

According to the bill analysis, the Enhanced Fleet Modernization Program established by AB 118 in 2007 has not “attracted substantial consumer participation.” Rebates have been issued to promote the very cleanest new vehicles paid for through smog abatement fees. In response, Pavley’s bill will hand out subsidies to remove “high polluting vehicles” from the road.

AB 8 is by Assemblyman Henry Perea, D-Fresno. It extended AB 118 until 2024. AB 118. For the current fiscal year, the program is expected to invest approximately $90 million to encourage the development and use of new technologies, and alternative and renewable fuels, to help the state meet its climate change goals. It is funded through vehicle and boat registration fees, as well as smog check and license plate fees.

While this is not the first voucher program CARB has created, it is the first that specifically targets low-income families who cannot afford an electric car.

As of early March 2013, the CARB has issued about 18,000 rebates totaling $41 million.

Also in March, the California Energy Commission voted to expand the state’s clean-vehicle rebate program with an award of $4.5 million to the California Air Resources Board through an interagency agreement to provide funding for the Clean Vehicle Rebate Project.

The latest fund award was made through the energy commission’s Alternative and Renewable Fuel and Vehicle Technology Program, created by

Transportation justice

In the San Francisco Bay Area, the Transportation Justice Working Group is part of the Social Equity Caucus, and is facilitated by Urban Habitat. They are fighting against “entrenched interests in transportation decision-making that have yielded socially and racially unjust outcomes for the past century in the Bay Area.”

To this group, transportation justice is about the highway system which has “displaced and cut up low-income communities of color and continues to burden them with toxic air pollution, traffic hazards and other disproportionate threats to their safety and health.”

These decisions have prioritized the construction and expansion of commuter rail systems, like BART and Caltrain, that are designed to serve affluent suburban riders, at the expense of urban bus systems,” the group said.

While the Transportation Justice Working Group is largely talking about restoring a once-effective bus system, the California Air Resources Board continues to push instead for new electric cars for the low income.

“Most plug-in electric cars cost more than the used cars that lower-income families and communities — the people who could most benefit from EV fuel savings, in other words — can typically afford. It doesn’t have to be that way, however, and California’s Air Resource Board is working to help low-income families get access to EVs by issuing vouchers starting at $2500.”

“With net operating costs approaching zero for cars like Nissan’s Leaf in some cases, electric car ownership could go a long way towards enabling low-income wage earners to get better education, as well as better access to healthy food and healthcare,” said Gas2, a car blog. “These low-income families would also be able to get to a number of private-sector jobs that, without an EV, would be off-limits to them. That means they’d quickly pay back CARB’s $2500 voucher through increased income, payroll, and sales taxes.”

The numbers

According to the governor’s working group on zero-emission vehicles, the roadmap toward 1.5 million zero-emission vehicles on California roadways by 2025, current spending will include:

* $44.5 million to help Californian buy low emissions vehicles such as plug-in hybrids and zero-emission cars and light trucks, with rebates of up to $2,500 as long as the funds last.

* The state’s hybrid and zero-emission truck and bus voucher incentive was increased from $5 million to $15 million. The vouchers of up to $55,000 are for fleet purchases of cleaner trucks and buses.

* The Truck Loan Assistance Program received an additional $18 million to help small-business fleet owners finance truck upgrades required by law.

As Brown often does, he first took on his critics:

“It occurred to me that these critics – who have long recited our state’s decline – perhaps have nothing to say in the face of California’s comeback – except, ‘please, don’t report it.’ Well, I’m going to report it, and what a comeback it is: A million new jobs since 2010, a budgetary surplus in the billions and a minimum wage rising to $10 an hour!”

Brown stressed again the need for “fiscal restraint” from the Legislature. But then he went on to discuss several big state spending projects:

“We’re on our way to a million electric vehicles and we’re building the nation’s only high-speed rail. We’re expanding health care coverage to millions more.”

Assemblywoman Kristen Olsen, R-Modesto, wasn’t buying Brown’s hype about fiscal restraint. She said:

“The Governor’s message of fiscal prudence would be inspiring, if not for his persistence of High Speed Rail and the Bay Delta Conservation Plan (i.e. Delta tunnels). It is irresponsible to continue wasting taxpayer dollars on projects like High Speed Rail that have no viable business plan and no connection to real needs in the San Joaquin Valley. The Governor should instead prioritize more immediate issues that have state-wide relevance, such as water storage.”

