By Sharon Bernstein
SACRAMENTO, Calif. (Reuters) - California would spend more on education and sock away an extra $1.2 billion for a rainy day under a budget proposal to be released on Friday by Democratic Governor Jerry Brown, a fiscal moderate whose tight-fisted policies helped stabilize state finances.
"Soon we will make the last payment on the $15 billion of borrowing made to cover budget deficits dating back to 2002," Brown said in a speech earlier this week. "We will also repay a billion dollars borrowed from schools and community colleges."
Brown's plan is the first volley in what will no doubt be months of wrangling with members of his own party who say they state should spend more on social programs as the improving economy has increased California's tax revenues.
Democrats dominate both houses of the Legislature and occupy all statewide offices in California, but Brown has charted a centrist course on fiscal issues that has sometimes put him in conflict with the party's more progressive wing.
He has already indicated he will fight a plan by University of California President Janet Napolitano, the former U.S. homeland security secretary, to raise tuition at the system by 5 percent a year for the next five years.
Last year, he rejected budget bills aimed at shoring up parts of the state's recession-damaged safety net, saying it was more important to stabilize California's finances.
Even so, Brown is expected to support funding increases in several areas, including primary and secondary education. Brown is proposing to spend about $66 billion on public schools and community colleges, about 40 percent more than the state was spending when he came into office four years ago, spokesman H.D. Palmer said.
The budget plan also allocates $1.2 billion for the state's rainy day fund, bringing the total in the fund to $2.8 billion, Palmer said.
Brown is also expected to tackle looming problems with the state's complicated public employee and teacher retirement systems, including a plan to address a growing $72 billion unfunded liability to cover retiree health and dental benefits.
When Brown took over in 2011 from two-term Republican Governor Arnold Schwarzenegger, the state faced an 18-month budget gap of $25 billion.
(Reporting by Sharon Bernstein; Editing by Peter Cooney)