Democratic lawmakers are already gearing up for brawls with Gov.-elect Gavin Newsom over costly efforts to expand state government with a single-payer health care system and a bold new push for subsidized pre-kindergarten education. Now, another ambitious bill with a huge price tag has emerged: one guaranteeing the state’s steadily growing homeless population an inherent right to government paid or provided shelter.

A 2017 federal estimate put the total number of California’s homeless at 134,000. If 100,000 took advantage of shelter at a cost of $100 per night, that’s a $3.65 billion annual outlay.

State Sen. Scott Wiener, D-San Francisco, is the lead proponent. He told the Bay City Beacon that his “right to shelter” Senate Bill 48 is inspired by the policy put in place by New York City in 1981 after New York courts interpreted the state’s constitution as creating such a right.

“Shelter isn’t the ultimate goal – permanent housing is the goal – but shelter is a critical step in helping people get back on their feet. Access to shelter shouldn’t depend on where you live, yet in California today, it does. Too many parts of California either have no shelters or inadequate shelters,” Wiener said in a statement about his measure.

Wiener won praise from some fellow Bay Area politicians for his framing of the homeless crisis as a state problem, rather than one that should be seen exclusively as a local headache – one that San Francisco has seemed overwhelmed by in recent years.

“Elevating this up above our internal San Francisco food fight is certainly good,” San Francisco Supervisor Rafael Mandelman said.

Proposal knocked for vagueness on details, funding

A 2017 report in The Urbanist online magazine found that while the focus had long been on San Francisco’s homeless population, officials in neighboring counties – Alameda, Oakland, San Mateo and Santa Clara – all struggled to come up with effective plans and funding to deal with their growing homelessness.

However, some of the coverage of Weiner’s bill paralleled the criticism that California Senate Democrats faced in 2017 when they passed Senate Bill 562. It would have committed the state to establishing a single-payer health-care system without offering such key details as how its $400 billion annual cost would be covered – or outlining how such a state law could overcome the obstacles to state single-payer that are well-established in federal law. Assembly Speaker Anthony Rendon knocked senators for expecting the Assembly to fix a bill that was “woefully incomplete.”

Similarly, San Francisco Chronicle columnist Heather Knight wrote last week of Wiener’s bill, “He doesn’t know exactly how it will work. He doesn’t know how much it will cost or how it will be funded.”

In interviews, Wiener offered a vague vision of a statewide network of “Navigation Centers” – friendlier, more supportive homeless shelters that offered access to health, substance abuse and other programs.

Inspired by New York City program with many critics

Yet even after Wiener begins fleshing out his proposal in substantive ways, California residents will learn that the history of New York City’s pioneering program is as problematic as inspirational. While the city’s program is widely praised on humanitarian grounds for sheltering more than 60,000 people a night, it has also long been a political punching bag that faces criticism from across the ideological spectrum.

A 2017 report by the Daily Beast website – normally sympathetic to liberal initiatives – was typical.

On the left, there are complaints about the shoddy, crime-ridden private facilities and residential hotels that the city contracts to handle some of the homeless.

Moderates worry that so much is spent on shelter that there’s not much money left to spend on programs to transition the homeless to jobs and productive lives.

Conservatives like the American Enterprise Institute’s Kevin Corinth say there’s statistical evidence that family homelessness is increasing much faster in New York City than nationally because once such families secure city shelter, parents lose their incentive to seek jobs or career training. The average stay in a shelter is more than a year.

But on his home turf, at least, Wiener is finding praise for thinking big.

“We can’t just have people languishing and dying in the streets as we wait decades to build enough affordable housing for everyone,” San Francisco Supervisor Hillary Ronen told the Chronicle. “We need a safe, dignified place for people to be in the interim.”

Photo Credit: Wikimedia Commons photo of homeless woman in San Francisco’s Tenderloin district.

But nearly six months later, as final work on the budget wraps up, Brown’s dominance of state finances has gone all but unchallenged. Any assumption that a lame-duck governor in his final year would have less clout has long since been disproved.