Promises

Brown quoted the American philosopher George Santayana: “Those who cannot remember the past are condemned to repeat it.” With Brown’s third term nearing an end, and perhaps a fourth ahead, Major League Baseball player and manager Yogi Berra might be more appropriate: “It’s like déjà vu all over again.”

Assemblyman Don Wagner, R-Irvine, also remained skeptical of Brown’s promises:

“The commitment from Governor Brown to reduce the debt is a message Californians want to hear. But, while it is encouraging that the governor is urging ‘fiscal restraint,’ I remain skeptical that a majority of Democrats in the Legislature share this vision.  Governor Brown has work to do to convince them, and I will help in in whatever way I can.”

While the governor’s budget addresses some of the state’s debt, Brown touched on only some of the state’s long-term debt and liabilities in his speech:

“And while we know our revenues will fluctuate up and down, our long-term liabilities are enormous and ever growing. Let me list some of them: Over $100 billion for pensions owed to state workers, teachers and judges; tens of billions needed to cover retiree health care; and $65 billion needed to maintain and keep our roads, buildings and other infrastructure in sound repair. We also must account for future risks that could negatively affect our budgets like congressional decisions, natural disasters and the uncertain costs of the Affordable Care Act.”

Assemblyman Mike Morrell, R-Rancho Cucamonga, answered:

“A perceived budget ‘surplus’ that fails to take into account hundreds of billions of dollars in unfunded liabilities is no justification to commit our children and grandchildren to more debt.” 

However, Assemblyman Luis Alejo, D-Watsonville, agreed with the governor:

“By instituting a rainy day fund, paying down the state’s burdensome wall of debt, and supporting proposals that advance these goals, we can ensure that education and other vital services in California are protected from the volatile nature of today’s economy.”

Brown addressed the serious need for a rainy day fund:

“In 2004, the people voted for a rainy day fund which was found to be unworkable. In 2010, you created another rainy day fund, now scheduled for the November Election. But this latest effort doesn’t give the state the option to pay off debt, doesn’t deal with the ups and downs of Proposition 98 and doesn’t account for spikes in capital gains. So let’s fix these flaws before going to the voters. This is work that must be accomplished in the next few months.”

Drought

The governor talked about the drought, and the serious implications for California:

“We need everyone in every part of the state to conserve water. We need regulators to rebalance water rules and enable voluntary transfers of water and we must prepare for forest fires. As the State Water Action Plan lays out, water recycling, expanded storage and serious groundwater management must all be part of the mix. So too must be investments in safe drinking water, particularly in disadvantaged communities. We also need wetlands and watershed restoration and further progress on the Bay Delta Conservation Plan.”

“It is a tall order.”

While Sen. Andy Vidak, R-Hanford, applauded the governor on his call for fiscal discipline, he remained skeptical on water policy:

“It’s encouraging that the governor mentioned the need to expand water storage and provide clean drinking water for our disadvantaged communities. I hope this is an indication of leadership, not delay, on a water bond that fully funds water storage on this November’s ballot.”

Assemblyman Henry T. Perea, D-Fresno, also addressed the need for water storage in California:

“It’s clear Governor Brown has made water a priority, and should be applauded for his emphasis on the need for water storage and providing clean drinking water to disadvantaged communities, both critical to California and the Central Valley. The drought brings to light the importance of investing in California’s water infrastructure.”

Global warming

Brown waded into global warming and AB32, the Global Warming Solutions Act of 2006:

“The United Nations Panel on Climate Change says – with 95 percent confidence – that human beings are changing our climate. 

“California is the leader in dealing with climate change. From AB32, to our building and appliance efficiency standards, our renewable portfolio standard and our support of electric vehicles, California is leading the way.”

Brown talked about California being a pioneer state, but not for what you might expect:

“California is not only the state where immigrants can dream, they can drive, legally.”

Brown neglected to identify the bill allowing immigrants to drive legally was for undocumented immigrants. Legal immigrants long have been able to drive in CA.

