California Gov. Jerry Brown delivered a $122.5 million budget proposal Tuesday, revealing his plans to prepare for the possibility of steep cuts in federal funding for health care and other public services.
Brown warned that the state might face a $2 billion deficit in the coming fiscal year, adding that the budget will likely be one of the most difficult California has faced since 2012 due to declining revenues.
"This year's budget will be the most difficult that we have faced since 2012," Brown said in a letter to lawmakers. "The surging tide of revenue increases that we enjoyed the past few years appears to have turned. Instead, we now face a budget deficit of $2 billion.
"While this amount pales in comparison to the $27 billion deficit we faced in 2011, it demands our attention. Small deficits can quickly mushroom into large ones if not promptly eliminated."
The Democratic governor has crafted his spending plan amid uncertainty about the changes to come from President-elect Donald Trump and the Republican-led U.S. Congress.
Brown and senior Democratic lawmakers have welcomed a confrontation with Trump, who takes office next week and has loomed large over the beginning of the legislative session. The incoming Republican president has pledged to repeal President Barack Obama's health care law, which California has embraced, and to financially punish local governments that impede federal immigration enforcement, as Democratic legislators have vowed to do.
Obama's Affordable Care Act, often called "Obamacare," provides about $20 billion to help deliver health care coverage to 5 million Californians.
Brown's January budget, which must be published by Tuesday under the state constitution, is the governor's opening salvo in the six months of spending negotiations to come.
Brown last year signed a $122 billion general fund spending plan. The nonpartisan legislative analyst, Mac Taylor, released his own budget forecast in November projecting that general fund revenue would rise nearly 7 percent from the current fiscal year and that the state would have a $2.8 billion surplus after accounting for the higher cost of delivering state services for another year.
Still, Taylor's office said this week that the three biggest sources of state tax revenue were $1.4 billion below projections in the first half of the current fiscal year. Year-end taxes aren't fully accounted for and could still rebound. The shortfall, which can be absorbed by budget reserves and would not require cuts, is caused largely by lower-than-expected personal income tax revenue.
Brown's administration has signaled that he's likely to stick with his restrained approach to budgeting, repeating his common refrain that he is reluctant to commit to spending the state cannot afford to sustain. He has pointed to the lower-than-expected revenue, uncertainty over Trump's policies and likelihood of a recession in the near future as reasons for caution.
His caution puts Brown at odds with senior Democrats in the Legislature, who prefer to use the state's growing finances to expand funding for higher education and social services.
The leaders of the Assembly and Senate budget committees, Assemblyman Phil Ting of San Francisco and Sen. Holly Mitchell of Los Angeles, say California should not refrain from making necessary investments out of fear of policies from Washington that have yet to be determined.