For the fiscal year which begins Sunday, the state will have a $138.6 billion general fund. Spending on special funds dedicated to specific programs and on bond debt will bring the total overall budget to $199.6 billion.

Brown made some concessions during the budget process. The state will spend an additional $600 million on programs to help local governments deal with homelessness; give an additional $344 million to the CSU and UC systems; and provide $90 million more for monthly CALworks welfare payments.

But new spending is dwarfed by the billions of dollars the state continues to set aside in reserves. Nearly $14 billion is expected to be in the state’s “rainy day” fund and $2 billion more in other funds by the end of fiscal 2018-19 – so much so that the state may soon have to cut the sales tax to prevent reserves from exceeding constitutional limits.

The governor has emphasized building up reserves because of his frequently voiced belief that the state is overdue for a recession. Because by far the state’s biggest source of money is income and capital-gains taxes paid by the very wealthy, revenue can plunge rapidly when Silicon Valley stumbles. A decade ago, in the first fiscal year after the Great Recession, revenue fell $20 billion – leading to cuts in spending on public education and welfare programs under Brown’s predecessor, Arnold Schwarzenegger.

The freshness of this budget pain in the memories of dozens of long-serving state lawmakers has made even some ardent liberals open to the governor’s relative frugality.

No expansion of Medi-Cal to undocumented adults

This was evident in the resolution of the fight over access to Medi-Cal, the state program providing health care to the poor. Some Bay Area and Los Angeles County Democrats pushed hard for giving regular, full access to the subsidized care to older unauthorized immigrants, not just to children, as is now the case.

But the governor never budged. All progressives got out of Brown was an agreement to form a commission that will “broadly study California’s health care needs” – a concession that was dismissed as meaningless by some groups which had hoped for much more, according to a Los Angeles Times report. Cynthia Buiza, executive director of the California Immigrant Policy Center, told the Times that the “budget deal is devastating for the health of all that call California home. … We are specifically disappointed that our low-income immigrant neighbors, friends, colleagues and communities will continue to suffer from [Medi-Cal] exclusion.”

Republican lawmakers were largely on the sidelines in shaping the budget. While some praise Brown for restraining his fellow Democrats, others challenge the narrative that he is frugal. A recent budget op-ed in the Los Angeles Times offered some support for this skepticism. It noted that total spending will go up by 9 percent from the current fiscal year to the next one – more than four times the rate of inflation.

SACRAMENTO – Gov. Jerry Brown’s annual budgets have become familiar affairs. During his last two terms in office, Brown routinely offered a budget plan that broke spending records, but also was designed to limit the creation of new programs while girding against the possibility of another recession. The governor’s budget release from last Thursday was true to form.

Brown’s 2018-2019 budget plan would spend a record $132 billion in the general fund – which is 4 percent higher than last year and 44 percent higher than the first budget he released in his modern gubernatorial terms (2011-2012). The total budget – including spending from bonds and special funds – tops $190 billion. As columnist Dan Walters points out, Brown’s first-ever budget from the 1970s spent only $11.5 billion in the general fund. 

But Brown touted his infamous chart showing that balanced budgets often have been followed by deficits.  “California has faced 10 recessions since World War II and we must prepare for the eleventh. Yes, we have had some very good years and program spending has steadily increased. Let’s not blow it now,” he said in his budget statement.

The governor also warned about the ramifications of the recent federal tax plan, signed by President Trump, which increases the tax bite on high-income Californians by limiting their ability to write off state and local taxes. Unless the state Legislature passes a workaround (such as a proposed plan that allows Californians to designate their state tax payments as a “charitable contribution”), the new rules are expected to reduce revenues in high-tax states.

There are other steps that followed in a more fiscally conservative manner. Following the recent increase in the gas tax and vehicle-license fees, the new budget showed a healthy surplus. Instead of spending it on new programs, Brown has earmarked $5 billion to the state’s rainy day fund. That’s $3.5 billion more this year than he is obligated to set aside in case of a coming downturn. It brings the total fund to $13.5 billion.

