Despite income tax revenue running about $4.5 billion ahead of expectations through April, Gov. Jerry Brown included relatively low revenue figures in the revised budget he released this morning, likely dampening expectations for greater program spending.
The budget Brown proposed will assume revenue in the current fiscal year only $2.8 billion ahead of expectations, with revenue next fiscal year down $1.8 billion from Brown's January estimate.
In the weeks leading up to Tuesday's budget revision, speculation mounted that Brown could take advantage of $4.5 billion that rolled into state coffers unexpectedly this spring. But the governor took a more cautious approach, projecting that economic growth will be slower than previously thought because of federal spending cuts and a higher payroll tax on workers.
"Four percent growth has now become 2 percent," Brown said.
The governor also assumes that the spring revenue spike was partly due to wealthy taxpayers taking more income in 2012 in anticipation of federal tax changes. That means the state potentially would receive lower tax revenues in 2013-14 than Brown previously expected.
"We have climbed out of a hole with a Prop 30 tax," Brown said, referring to his initiative last year that hiked income taxes on the wealthy and sales taxes. "That's good. But this is not the time to break out the champagne."
The proposed budget includes a $1.1 billion reserve. It increases funding for Brown's effort to overhaul California's educational finance system by $240 million. In his education proposal, Brown also proposes $1 billion to implement English, math and other subject guidelines known as the Common Core Standards.
Brown continued to ask lawmakers to approve his new funding formula, which directs more money to K-12 districts with large numbers of impoverished students and English learners. He was skeptical of critics who consider his plan flawed because wealthier suburban districts stand to receive less money than they would otherwise.
"Ask somebody in Beverly Hills or Palo Alto or Piedmont, 'Would you like to move to Compton? Would you like to move to Watts?' And if they say, 'Yeah, let's do it because I want to get the extra money,' then I'll believe it," Brown said.
The governor has dropped his January proposal to cap the number of state-subsidized classes that public university students can take. He had pitched the idea as a way to make the University of California and California State University systems more efficient.
Brown proposed a statewide approach - not a county-by-county effort - to implement California's expansion of Medi-Cal under the federal health care overhaul.
The budget includes $500 million in additional Medi-Cal spending, and more funding for California's prison realignment, in which the state shifted responsibility for certain low-level offenders to counties.
Brown seemed resistant Tuesday to Democratic proposals to raise additional taxes. He also dismissed calls to increase spending beyond education, mocking the Capitol as "a big spending machine."
PHOTO CREDIT: Gov. Jerry Brown unveils the revision of his budget proposal. The Sacramento Bee/Melody Gutierrez