California governor plans big budget with downturn in mind

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Posted: Jan 09, 2015 5:51 PM
California governor plans big budget with downturn in mind

SACRAMENTO, Calif. (AP) — Ever mindful that the next economic downturn could be right around the corner, Gov. Jerry Brown released a record $113 billion California spending plan on Friday that resists calls for expanding social services and instead dedicates billions for paying down debt and saving for a rainy day.

"We saw the boom and the bust, and I'm trying to avoid that," Brown said in unveiling his new budget proposal at the state Capitol. He will work with lawmakers in the coming months to pass a final version in June.

The Democratic governor returned to office four years ago amid multibillion deficits that left California in so much fiscal turmoil that he led the charge for temporary tax hikes while cutting social programs, reducing education funding and restructuring government.

Now Brown, who was sworn into his fourth and final term this week, is determined not to spend all of California's second annual surplus. But that restraint has created tension with advocates and members of his own party eager to do more for the poor and fight income inequality.

"We're disappointed this budget continues the cuts that were made in the recession," said Andrew Cheyne, California Association of Food Banks policy director. Cheyne is part of a coalition of groups pushing for increased social services spending.

Brown's plan also stirred angst over the level of state investment in higher education, particularly at the University of California. Brown offered the nation's largest public university system a $120 million increase, but it wasn't as much as UC leaders wanted to avoid increases of as much as 5 percent each for the next five years.

"While we are disappointed the governor did not include sufficient revenue to expand enrollment of California students and reinvest in academic quality at the university, we are hopeful that continued discussions with the governor and the legislature will yield a budget that maintains the access, affordability and excellence for which the University of California is renowned," UC President Janet Napolitano said in a response Friday.

Brown's budget includes a $1.2 billion deposit into the rainy day fund and a $1.2 billion debt payment. He wants to pay off debt accrued during the recession, including making the final payments on a $15 billion bond that was championed a decade ago by then-Gov. Arnold Schwarzenegger to close the state's deficit.

By law, Brown must use much of the revenue growth on K-12 education and community colleges.

As a result, the governor chose not to propose many new programs and instead focused on covering growing costs to existing programs. "It's precariously balanced, and it's going to get even more challenging as we get down the road," Brown said.

Health care for the poor is one major cost pressure. About 4 million more people are enrolled in the state's low-income health care plan, Medi-Cal, as compared with 2012.

The Brown administration pointed out that President Barack Obama's executive order to spare some immigrants from deportation will enable hundreds of thousands of low-income immigrants in California to apply for the state's version of Medicaid. While the president's action excludes immigrants who came to the country illegally from qualifying for federal health benefits, California has a policy of using state money to provide health coverage for low-income immigrants with deferred-action status.

Brown also wants to bargain with labor unions to begin addressing the state's unfunded liability for retiree health care benefits, currently estimated at $72 billion.

Republicans, whose votes are not needed to pass a budget, said they liked the governor's plan for saving the reserve, but they have criticized him for failing to provide an economic strategy for job growth. Brown's budget includes funding for workforce development through adult education and technical training programs.

On Friday, Brown pushed back on criticism of not doing more, noting that about a third of the budget is dedicated to serving the poor through child care, health care and other programs.

"We do the best we can," he said.

It may be harder for Brown to fend off new spending proposals as he did last year. Democrats have already put forth proposals to expand health care to all regardless of their immigration status and to expand the state's sales tax to services, and not just tangible goods.

The governor questioned if it was politically feasible.

"If you tell people now that their Pilates takes an 8.5 percent sales tax, they may not be as yoga happy as they were before," he said.

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Associated Press writer Fenit Nirappil in Sacramento and Lisa Leff in San Francisco contributed to this report.