Governor’s Revised Budget Increases Spending on Public Schools

Buoyed by $6.6 billion in higher-than-anticipated tax revenue over two years, Gov. Jerry Brown’s revised budget provides public schools with $3 billion more than his January spending plan and eliminates $2.9 billion in taxes he previously wanted to extend.

The Democratic governor’s updated budget is still contingent on a five-year extension of a 1 cent sales tax increase due to expire this year but the $6.6 billion in higher tax collections took some of the sting out of potential cuts.

He wants lawmakers to approve the tax extension and then have voters ratify it in November.

For the fiscal year beginning July 1, Brown says public schools are entitled to a minimum of $52.4 billion, $3 billion more than the level in his January spending plan.

But the additional revenue doesn’t mean the state is “out of the woods,” Brown said.

“We have a serious structural deficit now and into the future,” Brown told reporters May 16 in outlining his approach to closing the remaining budget hole — $9.6 billion plus a $1.2 billion reserve.

“The bottom line is the state still has a large ongoing budget problem and massive liabilities for the long-term,” the spending blueprint says.

Brown began the year with what he estimated was a $26.6 billion gap between revenue and spending commitments. In March, lawmakers approved a budget bill and a series of related measures, which erased $13.4 billion of the gap.

Much of Brown’s description of his spending plan focused on what he called the “wall of debt” faced by the state.

“The state’s current budget problem is exacerbated by an unprecedented level of debts, deferrals and budgetary obligations,” the May budget revision says.

Brown says that the state has added $35 billion in debt over the past decade, $10.4 billion of which in the form of delayed payments by the state to public schools.

He proposes paying down borrowing from various state funds by $744 million.

Redevelopment agencies are still targeted for extinction under Brown’s May plan but he no longer seeks to eliminate enterprise zones for a savings of $900 million.

Now Brown says he “proposes to implement a series of reforms to help ensure that the zones are creating incentives for new jobs, rather than reward businesses for decisions they have already made.”

He also wants to reinstate a sales tax exemption for manufacturing equipment that expired in 2003.

A sales tax exemption for purchases of manufacturing equipment costs $870 million annually, according to legislative budget writers.

Brown says such an exemption “will encourage investments in equipment and provide the most benefit – a full exclusion from the state sales tax (5 percent) – to those businesses just starting out.”

Like Brown’s proposal, California’s previous “Manufacturer’s Investment Tax Credit” forgave the state’s share of sales tax for purchases of manufacturing equipment.

Then Assembly Speaker Willie Brown placed a caveat in the measure that the exemption would expire the year after a year in which manufacturing jobs did not exceed the number of manufacturing jobs on January 1, 1994 by 100,000.

On January 1, 2003, manufacturing employment failed to exceed the 1994 employment numbers by more than 100,000  — actually it was more than 10,000 jobs less than the 1994 number – and the exemption expired.

The Democratic governor also would save $41.5 million form the state’s general fund by eliminating 43 boards and commissions.

On the list are the Office of the Insurance Advisor, the Anti-Terrorism Information Center, the Postsecondary Education Commission, the managed Risk Medical insurance Board,the Fair Employment and Housing Commission and the Commission on the Status of Women.

“The governor has laid out the only credible framework for achieving a long-term resolution to California’s budget challenges,” said Senate President Pro Tempore Darrell Steinberg, a Sacramento Democrat.

“It will achieve the necessary balance between deep and difficult cuts, and the revenue needed to ensure that the cuts to education, public safety and other vital services are no deeper than they have to be.

This from Sen. Tony Strickland, a Thousand Oaks Republican:

“While Gov. Brown’s plan is a good start, it is unfortunate the May revision still seeks tax increases– tax increases which are not necessary. Assembly Republicans recently put forth a plan that does not include tax increases and yet still maintains the funding for education and essential services like public safety.

“We need to live within our means like every family in California is doing and focus on what we will do to put people back to work. With the revelation of the extra $6.6 billion I don’t see why any member of the legislature would ever vote to increase taxes on hardworking Californians.”

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