Brown never once mentioned unemployment, which remains high at 8.5 percent, according to the Bureau of Labor Statistics.

Brown wrapped up his State of the Sate address:

“Yes, California is a leader in so many ways. But, the dangers and difficulties we face can never be taken lightly. We still have too many struggling families, too much debt, and too many unknowns when it comes to our climate. Overcoming these challenges will test our vision, our discipline and our ability to persevere. But overcome them we will and as we do, we will build for the future, not steal from it.”

SB 687 was on the agenda in the education committee. The bill would allow school districts to permit adults to volunteer time or resources for maintenance or improvement of a school, volunteer time in the classroom or help during the lunch period.

And the bill would prohibit a collective bargaining agreement from prohibiting a school district from using volunteers.

Needless to say, SB 687, authored by Sen. Joel Anderson, R-Alpine, but presented by Sen. Mark Wyland, R-Solana Beach, elicited a great deal of discussion and plenty of union pushback.

Despite the need for maintenance at so many of California’s public schools, most of the committee concern seemed to center around the displacement of union employees with volunteers and “faulty work.” The bill analysis by the committee staff said volunteers “may not have the proper qualifications and training to perform capital projects.”

Committee members cited several school volunteer projects that went awry, including a heating and air conditioning replacement and a broken drinking fountain. “It puts the safety of kids in jeopardy,” said Sen. Marty Block, D-San Diego.

Torres’ comment draws guffaws

“There nothing in the current law preventing parents from volunteering in schools,” said Sen. Norma Torres, D-Chino, who noted that parents and volunteers do community beautification projects at school campuses in her district once a year. “And they are always done side by side with the classified employees, to plant flowers, remove graffiti, to do small things that improve the quality of life of that student while they are there,” she said.

“I am concerned about infrastructure improvements,” Torres said. “I don’t know — I am very concerned that everybody is talking about a water fountain as if it was no big deal. But some of our water fountains here in the Capitol had been infected with worms.”

Her comment prompted some guffaws and giggles.

“I don’t think that’s funny,” Torres said. “Our children deserve better than that. There’s asbestosis — some child may not know until 30 years from now that they got asbestosis from some parent cracking a wall and tapping into those types of contaminates.”

Torres continued: “Lead poisoning — we tried to do a painting project that included painting fences around the school, unknowingly that there was lead. Thank goodness that the classified employees, the people in the building trades that were assigned to work with the parents that day, understood what the volunteers did not understand.”

“I think this is a slippery slope and going down the …  um … wrong tube here with this proposal, and I’m not supporting it.”

Long list of unions oppose bill

After testimony in opposition of the bill by the California Teachers Association, California School Employees Association, California Federation of Teachers, and California Labor Federation – all labor unions or groups — Committee Chairwoman Sen. Carol Liu, D–La Cañada Flintridge, said she would keep the bill in the committee to allow Anderson to make changes to it.

Bill Lucia with Ed Voice, offered support for SB 687, saying it should be a local control, district by district issue, particularly to deal with irregular maintenance in schools.

But don’t expect to see parent volunteers at schools doing anything but planting flowers.

In a new report on the spending plan, the Legislative Analyst’s Office said Jerry Brown’s proposal to use cap-and-trade funds for high-speed rail is unlikely to maximize greenhouse gas emission reductions, which was the entire stated purpose of AB 32 and the cap-and-trade program.

Under AB 32, the California Air Resources Board created a regulation that establishes
 a cap-and-trade program, to help lower carbon emissions in California. AB 32 is the Global Warming Solutions Act, passed in 2006 by the state Legislature and signed into law by Gov. Arnold Schwarzenegger. The goal is to reduce greenhouse gas emissions in the state to 1990 levels by 2020.

Cap-and-trade was established to help achieve this goal. The regulation places a “cap” on aggregate greenhouse gas emissions from businesses and entities responsible for approximately 85 percent of the state’s emissions.

In the implementation the cap-and-trade program, the California Air Resources Board allocates a certain number of carbon allowances to the businesses. According to the CARB, each allowance equals one ton of carbon dioxide equivalent. The CARB provides some allowances for free to designated businesses. Other businesses are required to purchase allowances at auctions. Once the allowances have been allocated, entities can then “trade,” buy and sell the allowances, in order to obtain enough to cover their total emissions for a given period of time.

