California Gov. Jerry Brown proposed a $122.5 billion state spending plan this week and warned of a looming $1.6 billion budget deficit because of slow growth in tax revenues.
Brown announced his proposed budget as the state faces uncertainty about changes to come from President-elect Donald Trump and the Republican-led U.S. Congress on a host of programs that affect California, from health care policy to immigration.
Trump has pledged to repeal President Barack Obama’s health care law, which California has embraced by enrolling about 5 million people in private health insurance or publicly funded Medi-Cal coverage.
The proposed budget assumes policies remain the same, but Brown noted the federal uncertainty is another reason to maintain the fiscal prudence for which he consistently advocates.
“If they do go down that road, it will be extremely painful for California,” Brown said about the Trump administration.
About 1.4 million people signed up for coverage last year through Covered California, the insurance exchange created under the Affordable Care Act.
Nearly 90 percent received federal subsidies that would go away under previous GOP proposals to repeal “Obamacare.” Another 3.8 million people with low incomes joined the Medi-Cal program, with 95 percent of their costs paid by the federal government, amounting to about $15 billion in subsidies during the current fiscal year.
Brown’s proposal is his opening salvo in six months of spending negotiations with lawmakers. He seeks to boost the state’s reserve fund to $7.9 billion, up from $6.7 billion in the current budget year, to help soften what he warned is an inevitable recession after 10 years of economic recovery.
“You’ve got to save your money or you’re going to lose the farm,” Brown said.
Republicans, who are more often aligned with Brown than legislative Democrats on spending, were cautiously optimistic about the governor’s approach.
“Our California budget is perilously balanced,” said Sen. Jim Nielsen, R-Gerber, the ranking Republican on the Senate budget committee. “The governor has, along with the Republicans, opted to hold the line on our spending. We cannot be getting loose with the purse in California.”
The 78-year-old governor also used his annual budget news conference to harp against the state tax system that he says is overly reliant on the highest-income earners, leading to inevitable boom-and-bust cycles dominated by the fortunes of Silicon Valley.
“This is not just some kind of, you know, quirk, or legacy or `Brownie-ism,”‘ he said, noting that there has been reluctance to address the problem.
Brown did not depart from his tradition of advising against long-term spending commitments that would have to be cut during the next recession. He pointed to lower-than-expected state revenue and uncertainty over Trump’s policies as other reasons for caution.
His position sets up a potential skirmish with Democratic legislative leaders, who prefer to expand funding for higher education, social services and other state programs.
Brown’s spending proposal remains the same as the current $122.5 billion 2016-17 general fund budget but reflects cuts because inflation generally causes spending to rise each year.
The Democratic leaders of the Assembly and Senate budget committees, Assemblyman Phil Ting of San Francisco and Sen. Holly Mitchell of Los Angeles, say California should continue spending on important programs rather than act out of fear of uncertain policies from Washington.
The nonpartisan legislative analyst, Mac Taylor, released his budget forecast in November, projecting the state would have a $2.8 billion surplus after accounting for the higher cost of delivering state services for another year.
Taylor’s office says 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 due largely to lower-than-expected personal income tax revenue.
Associated Press writer Don Thompson contributed to this report.
Topics California
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