These efforts drew praise from across the political spectrum for their prudency. As the San Francisco Chronicle opined, Brown’s “proposed budget, drenched in a $7 billion surplus, spends money sparingly, dumps dollars into a record rainy-day fund, and dodges big-ticket programs favored by his would-be successors.” Democratic legislators and statewide elected officials likewise praised the governor for spending more without breaking the bank.

He even earned the faint praise of some Republicans legislators, who fear that the next Democratic governor will be far more eager to spend beyond Californians’ means. “As usual, the governor gave a good speech this morning,” said Sen. Jeff Stone, R-Temecula. “But as has been the case far too often, the initial budget is the floor and I’m sure the Democrat leadership in Sacramento will now begin the spending spree we all know is coming.” Other Republicans argued that the surplus proved that the gas-tax hike was unnecessary – and urged the governor to return the surplus to taxpayers.

There are a number of other noteworthy spending proposals. For instance, the governor plans to quickly start spending $4.6 billion in road improvements, which some observers believe could blunt the momentum of a proposed statewide initiative, which is now in the signature-gathering stage, that would repeal the unpopular tax. The governor also proposes spending nearly 3 percent more on California State University and the University of California systems – a proposal that drew criticism as being insufficient from some education officials. Total K-12 spending would be up by 2.5 percent.

Of particular note, the governor proposes the creation of a new fully online state community college to serve the “2.5 million Californians in the prime working ages between 25 and 34 who have only a high school diploma or some college but no degree.” Brown says these Californians – mostly Latino and women – are most vulnerable to recession and to automation in the workplace. The proposed cost to get started is approximately $100 million and then $20 million a year.

Social services spending remained stable. The budget boosts health care spending but contains some uncertainty, pending a coming decision from Congress regarding whether it will continue to split the costs of the Children’s Health Insurance Program with the states. The governor continues to boost funding for programs to combat climate change. He continues to pay down the so-called “Wall of Debt,” which hit $35 billion in 2011 and is down to $6 billion in this budget year.

One big fiscal issue, that doesn’t directly affect the current, proposed budget, involves the state’s growing payments to cover its unfunded pension liabilities. “When the next recession comes around, the governor will have the option of considering pension cutbacks for the first time in a long time,” the governor said at a press conference. They will, he said, be on the “chopping block.”

Brown was referring to a series of cases that the California Supreme Court has agreed to review this year involving something known as the “California Rule.” That refers to a series of decisions dating to 1955, which forbid government from cutting pension benefits for current employees even going forward (i.e., you accrue the promised benefit through today, but start earning a lower amount starting tomorrow).

Unions have challenged some changes in the governor’s 2013 pension-reform law. Brown’s legal team submitted a brief to the court that defends not only the reform law, but which seems to back broader changes to the rule. Clearly, the governor expects the court to side with him, which would not only give the state more latitude in reining in spending, but local governments, too.

That’s a longer-term picture, but in the short term the budget proposal is pure Jerry Brown. He wants to spend more on government programs, but wants to be certain that the state isn’t committing itself to huge new spending obligations if the economy goes soft.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

In fact, the budget plan conforms almost exactly to the governor’s longtime fiscal approach. He wants to fund social programs as much as possible, but not create new, permanent spending programs that cannot be curtailed when fiscal times are bad. He talks repeatedly about frugality, yet his budgets continue to ramp up state spending to record levels. He did set aside $8.5 billion for the rainy-day fund to prepare for any downturn.

Even the governor’s approach to the state’s unfunded pension liabilities is prototypical Brown. The governor speaks regularly about the size of the state debt to pay for pensions and retiree medical programs, but he typically addresses the problem with small-scale solutions that trim debt levels without antagonizing state workers and the unions that represent them.

This particular deal would borrow money from a state fund that pays a low interest rate, and pay down some of the state’s pension debt by investing it with the California Public Employees’ Retirement System, which predicts a fairly high rate of return (7 percent). Brown says this plan will save the state $11 billion over the next two decades simply because of the difference in interest rates. 

In terms of spending, the budget uses $1.2 billion in new revenues from the state’s recently passed tax increase on tobacco to help pay for growing costs to Medi-Cal, the state health program for low-income residents. But about half of those new revenues will be earmarked to health care providers and to family-planning entities like Planned Parenthood. It expands spending on the state’s K-14 educational system.

