The Legislature's nonpartisan fiscal analyst said Monday that Gov. Jerry Brown's new spending plan "would place California on an even stronger fiscal footing," broadly praising the budget plan in the office's initial review.
"The governor's emphasis on debt repayment is a prudent one," the Legislative Analyst's Office said. "Overall, the governor's proposal would place California on an even stronger fiscal footing, continuing California's budgetary progress."
Still, the LAO expressed reservations about the proposal's lack of strings attached to higher education funding and the use of fees paid by carbon producers for high-speed rail.
Brown last week released a $154.9 billion budget that includes modest increases for social services and schools, but also billions of dollars to pay down long-term debt.
The LAO praised Brown for proposing a rainy-day fund, saying that "in general, setting aside money for a rainy day is exactly what the state should be doing when revenues are soaring, as they are now." However, the analyst suggested the fund proposed by Brown may be too unwieldy, and it recommended considering simpler reserve plans.
The LAO also recommended putting some money aside to address the struggling state teachers' retirement fund. Brown's budget plan does not commit money to the fund but pledges to "begin working" on way to stabilize the fund.
Brown's proposal to use $250 million in proceeds from the state's cap-and-trade program to help finance California's $68 billion high-speed rail project is one of the more controversial elements of his plan. The LAO said the proposal "likely would not maximize the reduction" of greenhouse gas emissions, as the project will not be finished by 2020. It called the proposal "legally risky."
On higher education, the analyst criticized Brown for including broad goals for higher education — including reducing costs and increasingly timely degree completion — but tying funding only to keeping tuition rates flat.
"This approach diminishes the Legislature's role in key policy decisions and allows the universities to pursue their own interests rather than the broader public interest," the analyst said.
Brown released his annual spending plan last week, setting the stage for months of budget talks at the Capitol. The LAO said there is "a significant possibility" that revenue estimates "will rise by a few billion dollars" by the time Brown releases his budget revision in May.
PHOTO: Senate President Pro Tem Darrell Steinberg, left, Gov. Jerry Brown, center, and Assembly Speaker John A. Pérez, right, celebrate a budget deal with a formal announcement at the California Capitol on Tuesday, June 11, 2013. The Sacramento Bee/Randy Pench