Gov. Jerry Brown Unveils Spending Plan Update After Tax Revenue Boost, Added Costs

California's general fund is expected to reach a record high, but Gov. Jerry Brown continues to encourage fiscal restraint

By Jonathan Lloyd and Associated Press Reports
|  Tuesday, May 13, 2014  |  Updated 1:45 PM PDT
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Gov. Jerry Brown delivers his State of the State address, Wednesday, Jan. 22, 2014.

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Gov. Jerry Brown embarked on a three-city stop Tuesday to introduce his updated budget for the coming fiscal year, a spending plan bolstered by California's economic turnaround and voter-approved tax hikes.

After a news conference in Sacramento, Brown was greeted by protests in Los Angeles as he arrived for a mid-day budget presentation at the Ronald Reagan State Building in downtown LA before traveling to San Diego. The LA protesters demanded more money for social programs as Brown issued the revised budget at a time when tax revenue in the current fiscal year is running ahead of expectations by more than $2 billion, according to the state controller's office.

Despite increased revenue, Brown has echoed his message from his original budget presentation in January and called on lawmakers to maintain fiscal restraint by stressing the need to pay down tens of billions of dollars that make up what he called California's "wall of debt." The May update accounts for $2 billion  in added costs over the budget proposed in January, according to the governor's office.

That figure includes money for health care coverage under Medi-Cal -- the state's program serving low-income families and individuals who meet certain eligibility requirements -- to pay for 1 million more people, emergency drought assistance, school funding requirements and contributions to the state's public employees' retirement fund.

"This May Revision is good news for California," said Brown. "It shows that California can afford to provide health care to many more people, while at the same time paying its debts and shoring up the long-troubled teachers' retirement system."

California's general fund is expected to reach a record high with help from a soaring stock market and the sales and income tax increase approved by voters in 2012. The expected surplus is a stark turnaround from the not-too-distant past, which was marked by multibillion-dollar shortfalls, state worker furloughs, state-issued IOUs and what the governor described as "improvident tax cuts and too much spending."

The Legislature is required to pass a budget by June 15. The budget, once approved and signed by the governor, would go into effect July 1.

Earlier this week, Brown and lawmakers announced a bipartisan agreement to replace the Rainy Day Fund agreement -- a key part of Brown's January proposal.

Votes on the revised agreement are scheduled for next week in the California Legislature. The proposal would then go before voters on the November ballot.

In his January budget presentation, Brown said the constitutional amendment as worded would not give the state enough flexibility to pay down debt and liabilities, does not address volatile school funding requirements and bases the amount the state would need to pay into the fund on historical revenue rather than spikes in capital gains.

The agreement announced this week calls for deposit increases when the state sees increases in capital gains revenues, supplemental payoffs for the state's debts and liabilities and a boost of the Rainy Day Fund to 10 percent of General Fund revenues.

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