The budget also expands spending for both of the state’s university systems (the University of California and California State University), but the nearly $300 million combined in increased higher education spending comes with some conditions. The plan withholds $50 million from the University of California until the Office of the President fulfills the recommendations made earlier this year by a state auditor. It also requires California State University officials to “find space for students denied entry to their preferred campus or program,” according to the Sacramento Bee.

The budget increases spending on subsidized affordable-housing programs by $400 million. The budget also will allow more people to take advantage of the state-level Earned Income Tax Credit. Under new criteria, low-income people earning up to $22,000 a year will qualify for state EITC payments, up nearly $8,000 from previous standards. The new eligibility standards also apply to people who work for ridesharing companies or are involved in other forms of self-employment, according to various news sources. The budget doesn’t include an extension of the cap-and-trade system, although the system is likely to be extended in separate legislation.

Furthermore, the budget spends $100 million to set up a new agency to deal with the legalization of recreational marijuana sales, including the creation of a tax office along the Redwood Coast in the heart of marijuana-growing country.

The whole budget, which includes all spending (from bonds, etc.) totals $183.2 billion. But the biggest controversies are not around the amount of money the state will spend. The Legislature used the trailer-bill process – normally reserved for technical amendments to budget matters – to pass some controversial, nonbudget-related matters.

For instance, Democrats are fighting a recall measure against state Sen. Josh Newman of Fullerton. Republicans targeted him because of his vote on the recently passed gas-tax increase. One trailer bill in the budget would extend the timelines for the recall, making it more likely that the election would be put on a regularly scheduled ballot timeframe that would be more favorable to the Democratic incumbent. Another trailer bill would reduce the power of elected officials in the state Board of Equalization, a tax board. Yet another creates new dam-safety rules, following problems at the Oroville Dam spillway last winter.

Still, what Democrats described as responsible drew some rebuke from Republicans, who note that general-fund spending is nearly $40 billion higher in this budget than it was six years ago. Balanced and progressive or out of control? It depends on which side of the aisle one sits on. But everyone at least agrees that it’s basically in balance.

 Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

Will progressive lawmakers challenge Gov. Jerry Brown over his decision to dash their big dreams for the 2017-18 fiscal year? Or will they acquiesce as they mostly have in recent months of May after Brown released revised budgets without money for new or expanded government programs?

Despite the pleas of Assembly Speaker Anthony Rendon, D-Paramount, and Senate President Kevin de Leon, D-Los Angeles, that he take a break from his usual frugality, the governor’s revised 2017-18 $124 billion general fund budget released last week is far more concerned about helping public schools and beefing up the state’s rainy-day fund than any new liberal cause.

With a month until the June 15 deadline to adopt a state budget, that means Democratic lawmakers – especially those from liberal districts in the Bay Area and Los Angeles County – have a big decision to make: Do they accept a wipeout? Or do they put pressure on Brown by sending him bills popular with Trump-agitated grass-roots Democrats and making him veto them?

This is the dynamic created by the fact that Democratic legislative leaders entered the current session in January with ambitious hopes for bold new programs making college much cheaper, expanding state affordable housing efforts and providing health care for all.

Ambitious legislation not taken seriously

The governor doesn’t even think the ideas are worth discussing.

Brown’s budget rejects the basics of Assembly Bill 1356, by Assemblywoman Susan Talamantes Eggman, D-Stockton, which would have added a 1 percent surtax on California families earning $1 million or more to cover the cost of fees and tuition for in-state students at the University of California, California State University and the California Community College system. The governor also dismissed without comment Assembly Democrats’ push to help cover basic living expenses for 350,000-plus UC and CSU students from families which make less than $150,000 a year.

Brown’s budget makes no mention of SB562, a bill by Sens. Ricardo Lara, D-Bell Gardens, and Toni Atkins, D-San Diego, that would create a government-run single-payer health care system. It’s won some early committee victories, despite not having a fiscal analysis that explains how or who will pay for the program.

