Gov. Jerry Brown has released his budget for fiscal year 2014-15, which begins July 1. The proposed budget of $106.8 billion is $8.3 billion (or 8.5 percent) more than 2013-14 budget. This is the largest state budget since former Gov. Arnold Schwarzenegger’s $102 billion budget for fiscal year 2007-08.
While most state programs will enjoy a modest increase, Brown’s priorities are education and debt reduction.
At his press conference introducing the budget proposal, Brown said, “The good news is fiscal stability and resource available for the State of California. It’s a cautionary warm-up, but by no means are we out of the wilderness.”
Brown’s previous budgets all included significant cuts in order to avoid deficits. This year, he proposes a nearly $2 billion surplus, to be saved for the future.
“We have serious issues before us – long-term liabilities and debt. So we must be very prudent how we spend public funds,” he stated. “Some people think we should go on a spending binge. I don’t agree with that.” Brown stressed the volatility of capital gains revenue as an important reason for caution and prudence.
Brown said he intends to avoid situations where temporary tax revenue increases were quickly used to fund permanent and long-term programs. While he has included a $5-billion increase in funding for education programs at all levels, he also proposes setting aside $1.6 billion in a “Rainy Day Fund” and another $967 million in a special fund for economic uncertainties.
Brown continues to pare down the “Wall of Debt” confronting him when he took office in 2011. The total $34.7 billion will be entirely eliminated by 2017-18. In addition, he hopes to begin discussions and eventual negotiations to address the $218 billion balance of unfunded state retirement liabilities.
This budget proposal does not address these unfunded liabilities, but Brown acknowledged the shadow they cast on future budgets.
“Quite frankly, how much we do, how much teachers do, what do school districts do, how does the state handle this will be quite contentious,” he said referring to the $80 billion liability just for state teachers. “I’ve set forth time to meet with all stakeholders. It’s going to be daunting.”
The growth in revenues is largely because of the market’s resilience in the past year and the temporary Proposition 30 tax increases. For this reason, Brown is reluctant to commit all of these funds to restoring past spending or beginning new programs.
The focus is on education. Not only will there be more funds for next year, but Brown’s budget projects future growth in education spending through 2017-18.
“We’re finally able to provide a substantial amount of new money for schools,” Brown said. On per student basis, state funding will exceed $12,800 this year.
His budget also eliminates all remaining deferrals of education funding for local districts. Assemblyman Brian Nestande has advocated for this step for two years and submitted a proposed state constitutional amendment to achieve it.
“The practice of deferring education dollars to pay for other state programs had gotten out of control. I am pleased that Governor Brown has taken a very proactive approach to paying down these deferrals, which at the beginning of 2013 topped more than $10 billion,” Nestande said in press release after the governor’s budget was released. “This will prevent schools from paying millions of dollars a year in interest on loans and that money can go back into the classroom where it belongs.”
Higher education is a beneficiary also. From 2007 through 2011, the University of California and California State University nearly doubled tuition and fees. The budget proposal continues to provide additional funds for these units so that tuition remains flat with 2011 levels through 2016.
Complementing the education funding, the budget proposal also commits $670 million in new spending for the expansion of Medi-Cal benefits, including mental health, substance use disorder, adult dental and specialized nutrition services.
“Education and good health are the way out of poverty,” Brown said. “If people want more for income support, they have to take it from somewhere else.”
Brown also has added $100 million for maintenance projects, which have been deferred for years, at state facilities and $40 million has been allocated to the state parks.
At the conclusion of his press conference, Brown stressed that he did not think this was the year to ask voters for new taxes. Consequently, he is not proposing any change to the Prop. 30 temporary tax increases.