SACRAMENTO, Calif. (CN) - With a stabilized economy and billions in 2015 income taxes pouring in, California Gov. Jerry Brown released his budget proposal Thursday with "fiscal caution" despite the Legislature's recent jostling for the growing tax coffers.
Brown introduced a $122.6 billion general-fund spending plan that adds $2 billion to the state's rainy-day fund, continues to pay down debt and creates a replacement tax strategy to comply with the Affordable Care Act and avoid losing federal Medi-Cal dollars.
The proposed budget also freezes tuition to state universities at 2011-2012 levels and increases K-12 spending to $10,591 per student, $3,600 more than when Brown retook office in 2011.
"Relative to budgets in the past, this budget is in good shape," Brown said of his 2016-2017 budget, which includes $170.6 billion in total spending.
California's fiscal outlook is as healthy as ever because the main source of California's general fund revenue -personal income taxes - continues to exceed Brown's 2015-2016 estimates, the nonpartisan Legislative Analyst's Office said in a November report.
The annual report estimated general-fund revenues should surpass budget predictions by $3.6 billion and the rainy-day fund could expand to $7.2 billion by June 2017.
Brown, who retook office during the massive global recession, said his proposal is unusual in that it prepares for a future recession and that he sought the advice of economists about the potential for an inevitable economic downturn.
"We've had 10 recessions since World War II," Brown said. "We know we will get another recession but nobody ever plans for it so it's always a surprise."
The proposal signals the beginning of budget negotiations between the governor's office and the Democratic-led state Legislature for the 2016-2017 fiscal year. A final budget is due in June and Brown's reformed managed health care tax must gain a significant amount of Republican support to pass.
In 2015, Brown unsuccessfully proposed tax measures to fund transportation and Medi-Cal improvements.
The health care tax would provide a net reduction in taxes paid by the private health care industry and secure nearly $1 billion in federal matching dollars, Finance Department director Michael Cohen said.
Last year Brown tasked the Legislature with figuring out a way to create funding for the struggling and underfunded Medi-Cal system during a special session. While special-session meetings are still ongoing, Brown acknowledged the lack of progress achieved by the Legislature and told reporters he would "increase my role" to spur action.
Republicans echoed support of Brown's budget bill, applauding him for not "going on a spending spree."
"He is sticking with supporting and defending the rainy-day fund and building it up," state Sen. Jim Nielsen, R-Gerber, told Courthouse News. "That's the way we should proceed with our budget and [Brown] is telling [Democrats] be cautious, be careful."
The mounting surplus has spurred spending suggestions from state Democrats, including money for the homeless and Medi-Cal coverage for undocumented immigrants. On Monday, Senate President pro tem Kevin de Leon and a group of lawmakers proposed a $2 billion blueprint for building permanent homes for the homeless with public funding.
A fourth-term governor, Brown said he needs to take a closer look at the proposal that directs Proposition 63 funding to the state's estimated 114,000 homeless but that "there is a real need there."
Last summer Democrats gave Brown a revised budget that added nearly $800 million in social-program spending, but Brown largely ignored their requests in his final budget.
De Leon said the budget bill "espouses a clear-eyed focus" toward fiscal prudence but that the Legislature must continue to petition for improvements for California's "most vulnerable citizens.
"This budget reflects historic investments in our children's education that will make a tremendous difference. But we still have to take a closer look at strengthening our health care system for the poor and developmentally disabled that has been starved for far too long," De Leon said in a statement.
Meanwhile Republican leaders in the Assembly have also petitioned Brown for cash on social services, specifically the state's more than 270,000 developmentally disabled residents - introducing a bill Tuesday that would increase state funding for developmental disabilities programs by 10 percent, or $309 million annually.
Brown's draft budget also addresses the state's crumbling infrastructure by including $807 million for maintenance at universities, state hospitals and levee improvements. Brown also said each state-owned building will be assessed for future improvements.
"These buildings, after a very careful independent analysis, indicate they are deteriorating; we must invest money," Brown said.
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