SACRAMENTO, Calif. (CN) – California’s complicated and often cloudy budget process began Tuesday, with Gov. Jerry Brown predicting a looming $1.6 billion deficit and again preaching fiscal restraint to fellow Democrats.
Brown unveiled a $122.5 billion general-fund budget that he called “the most difficult since 2012” in light of sluggish tax revenues and an uncertain future with President-elect Donald Trump regarding health care, environmental and immigration issues.
“To manage unreliability requires prudence, it requires that we keep a very close eye on the balance in our budget,” Brown said. “If you want a progressive tax system, you have to have a very big reserve and rainy-day fund.”
The proposed 2017-2018 budget would dedicate $1.15 billion to the state’s rainy-day fund and nearly double the commitment to Medi-Cal spending. The fiscal blueprint also dedicates $73.5 billion in education funding and increases spending on low-income programs, including the scheduled hike in the state’s minimum wage and child care programs.
Charts flanking the fourth-term governor showed that in recent years, California’s balanced budgets have typically been followed by deficits. Brown circled red bars for the next fiscal year, indicating his financial planners expect a significant drop in the state’s economy.
“The fact is that a modest recession will cost California $18 billion a year for three years,” Brown said, citing his financial department’s estimates.
Brown, who has repeatedly rebuffed his party members for adding new spending to budget proposals during his final term, said preparing for the next recession played a major part in crafting his proposal.
Recent tax collections have come in short of the current budget’s predictions, with the Legislative Analyst’s Office reporting that December tax payments were nearly $1.2 billion below expectations. Five out of the past seven months have fallen short of the finance department’s monthly revenue estimates.
“I don’t think it makes any sense or is even very decent to pretend we have money when we don’t,” Brown warned.
With the state’s controversial carbon-tax program set to expire, Brown called on lawmakers to extend the cap-and-trade program beyond 2020 through a two-thirds urgency vote. Democrats clinched a supermajority with the 2016 election, and could act on Brown’s recommendation without any Republican cooperation.
Brown also introduced a 10-year transportation spending plan in the budget to address the Legislature at a standstill and unable to produce a bill to fix California’s crumbling 50,000 lane-miles of state and federal highways.
The plan calls for a new $65 fee on all vehicles and raising the state’s gasoline and diesel tax. Brown said the plan focuses on fixing state highways and bridges first, and won’t have a major impact on the state’s general fund.
The transportation package carries a $4.2 billion price tag. A similar $3.6 billion proposal stalled in the Legislature last year after Brown forced lawmakers into a special planning session.
State Republicans criticized Brown’s transportation plan, saying California should fund the infrastructure repairs by diverting money from the “unnecessary high-speed train” rather than through tax increases.
“On transportation, I agree with the need to fix our aging roads, but I am troubled that the governor still wants drivers to pay massively higher gas taxes. The state can fix our roads by diverting money from an unnecessary high-speed train, eliminating inefficiencies at Caltrans and using designated transportation dollars for their original purpose,” state Sen. Patricia Bates, R-Laguna Niguel, said in a statement.
Meanwhile, Brown’s cabinet and party applauded the governor’s frugal message and fiscal approach.
“If it is true that budgets are a reflection of our values, then let us embrace a plan that uplifts our people, promotes job creation and focuses on building infrastructure for generations of Californians,” State Treasurer John Chiang, a 2018 gubernatorial candidate, said.
Brown, 78, was hounded by reporters regarding Trump’s ominous policy promises and their potential impact on the nation’s most progressive and populous state. Regarding health care, Brown said it was unlikely that any president would take away medical coverage from millions of Americans.
“I don’t think there’s ever been a politician in American history that would ever imagine taking away health insurance from 20 million Americans. That’s a very bold move that isn’t very consistent with decency,” Brown said of Trump’s promise to repeal and replace President Barack Obama’s health care law.
Brown’s budget assumes the health care law won’t be replaced and that the state will still receive $15 billion from the federal government for health care. The proposal dedicates nearly $1.6 billion in general fund expenditures toward the Medi-Cal program, and Brown acknowledged “it will be extremely painful for California,” if the law is dismantled.
Budgeting talks between Brown and Democratic party leaders begin Tuesday, with a revised budget draft expected in May.
California lawmakers, specifically Democrats, are notorious for including last-minute budget trailer bills and essentially circumventing the legislative process. Hoping to address last-minute legislation, voters last November approved a proposition requiring a 72-hour notice before final votes on bills.
Republicans have largely been shut out of the state’s budgeting process following voters’ approval of a 2010 initiative that changed the legislative requirement for approving budgets from a two-thirds vote to a simple majority.
Assemblyman Randy Voepel, R-Santee, said Brown’s budget proposal reflects the “desires of legislative Democrats” and not the “core needs of California citizens.”
“This budget neglects to address our significant transportation and water infrastructure needs, pays down far too little debt, and does not do enough to strengthen our state’s rainy-day fund,” Voepel said in a statement.