From the LAO report:

In order to minimize the economic impact of cap-and-trade, it is important that auction revenues be invested in a way that maximizes GHG emission reductions. Maximizing emission reductions (specifically in the capped sectors) reduces competition for allowances, thereby putting downward pressure on the price of allowances. This, in turn, reduces the overall cost for covered entities to comply with AB 32 and the potential negative economic impacts of the program on consumers, businesses, and ratepayers. It is, however, unclear to what extent the complement of activities proposed by the Governor maximizes GHG emission reductions.

college essays writing servicesThe LAO warns the Legislature there are legal risks with Brown’s plan to use cap-and-trade auction funds for funding high-speed rail:

Based on an opinion that we received from Legislative Counsel, the revenues generated from ARB’s cap–and–trade auctions are considered “mitigation fee” revenues. Thus, the use of these revenues are subject to certain legal criteria. Specifically, we are advised that their use is subject to the so–called Sinclair nexus test. This test requires that a clear nexus must exist between an activity for which a mitigation fee is used and the adverse effects related to the activity on which that fee is levied. Given this legal requirement, the administration’s proposal to fund activities (such as high–speed rail) could be legally risky. While the high–speed rail project could eventually help reduce GHG emissions somewhat in the very long run, it would not help achieve AB 32’s primary goal of reducing GHG emissions by 2020.

High-speed rail will not reduce carbon emissions

The Legislative Analyst’s Office warned in 2008 that the high-speed rail project would initially increase greenhouse gas (GHG) emissions for many years.

Following up, a greenhouse gas emission analysis done by the High Speed Rail Authority in 2013 indicates that once the high-speed rail system is completed and operational in 2022, it would contribute a relatively minor amount of GHG emission reductions.

The bullet-train project was touted as a way to dramatically reduce these emissions. Yet even after contrary reports, the governor still insists the project is green. “The high-speed rail is a reducer of greenhouse gases, an enhancement of the quality of California life and a bringing together of our various communities around the state,” Brown said at his budget press conference Thursday. He said because the state's population will grow by millions of residents, “we need alternatives.”

But as the LAO has consistently warned since 2008, and has does again with its new report, the construction of the project would actually produce additional emissions:

Despite these findings, roughly 30 percent of the funding in the Governor’s proposal goes to the high–speed rail project. Compared to a different mix of investments that could be made with the cap–and–trade revenue, the governor’s proposal is unlikely to maximize GHG emission reductions. Therefore, the Legislature will need to consider the most effective use of the cap–and–trade auction revenue.

Set to expire in 2018, it was sold to voters as a temporary tax.

“’We need to renew Prop. 30,’ Torlakson, the state Superintendent of Public Instruction, said Wednesday night at a coffee meeting with local PTA leaders in a Sacramento home,” the Sacramento Bee reported online.

Two days later, the Bee did a newspaper story  (and put it online) about that same meeting with Torlakson in a private home. But those pieces said the meeting was to talk to parents and teachers about the new Common Core state education standards. There was no mention of Torlakson’s call to extend Prop. 30 in the newspaper version of the story, yet both stories were written by Bee reporter Diana Lambert.

Perhaps Torlakson had an early copy of the Legislative Analyst’s Office 2014-15 fiscal review.

“As Proposition 30 Personal Income Tax increases phase out, much slower revenue growth forecasted,” the LAO headline said.

“Under Proposition 30, the increase in Personal Income Tax rates for high–income taxpayers generates a much greater proportion of revenue than the sales tax increase,” the LAO report found.

Under a hypothetical recession, the LAO explained, “the revenue losses would be offset somewhat by lower Proposition 98 minimum requirements, and we assume that the state would reduce spending to the lower allowed spending levels.”

The LAO warned against overcommitting, which could bring back budget shortfalls.

General fund spending

The California Personal Income Tax is two–thirds of the annual general fund revenues.

“We note, however, that the proportion of the general fund supported by PIT revenues likely would be growing even if Proposition 30 were not in effect due to more income concentration among the highest–income taxpayers and the other factors described earlier,” the LAO said.

