Gov. Jerry Brown signs California budget of more than $122.5 billion

Posted at 4:54 PM, Jun 27, 2016
and last updated 2016-06-27 19:54:38-04

SACRAMENTO, Calif. - Gov. Jerry Brown signed a state budget Monday that uses a slice of California's revenue surplus to boost assistance for the poor and send more money to universities but keeps other new ongoing spending commitments to a minimum.

In negotiating with Democratic legislative leaders on the $122.5 billion spending plan, Brown secured a commitment to boost the state's rainy day fund, pay down debts and use cash instead of debt for building maintenance and construction.

Using billions for savings and one-time purposes is a victory for the Democratic governor, who warns repeatedly that California's current budget surpluses are based largely on capital gains income of wealthy taxpayers. That revenue will quickly plummet during economic difficulties, he says, forcing the state to take back money approved during the boom times.

"This solid budget makes responsible investments in California and sets aside billions of dollars to prepare for the next recession," Brown said in a statement announcing that he has signed the budget.

Brown has suggested that he'll later be judged on how well the budget weathers the next recession. His predecessors saw their popularity plummet when they were forced to accept steep spending cuts, he said.

"I don't want to repeat these errors, because we had two governors who were riding high. And paradoxically, that very moment when everyone's feeling the best is the very moment when the recession is about to hit," Brown said last month. "So instead of pulling back in the last two recessions, the state of California accelerated its spending and therefore made the budget cuts all the more painful."

In a rare move, Brown did not use his line-item veto authority to erase any specific budget items, leaving the budget the Legislature approved intact. His signature allows state agencies to continue operating for another year after June 30.

But even as Brown signed 13 budget-related bills, several related measures remained in limbo. The Senate budget committee declined to endorse an energy spending bill Monday morning when lawmakers said they hadn't had time to understand provisions Brown's administration had added late.

The Senate and Assembly also have yet to agree on a natural resources budget bill.

Brown negotiated the spending plan with Assembly Speaker Anthony Rendon, D-Paramount, and Senate President Pro Tem Kevin de Leon, D-Los Angeles.

The package includes a $2 billion additional deposit in the state rainy day fund on top of the $1.3 billion contribution required by the state constitution, bringing the total balance to $6.7 billion. The budget also includes a regular reserve of $1.75 billion to cushion against a drop in revenue. Another $2 billion was earmarked for deferred maintenance and state building construction.

Brown also secured $270 million in bonds for jail construction, though he would have preferred to use cash. Democratic lawmakers fought unsuccessfully to cut the jail funds that they say would be better spent on rehabilitation programs.

Lawmakers agreed earlier in the year to reserve $240 million to fund future health care costs for state workers once they're retired, a priority for Brown. 

"Our final product means California is in stronger fiscal shape than we have been for years," Rendon said in a statement.

However, Brown has made little progress in his quest to raise taxes or fees to fix crumbling highways.

And despite his reluctance to bless new ongoing spending, Brown gave in to several priorities for Democratic lawmakers, including an expansion of state-funded day care that will eventually cost $500 million a year. He also agreed to repeal a welfare policy known as the maximum family grant, which denies additional aid to families that have more children while receiving aid, at a cost of more than $220 million a year. A special account will take over the long-term cost, limiting the general fund hit to the next three years.

The spending plan was approved by lawmakers June 15 with only one Republican vote. GOP lawmakers said the budget sets the state on the course for deficits despite Brown's effort to limit recurring costs. They also criticized the lack of funding for road construction.

Brown said last month that the state will see a budget shortfall of $4 billion by 2019 unless voters in November decide to renew temporary tax hikes on the rich. The nonpartisan legislative analyst disagreed, projecting budget surpluses in each of the next four fiscal years even if the taxes expire.

The budget raises vehicle registration fees from $70 to $80 a year starting in April, to generate $400 million a year for the Department of Motor Vehicles, California Highway Patrol, Air Resources Board and other departments.

Brown and legislative leaders agreed to set aside $400 million for low-income housing, assuming lawmakers and Brown can agree on a plan to bypass construction review processes in certain neighborhoods. The policy has drawn strong opposition from neighborhood activists who fear it will allow developments that change the character of their communities.