Gov. Brown and Democratic Legislative Leaders Announce Budget Deal

 

Gov. Jerry Brown and Democratic legislative leaders announced a budget plan June 27 that assumes the state will collect $4 billion more in revenues this year than expected, averting sharp cuts.

A key part of the deal includes keeping state support for public schools at $49.7 billion rather than increasing funding by $3 billion as the Democratic governor proposed in the revised budget he submitted to lawmakers in May.

“It’s a very good plan going forward for the budget,” Brown told reporters although admitting it isn’t the proposal he pitched in January.

Under the new plan some 75 percent of the state’s chronic annual gap between revenues and spending commitments would be eliminated, a drop from $10 billion to $5 billion, Brown and Democratic legislative leaders say.

Overall, since March, lawmakers and Brown have approved $14.6 billion in spending reductions.

Central to the new plan, which lawmakers will begin voting on as early as June 28, is a series of triggered cuts if the $4 billion budget-writers predict doesn’t materialize.

The move is an apparent sop to rating agencies and potential lenders skittish about the state’s ability to meet its financial obligations.

The $4 billion in additional revenue is based on tax collections running $2.8 billion above estimates from January to May and $1.2 billion over estimates in May and June.

As explained by legislative and Brown administration officials, if revenues during the fiscal year beginning July 1 don’t reach the newly estimated levels, a series of additional cuts will occur.

If the estimate falls short of $4 billion but is above $3 billion, no additional cuts are triggered.

If below $3 billion but above $2 billion, additional cuts of $100 million each are slated for the university of California and the California State University system. The same for prisons and double that for health and human services programs, particularly the Department of Developmental Services.

Should the projection be below $2 billion, schools would shoulder a $1.5 billion reduction –– the equivalent of one and one half weeks of instruction time.

Since January, lawmakers and Brown have tried to close what the Democratic governor estimates is a $26.6 billion budget hole.

Brown sought to close roughly half the gap with some $12 billion in revenue from extending several temporary taxes set to expire this year for an additional five years. With voter approval.

Republicans refused to give Brown the necessary votes to place the issue before voters. Now Brown says a 2012 initiative next year will be the likely result.

“This budget is the most austere fiscal blueprint California has seen in more than a generation. Spending levels are at an historic low and every sector of society will feel the difficult choices we’ve made to bring this budget into balance,” said Senate president Pro Tempore Darrell Steinberg, a Sacramento Democrat, in a statement.

“Unfortunately, Democrats were forced to deliver alone. We used all the tools available to us under the Constitution to do just that – deliver.

“The imperative for revenue is as great as before because there is still a structural deficit looming. We will move forward through the initiative process to put the question before the voters in November of 2012.”

Four GOP senators who had initially been negotiating with Brown issued a statement chiding Democrats who can approve the budget plan on a majority vote thanks to approval in November 2010 of Proposition 25 eliminating the two-thirds vote for a budget.

“The Democrats have proven once again that they are unwilling to stand up to the unions that fund their political campaigns and adamantly oppose meaningful pension reform.

“They didn’t want a bipartisan deal in March, and they don’t want a deal now. And, ultimately, it’s the hardworking people of California who pay the price,” the GOP senators’ statement says.

Several elements of the spending plan approved by Democratic lawmakers on June 15, which Brown vetoed within 24 hours, remain in the compromise.

Chief among them is holding public school spending at the levels proposed by Brown in January.

The new plan also retains a $150 per structure fee on parcels that fall within the nearly 31 million, mostly privately owned rural acres in which the state is responsible for fighting fires.

That fee is aimed at raising $300 million, reducing fire-fighting costs borne currently by the state’s cash-starved general fund.

Another measure approved as part of the June 15 budget that is retained requires online retailers, like Amazon, which have a physical presence in the state including that of a subsidiary to pay sales tax.

The budget deal adds an additional $150 million in reductions to the University of California and the California State University system for a total of $650 million, counting all budget actions this year.

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