Remember when Gov. Jerry Brown was campaigning to pass Prop. 30? “The taxes that I’m proposing on sales and higher income people goes to the schools — 100 percent of it,” the Los Angeles Times reported Brown saying. “But it goes in a way that integrates it with the budget itself.”

(Note: The L.A. Times stories with this quote are no longer available; the story linked is in the Press Democrat, but is a column by L.A. Times columnist George Skelton.)

However, what Brown wasn’t saying is that when state revenue increases, so does school funding, automatically. Proposition 98, passed in 1988 by the voters, guarantees K-12 public schools and community colleges about 40 percent of the general fund. So when general fund revenues go up, so does school spending. Conversely, when general fund revenues are reduced, school spending is also reduced.

“The first 18 months of the tax hike would raise $9 billion, according to the state Finance Department. Schools would be entitled to $3.8 billion, or 42 percent. The remaining $5.2 billion, or 58 percent, would be earmarked for budget balancing,” Skelton wrote.

So schools would not be receiving the bulk of the tax increase revenues. Is it any wonder Torlakson want to prolong the tax hike — other than a promise made to voters?

Following the budget press conference Thursday, Twitter was atwitter with comments.

Many lawmakers sent out formal press statements with their thoughts, like the statement (below) by Sen. Andy Vidak, R-Hanford.

Memorable Tweets

CA Democratic Party: GOP budget naysayers will be out in force but wont change basic facts: CA went from deficit to surplus under Gov. Brown & cuts to edu.

CA Democratic Party: ‪@abelmaldonado the Governor cleaned up your Republican Party's mess, balanced the budget & stopped cuts to education. What's that you say?

Jon Coupal:Does Governor realize that supporting lowering 2/3 vote on local bonds is a direct attack on Prop 13?  We'll make sure everyone knows that.

Phillip Ung: Missed this in the live ‪#cabudget broadcast, but ‪@JerryBrownGov says paying down debt should not be considered spending.

Gavin Newsom: The Gov. has kept his promise to be straight w/CA, releasing a sensible, balanced & socially progressive budget.”

Tim Donnelly: Bottomline – California's finances not as rosy as Governor Brown would have you believe. Time for him to go. Time for a Brown-out.

CA Assembly GOP: Asm GOP Ldr Conway on #cabudget: Democrats are going to want to “spend, spend, spend.” http://goo.gl/82iSzz  @kcranews

CTA: California teachers appreciate Gov's commitment to public education and to repaying the billions of dollars cut from our schools. #cabudget

Capitol Weekly: Brown's budget plan contradicts earlier bipartisan compromise over 'rainy day fund' …http://blogs.sacbee.com/capitolalertlatest/2014/01/rainy-day-fund-proposal-pulls-back-from-2010-deal.html … #cabudget #caleg

Darrell Steinberg: My statement on the proposed Jan. #CAbudget. I look forward to working with Gov. & my legislative peers in days ahead http://sd06.senate.ca.gov/news/2014-01-09-steinberg-statement-governor-proposed-2014-15-state-budget …

Speaker John Perez: I’m pleased to see how strongly ‪@JerryBrownGov has embraced the rainy day fund that is the cornerstone of ‪@AssemblyDems ‪#CABudget proposal.

‪Thomas Del Beccaro: @JerryBrownGov Jerry Brown's Paradoxical Budget:  Increases spending 9% to pay down debt?

That Jim Berg: There should be money in the #cabudget for #arts funding. $5million isn't too much to ask @JerryBrownGov

Ben Adler: ‪@JerryBrownGov presents his ‪#cabudget. Lots of charts, little suspense after it leaked out last night.

Ron Nehring: The ‪@jerrybrowngov budget leaves California uncompetitive, w/ highest sales and income taxes in America.

Desperado budget

The funniest response to Gov. Jerry Brown’s new budget plan came from Sen. Andy Vidak, R-Hanford, who responded using lyrics from an old song by the Eagles: “Governor Brown, why don't you come to your senses?”

Vidak left off the word “Desperado,” the title of the song. He was referring to Brown's budget proposal to use AB 32 cap-and-trade money to fund the controversial and doomed High-Speed Rail project – which could be looked at as a desperado attempt to save the project.

