Capitol Alert

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RB Budget 1A.jpgGov. Jerry Brown said Thursday that California faces no budget deficit for the first time since the recession.

"This is new. This is a breakthrough," Brown said.

But Brown allowed that the state still faces fiscal risks, notably uncertainty in the federal government's fiscal affairs and the still-unknown cost of federal health care reform.

"It is best to maintain a very solid budget and a good reserve...or we'll go back to the boom and bust, borrow and spend," he said.

The governor's declaration that the deficit is gone contrasts with the November projection from the nonpartisan Legislative Analyst's Office that the state still faced a $1.9 billion shortfall, despite voters' approval of new income tax rates on high earners and a temporary hike in the sales tax.

Brown said he is unwilling to restore funding for social service programs that have been cut during the recession. "That kind of yo-yo political economy is not good," he said. "I want to advance the progressive agenda, but consistent with the amount of money the people made available."

The spending plan Brown released this morning calls for small increases to education funding in a $97.7 billion general fund budget for the fiscal year that begins July 1 but generally holds the line elsewhere.

The governor's budget will give each state university system an extra $250 million. The addition is not as much as the University of California and California State University had hoped, so it remains to be seen whether university officials will pursue tuition hikes.

As part of his plan, Brown will demand each system cap the number of classes that students can take at 150 percent of what is necessary to complete most degrees - 270 quarterly units at UC and 180 semester units at CSU. That cap will shrink further after two years. Students could continue taking classes but would have to pay full price rather than the subsidized in-state rates. The governor believes this will force more students to finish on time and free up resources.

The governor proposes one of two paths to embrace the federal expansion of Medicaid - delivered in California as Medi-Cal. He suggests a slimmer state-based program that does not cover long-term care for newly eligible individuals - generally impoverished childless adults. An alternate version would hold the counties responsible for that population, building on the nascent federally-funded Low Income Health Program and leaving local officials to decide what benefits to offer.

Brown estimates that federal changes to Medicaid will cost the state $350 million extra in 2013-14, an amount mostly due to an expected increase in the number of people who are already eligible for Medi-Cal but don't sign up until next year because enrollment will be easier and awareness higher.

Funding for K-12 schools and community colleges will rise $2.7 billion, from $53.5 billion to $56.2 billion. The governor is calling on lawmakers to overhaul the school funding system with a new "Local Control Funding Formula," as detailed this morning in The Bee. The governor calls for $1.6 billion to go toward this new formula in the first year.

Brown wants to use $1.8 billion to reverse delayed payments to schools. The state delayed payments in past budgets as a backdoor way of borrowing to balance the budget.

The governor calls for a $1 billion reserve, but doesn't rely on severe cuts to get there unlike previous years. Instead, he relies principally on two Medi-Cal related taxes on managed care and hospitals that are intended to draw down additional federal funds. The taxes require a two-thirds vote but the payers generally have been supportive because they get reimbursed back with the additional federal money.

Republican lawmakers, who now comprise less than one-third of the Legislature, held their fire Thursday, with some even praising Brown for proposing a modest spending plan.

"I always appreciate it when the governor's the adult in the room," said Assembly Republican Leader Connie Conway, R-Tulare. "We certainly agree with his theme of fiscal responsibility. It's a good one, something that's been important to Republicans, always."

Assembly Speaker John A. Pérez applauded Brown's budget proposal, citing its slashing of the state's structural deficit, reduction of state debt, increase in school funding and commitment to implementing federal health-care reform.

"This is a good starting point," he said. "But it is that, it's a starting point."

The state's judicial leaders were among the most frustrated by Brown's proposal. While he kept funding flat for judicial operations, he proposed taking $200 million in court construction funds to help make ends meet and didn't add back funding as some had hoped.

Chief Justice Tani Cantil-Sakauye said a flat operational budget isn't enough because courts have suffered cuts too deep in recent years. She noted that courts in Los Angeles, Fresno and San Bernardino Counties are slated to close without additional funds.

"This budget doesn't answer our challenges and our problems," she said in a conference call with reporters. She added that many trial courts are "still on reduced hours and not able to provide full justice to the public, particularly families and the injured."

Photo Caption: Gov. Jerry Brown explains his budget at the sate Capitol in Sacramento on Thursday morning. Photo by Randall Benton /


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