And a push supported by dozens of Democratic lawmakers to impose a fee on real-estate transactions to provide a steady stream of hundreds of millions of dollars in annual funding for subsidized affordable housing projects was flatly rejected by Brown as inadequate to addressing California’s housing crisis.

At a Thursday press conference, the governor said, “I don’t think we should throw money at the housing problem if we don’t adopt real changes that make housing production more efficient and less costly. We’ve got to do that first.”

For nearly two years, the governor has pushed for laws reforming the California Environmental Quality Act to give builders fewer obstacles to constructing new housing units. But legislative Democrats have heeded their union, trial lawyer and environmental allies who say CEQA shouldn’t be weakened.

Brown and top Democratic lawmakers pulled off a big win last month on an issue they agreed on: the urgent need to improve California’s decaying infrastructure, both for quality-of-life reasons and to help the economy by reducing the drag on the economy caused by bad, clogged roads. They pushed through gas tax hikes to pay for a 10-year, $52 billion infrastructure improvement and repair initiative.

But Brown’s pragmatism about government spending has been the calling card of his second stint as governor. Given his high approval ratings, the governor seems unlikely to believe he needs to make concessions if Democratic lawmakers send him spending bills he doesn’t like.

Brown budget projects deficit

Good morning. Happy Hump Day! One word this morning: Budget. 

Gov. Jerry Brown preached prudence on Tuesday as he unveiled his 2017-18 state budget, proposing no new major spending programs while taking a wait-and-see approach to the incoming Trump administration, even as other prominent California Democrats brace for the unknown.

The budget showed a $2 billion deficit — modest by historical standards, but worthy of the lawmakers’ attention — caused by an increase in government programs over the last few years and lagging revenues.

Brown said he didn’t want to “repeat mistakes of the past,” recalling the days of the state’s budget crisis. The proposed budget showed approximately $8 billion in the Rainy Day Fund by the end of 2017-18, which is 63 percent of the constitutional target, which Brown said was bigger than it seemed as he called for greater savings now. 

Independent analysts, as well as Brown’s budget experts, have cautioned against the state’s over-dependence on the wealthiest residents to fund the government. Brown lauded the state’s “progressive” tax system, where people with the most pay the most. But he said it also requires prudence.

“It doesn’t make sense to pretend we have money when we really don’t,” Brown said. 

CalWatchdog has more.

In other news:

• Politics: “A new report tallying the costs of running against members of your own party revealed that Golden State Democrats spent big in 2016 on races without a Republican. This year, ‘Democrats raised or spent a total of $90.8 million on same-party races — a 67 percent increase from 2014 when Democrats spent $54.3 million,’ according to the study.” CalWatchdog has more. 

• Responsive Government: “San Diego is settling a lawsuit that accused the city of illegally limiting public comment at City Council meetings for at least 13 years.” The San Diego Union-Tribune has more. 

• Campaign Finance: “Now a handful of Los Angeles lawmakers are calling for a ban on such donations from real estate developers, saying they want to counter the perception that money drives those decisions.” The Los Angeles Times has more. 

• Tech: “Facebook CEO Mark Zuckerberg and his wife, Dr. Priscilla Chan, are strengthening their political connections, at least when it comes to philanthropy. On Tuesday, the couple announced that two well-known political figures among both Democrats and Republicans will lead policy and advocacy efforts at the Chan Zuckerberg Initiative, which they formed to fund philanthropic causes.” The San Jose Mercury News has more. 

Legislature:

• Gone till Friday at 9 a.m.

Gov. Brown:

• No public events announced. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @KesiAlexx

The budget showed a $2 billion deficit — modest by historical standards, but worthy of the lawmakers’ attention — caused by an increase in government programs over the last few years and lagging revenues.

Brown said he didn’t want to “repeat mistakes of the past,” recalling the days of the state’s budget crisis. The proposed budget showed approximately $8 billion in the Rainy Day Fund by the end of 2017-18, which is 63 percent of the constitutional target, which Brown said was bigger than it seemed as he called for greater savings now. 