Ironically, the Eagles used to be a backup band for Linda Ronstadt — Jerry Brown's high-profile girlfriend in the 1970's when he was governor the first time around.

Ronstadt did her own beautiful rendition of Desperado in 1976.

Desperado, why don't you come to your senses
You've been out ridin' fences
for so long now
Ohh you're a hard one
I know that you've got your reasons
These things that are pleasin' you
Can hurt you somehow

The governor’s $155 billion total spending plan increases the general fund spending to $106.8 billion from last year’s $97.7 billion. The budget only partly addressed the $10 billion owed to the federal government for unemployment borrowing,  about $6 billion borrowed internally from other funds, not to mention the estimated $500 billion in unfunded pension debt.

The budget is flush with new cash due to the modest economic recovery, and to the temporary tax increase from the governor's ballot initiative, Proposition 30, passed in 2012. This tax increase imposed a 10.3 percent tax rate on taxable income more than $250,000, an 11.3 percent tax rate on taxable income more than $300,000, a 12.3 percent tax rate on taxable income more than $500,000, and a 13.3 percent tax rate on taxable income more than $1 million.

Brown's budget also called for using $250 million in cap-and-trade money from Assembly Bill 32, the Global Warming Solutions Act of 2006, to fund the High-Speed Rail project, despite the criticism the project has come under lately, especially from the courts. Brown insisted the High-Speed Rail system, whose long-term cost is at least $68 million, will reduce carbon emissions.

At the press conference, Brown justified cap-and-trade funding the rail, “Cap and trade is a very good source for that … coming from the sources of pollution, to reduce pollution.”

Republican response, and ridicule, was swift to the rail funding idea. State Sen. Andy Vidak, R-Hanford, sent out a response using lyrics from an old song by legendary rock band the Eagles: “Governor Brown, why don't you come to your senses?” 

Vidak meant the proposal could be seen as a desperado attempt to save the project.

'New' budget still ignores debt

Brown also proposed $10 billion in new state spending on schools and community colleges, increasing the spending to more than $45 billion. In addition to the $10 billion going to schools and community colleges, Brown’s budget calls for $1 billion more for universities. Brown indicated he would continue to incentivize the state university systems to encourage graduation in four years.

What’s the carrot? Another $50 million in higher-ed funding.

Medi-Cal, the state's low-income health program, will receive an additional $670 million. Health and Human Services funding will increase to more than $48 billion.

“Wisdom and prudence should be the order of the day,” Brown said several times during the press conference. And he promised to chip away at California’s long-term debt. But Brown said he plans to only repay $11 billion in long-term debt, and would be putting away $1.6 billion in a rainy-day fund.

With the state's overall long-term debt problem chronically ignored, $11 billion is government chump change, and won't really chip away at the massive, growing debt problem.

“We owe $10 billion to the feds alone for unemployment compensation,” said Assemblyman Dan Wagner, in an interview. “$11 billion won't fix the problem, but sounds good in the media.” In Brown’s budgets, the hefty unemployment debt to the federal government is never included in the long-term “Wall of Debt.”

Brown limits what’s included in the Wall of Debt largely to money owed from the 2004 state bonds voters approved, and to money owed to K-12 schools and community colleges. The latter, in effect, is the state “owing” the money to itself.

Wagner said California ought to be working harder to pay the debts from outside of the state, such as the federal unemployment fund debt, which continue to rack up interest and penalties, rather than focusing on paying back funds borrowed from ourselves.

“And the unfunded pension liability is going to kill us,” Wagner added. “California is not back. No way.”

Fiscal restraint through tax increases and salary increases

Brown said he is committed to fiscal constraint. But the Republican minority in the Legislature held otherwise.

“In comparison to the [Democratic-run] Legislature, yes,” Brown has shown more constraint, said Everett Rice, Communications Director to Sen. Mimi Walters, R-Laguna Niguel. “But he also did tax increases, and gave pay increases to state employees. It’s hard to be constrained when you push tax increases and pay raises.”

The debt

Of the significant debt issues, pension and retirement benefits for public employees are unfunded by half a trillion dollars, according to Stanford University, and the state has billions of dollars in other outstanding obligations and debts. The California State Teachers Retirement System pension fund is currently underfunded by $80.4 billion, something Brown acknowledged in his budget proposal.