Independent analysts, as well as Brown’s budget experts, have cautioned against the state’s over-dependence on the wealthiest residents to fund the government. Brown lauded the state’s “progressive” tax system, where people with the most pay the most. But he said it also requires prudence.

“It doesn’t make sense to pretend we have money when we really don’t,” Brown said. 

Trump 

Recently, many prominent Democrats staked out positions as Trump antagonists, in interviews and even with the Legislature’s hiring of former U.S. Attorney General Eric Holder. Brown took a more measured approach by saying money wasn’t moved around to certain areas in anticipation of Trump, but left the door open for the May budget revision.

Brown seemed confident that the Affordable Care Act, which has expanded coverage to millions of Californians, wouldn’t go anywhere, noting that any repeal-and-replace proposal would have to get Democratic support in the Senate and that cutting health care for millions of people would be political suicide for Trump. 

Transportation and housing 

In response to the ongoing infrastructure funding woes, Brown proposed a “road improvement charge” of $65 per vehicle. In other car-related news, the gas tax will increase 2.1 cents per gallon automatically. 

As for housing, one of the other major unresolved issues facing the state, Brown proposed to re-appropriate an unused $400 million in funding for housing that was set aside in the last budget.

The budget does send $3.2 billion to local municipalities for affordable housing projects, but Brown said more needed to be done to spur housing development by cutting red tape, cutting delays and cutting “whatever expenses we can do without.”

“We have to bring down the cost structure of housing, not just subsidize,” Brown said.  

Photo Credit: abc7.com

With a cautiously optimistic tone, Gov. Jerry Brown preached prudence on Thursday morning during his annual State of the State address.

The speech — courteous in its brevity, clocking in at under 20 minutes — touted accomplishments and initiatives, like a budget surplus, several credit upgrades, a rainy-day fund, increased education spending and a raise in the minimum wage. However, it was most notable for its call to pay down existing obligations before creating new ones.

“The challenge is to solve today’s problems without making those of tomorrow even worse,” Brown told a packed Assembly floor, arguing the need for preparedness for life’s uncertainty. “In that spirit, you are not going to hear me talk today about new programs. Rather, I am going to focus on how we pay for the commitments we have already made.”

On the budget — Brown released his version earlier this month — the popular Democratic governor said that state economists predict that the next recession, if only of average intensity, “would cut our revenues by $55 billion over three years.”

“That is why it is imperative to build up the rainy-day fund, which was recently overwhelmingly approved by the voters, and invest our temporary surpluses in badly needed infrastructure or in other ways that will not lock in future spending,” Brown said.

Brown’s budget had revenue exceeding expectations by $3.6 billion, with most of the money being tucked into the rainy-day fund, according the Legislative Analyst’s Office.

While all the talk of fiscal restraint is likely to appease some concerns from the right, there was plenty to like for those on the left. On inequality, Brown touted a raise in the minimum wage, an Earned Income Tax Credit, paid sick leave and other traditionally Democratic priorities, including expanded access to health care under the Affordable Care Act.

“Most importantly – and this is truly monumental – we have wholeheartedly embraced the Affordable Care Act,” Brown said. “This is an historic achievement. It will provide health security to so many who could not otherwise afford it.”

Brown asked that legislators consider the revised managed care organization tax, a greater explanation of which can be found here on the California Chamber of Commerce website.

Brown applauded the 51 percent increase in education spending since 2011 and spoke of the need for increased funding for roads. He touted the Paris climate agreement and the Prop. 1 water bond, noting the bond’s passage as one of the “bright spots in our contentious politics.”

The transcript can be found here.

The proposed budget can be found here.

The LAO’s analysis of the budget can be found here.

Democrats in Sacramento praised the approval of a “balanced” and “on-time” budget. A prepared release from Assembly Speaker Toni Atkins, D-San Diego, says Assembly Bill 93, the budget bill, will “pay down debt, build reserves and restore funding to schools.”

“I want to thank our Budget Chair, Dr. Shirley Weber, our subcommittee chairs, the members of the Budget Committee and our conferees for performing an incredible amount of work, which is shown in the budget we voted on today,” said Speaker Atkins. “The stability from the years of hard choices gives us an opportunity that has been rare in recent years – the chance to focus on a budget that builds a stronger and brighter future for the people of California.”

Assemblyman Mike Gipson, D-Carson, released the following statement on the passage of AB93:

“I’m proud to support a balanced budget that prioritizes education, health care, and poverty reduction in California. By strengthening social programs to assist the disadvantaged, such as early education and the Earned Income Tax Program, more Californians will have the freedom to follow their own path to success and happiness. This budget will also help create healthier communities by restoring funding cuts to critical Medi-Cal programs. … Overall, these policies outline the virtues of a society concerned with creating the broadest opportunities for all of our citizens.”

Senator Connie Leyva, D-Chino, also commended the budget approval, calling it a “forward-looking budget that continues to strengthen California’s diverse communities … throughout the state.”

Democratic legislators highlighted the importance of investment in the Earned Income Tax Program, health care and Medi-Cal, state education at all levels of learning, public safety, child care and other programs. Senator Tony Mendoza, D-Artesia, said the budget “reflects the Legislature’s priorities of investing in the people of our great state … while paying down the state’s long term debt and setting aside more resources for our rainy day fund.”

But Republican legislators fear the budget does not do enough to meet the needs of California’s unfunded pension and retiree health care liabilities.

Senator John Moorlach, R-Costa Mesa, said on the Senate floor that the budget “departs from Governor Brown’s call for fiscal restraint” and does not “make a dent in our $72 billion in unfunded retiree medical costs, or the over $100 billion [plus] in unfunded pension liabilities.”

Senator Patricia Bates, R-Laguna Niguel, said the budget “gives a false sense of security to Californians.” Despite providing more resources for education, “it creates new and additional spending in other areas, which is simply unsustainable” and “may lead to higher taxes.” Her release continued:

“The undeniable fact is that this budget would spend a record $269 billion, which is $15 billion higher than last year’s budget. It also promises money that may never materialize as it assumes that the state will receive $3 billion more than what Governor Brown believes we will receive. That’s why he has not agreed to this budget. He recognizes that it repeats the foolishness of relying on rosy economic projections.

“Governor Brown has governed during times of both boom and bust, and I hope he will resist the urge to live beyond our means. By paying down more debt and smartly investing in top priorities such as education, we can avoid major problems down the road and secure a healthier future for all Californians.”

The Republican vice chairs of the Assembly and Senate budget committees, Assemblywoman Melissa Melendez, R-Lake Elsinore, and Senator Jim Nielsen, R-Gerber, also sent a formal letter to the governor, calling the proposed budget a “political exercise” and saying adoption of the budget would be “fiscal malpractice”:

“The needs of the state are great and the urge to spend is strong. As you have noted, however, a moderate economic downturn could cut state revenue by $40 billion over three short years. In assessing the health of the state’s economy, economists have suggested that California is not even prepared for a moderate recession. While our work to build a Rainy Day Fund is commendable, the Fund is only projected to have a $3.5 billion balance as of next summer. We should not delude ourselves into believing that $3.5 billion would be sufficient to smooth the effects of a significant economic tremor.”

According to charts from the Department of Finance, actual expenditures for fiscal year 2011-12 were $86.4 billion. As state revenues increased, that number has ballooned to $96.6 billion in FY 2012-13 and $99.8 billion in FY 2013-14. The proposed budget for FY 2015-16 is $117.5 billion – that’s about $17.7 billion dollars more than just two years ago.

The estimated revenue for the general fund in FY 2015-16 according to the Gov. Brown’s May Revise is $113.3 billion, which is less than the Legislature’s proposal to spend $117 billion and save $5 billion.

Gov. Brown and the Legislature will continue to negotiate and work out any discrepancies until the beginning of the fiscal year on July 1. The proposal now goes to the governor to sign and approve.