Brown called for “a new funding strategy” to include more from teachers and school districts, and have the state kick in more. But those solutions were not included in the budget numbers.

“The governor’s budget spends more than it should, pays down a pittance of the state’s long-term debt and saves too little for a rainy day,” said Assemblyman Jim Patterson, R-Fresno, in a statement. “It spends $10 billion more than last year; relies heavily on the new taxes that will end soon; and accomplishes little to chip away at California’s … wall of debt. It appears slightly better than some previous years, but it still misses the mark.”

The new budget includes a $1.6 billion “rainy day fund,” or 1.5 percent of the total.

The budget addresses what the governor has called the “Wall of Debt” run up by the state, currently totaling $24.9 billion. The major items are:

* $6.1 billion in deferred payments to schools, which will be eliminated;

* $3.9 billion for the Economic Recovery Bonds voters approved in 2004, at the insistence of Gov. Arnold Schwarenegger, which will be eliminated;

* $3.9 billion in loans from special funds, which will be reduced by $1 billion, to $2.9 billion;

* $5.4 billion in unpaid costs to local governments and schools for state mandates, which will remain the same;

* $2.4 billion for the under-funding of Proposition 98 for schools, which will be reduced by $600 million, to $1.8 billion.

Spending increase

In a question-and-answer session with reporters, I asked about the $20 billion increase in spending over three years.

The governor replied that most of the new spending is going to pay down the Wall of Debt. “When you pay off that debt, you improve the debt, you don’t make it worse,” he said.

However, the Wall of Debt includes two kinds of debt: First, what it owes to outside entities, mainly bond houses. This is real debt that, if not paid, would slam the state’s credit rating. Paying down the $3.9 billion from the Economic Recovery Bonds really does help the state’s financial position.

Second is what the state “owes” to itself, such as the deferred payment to schools, loans from special funds and under-funding Prop. 98. “Paying down” this kind of a loan really is just more spending. For the fiscal 2014-15 budget, this kind of spending amounts to about $9 billion, mainly the $6.1 billion in deferred payments to schools and community colleges.

Next year, it’s likely that continuing this spending will be demanded of the state by the schools and community colleges. On the positive side, cutting the spending — not including it in the budget for 2016-17 — could be easier because the governor could claim it was just a one-time situation.

CalSTRS

As did last year’s budget proposal, the governor’s 2014-15 proposal acknowledged that the California Teachers Retirement System “estimates that stabilizing the system could cost more than $4.5 billion a year, which could overwhelm other education priorities as well as other policy initiatives.” The proposal advances that, “A new funding strategy should phase in contribution increases for employees, employers, and the state to allow parties to prepare for increased costs.”

It should be noted that “employers” means local taxpayers and “the state” means state taxpayers.

And the budget proposal does not advance a solution. So if the needed $4.5 billion had been included in the budget, it would have devoured all the $1.6 billion rainy day fund and produced a deficit.

In the Q&A, CalWatchdog.com asked about the $4.5 billion needed for CalSTRS. Brown replied that he would be dealing with the problem, presumably if he is re-elected in November. “One way or another, we’re going to pay those teacher pensions,” he said. “This teacher retirement problem is real.”

More spending

Overall, the budget “continues our investment in schools by providing $10 billion this year alone to give California students a much better chance to succeed,” the governor wrote in is introductory words. And in his discussion with reporters, he touted his program of shifting more spending to needier schools.

But the budget does not deal with the problems of the educational policies behind school dysfunction. Spending more money on failed policies will only produce more expensive failures. The latest results from the National Assessment of Educational Progress found, according to the summary in the Mercury-News, “The Golden State’s fourth-graders ranked 47th in the nation in both math and reading. Eighth-graders ranked 45th in math and 42nd in reading. And the scores show that the gap separating white students from their black and Latino peers in English and math is bigger in California than it is nationwide.”

On the positive side, “But amid the dismal news are signs of improvement. California’s eighth-grade reading scores jumped 7 points from two years ago, the biggest gain on that test among the states. Eighth-graders gained 3 points in math.”

But unless such gains continue and even accelerate, the state is going to find that it won’t have the human capital to continue its preeminence in the world of high technology.