According to the overview, the conference version of the budget “carefully balances the need for additional public investment in child care, education, health care and other programs, with the necessity of maintaining the state’s fiscal stability through increased reserves and debt reduction.” These priorities include actions that will:

• “Benefit educational programs from pre-school through college, through:
  • “Investments of significant resources in early childhood education that will expand capacity, increase rates for services, and ensure a sound budgetary footing for the childcare program.
  • “Increased resources for K-12 education directed to the implementation of the Local Control Funding Formula, and more funds for educator training and adult education.
  • “Additional resources and improvements for the state’s higher education programs and segments by adopting greater support services, increasing enrollment slots for California residents, and CalGrant expansions.
• “Improve California’s health care system by increasing Medi-Cal provider rates, restoring most optional Medi-Cal benefits, and adding funding for specific specialized programs.
• “Provide resources for a new state Earned Income Tax Credit, consistent with the governor’s plan, which will provide a limited refundable tax credit for very low-income, wage-earning families.”

As detailed above, the Legislature’s version of the budget allocates total General Fund expenditures of $117.5 billion for 2015-16, which is about $2.2 billion more than Governor Jerry Brown’s May Revise. The budget includes total reserves of $5.7 billion, which includes $4.2 billion in the Prop. 2 “rainy day fund” and $1.5 billion in the regular budget reserve.

According to a prepared statement from the Assembly Democratic Caucus, the conference version of the budget “adds another $700 million over what the governor proposed for schools”:

• “Increases Prop. 98 funding for 2015-16 by $8.2 billion more than was provided in 2014-15 budget.
• “Expands Early Education funding by an ongoing amount of $577 million. In the budget year, the total cost will be $409 million, this includes:
  • “$148 million for preschool and quality rating activities within Proposition 98.
  • “$261 million for child care and preschool programs outside of Prop. 98.”

California community colleges and state universities will also receive increased funding:

• “Increases funding for the CSU by $107 million, an increase of $70 million over the May Revision. This increase will grow to about $150 million over the next few years, allowing CSU to increase enrollment and speed graduation times.
• “Provides $25 million increase for the UC, but makes the funds contingent upon UC increasing enrollment of California students by 5,000 over the next two years, capping enrollments of out of state students and only using state financial aid for in state students.
• “Increases the Cal Grant B stipend by $150, increases the number of Competitive Cal Grants awards by 16,000, eliminates the planned cut to Cal Grants for non-profit colleges, and funds the Middle Class Scholarship to cut tuition by 20 percent for CSU and UC students in the 2015-16 year.
• “Provides major increase for Community Colleges including a $38 million Cal Grant B increase for Community College Students.”

Regarding health care, the new budget will restore 5 percent of the “AB97 Medi-Cal rates cut for dental care immediately and the rest of Medi-Cal services on April 1, 2016.” In addition, funding has been allocated toward Medi-Cal services for children, regardless of immigration status. Previously optional Medi-Cal benefits have been restored, and Developmental Disability Services rates are increased by 5 percent for targeted services and 2.5 percent for all other services.

Senate President pro Tempore Kevin de León, D-Los Angeles, said in a prepared statement:

“Our legislative budget is on time, balanced, and great news for schools. Our budget includes $5.7 billion in reserves, about $1 billion more than the governor’s May Revision reserves, and an additional $760 million in debt payment, along with targeted investments to ensure economic growth and the well-being of our residents. This budget increases access to higher education for California students, adds childcare options for working families, creates an earned-income tax credit for working people, and provides help for Californians dealing with the drought.”

Despite the fanfare, Senate Republican Leader Bob Huff, R-San Dimas, urged caution in a release earlier this week:

“This budget deal negotiated by the legislative Democrats uses revenues projections that are higher than the governor’s May revenue projection by $3.2 billion. This is a risky move. I am afraid legislative Democrats want to spend money that may not exist and that once again will push our state into budget deficits down the road.

 

“Senate Republicans continue to press for a responsible, balanced budget. However, the ball is in the hands of the majority party in the Legislature, the Democrats. They can join the governor and Senate Republicans to continue to rebuild the Golden State’s financial health or they can continue to spend money we do not have, which ultimately would put our state financial outlook at risk.”

Both houses will vote on legislation reflecting the committee’s decisions, Senate Bill 69 and Assembly Bill 93, on Monday, June 15.