SACRAMENTO — The budget compromise announced today between Gov. Jerry Brown and the Legislature’s Democratic leaders largely mirrors the governor’s proposal for a fiscally restrained spending plan that assumes conservative revenue projections.

But there’s a catch: Rank-and-file Democratic lawmakers say they are agreeing to less spending than they wanted so they could pass the budget on time, although they will push for funding pet projects next year. That’s when they expect the state’s tax revenue will be coming in higher than the Brown administration projects.

Such a scenario could clear the way for hundreds of millions of dollars in discretionary spending on a wide range of programs, from Medicaid reimbursements paid to doctors and hospitals to extra money for courts and community colleges. Just this week, the state controller’s office said monthly cash receipts beat estimates by 12.4 percent, or nearly $800 million.

“If the revenues continue to perform as they have, the question becomes, ‘What do they do with the surplus collections?”‘ Gabriel Petek, a senior director who tracks California finances for the ratings agency Standard & Poor’s, said in an email Tuesday.

Petek said it appears the compromise budget plan pays down less debt than Brown had proposed. From a credit perspective, he said “that could be a bit of a fly in the ointment of an otherwise favorable process.”

Sen. Bill Emmerson, R-Redlands, the ranking Republican on the budget committee,
credited the governor with holding the line on spending but said he was disappointed the plan doesn’t do more to pay down the state’s so-called wall of debt, mainly loans that had accumulated during the recession.

Legislative Democrats and the governor defended the compromise plan during a joint news conference today.

Assembly Speaker John Perez said it uses the most volatile tax revenue to pay down some of the state’s debt and to start building a rainy day fund. Brown emphasized that it restricts spending, at least for now.

Brown said there’s no agreement to renegotiate the budget if revenues exceed projections.

“Only time will tell, but in general I think prudence rather than exuberance should be the order of the day,” the governor said.

In accepting the governor’s revenue projections, Democrats are hoping to revisit their spending priorities in the new year, when they expect higher tax revenue to materialize.

The Legislature is expected to vote on the main budget bills during floor sessions scheduled for the end of the week. Democrats, who control the Assembly and Senate, need only a simple majority vote to pass a budget and can do so without Republican support.

The compromise $96.3 billion spending plan that emerged Monday uses the more conservative revenue figure from the Brown administration rather than one put forward by the nonpartisan Legislative Analyst’s Office, which was $3.2 billion higher.

The governor also succeeded in securing a new K-12 funding formula that would channel additional money to school districts with high levels of low-income students, those with low English proficiency and foster children.

Assembly and Senate Democrats received funding for a few social programs and college aid for the middle class.

For example, Senate President Pro Tem Darrell Steinberg secured increased mental health care funding, particularly money to expand residential treatment bed capacity. He also got $77 million in the next fiscal year to restore adult dental care for an estimated 3 million Medi-Cal recipients, which would allow the poor to receive preventive dental care and dentures.

Perez, the Assembly speaker, received initial funding to offer college scholarships for students whose families earn less than $150,000 a year, known as a middle-class scholarship. He also received increases to in the state’s welfare-to-work program, known as CalWORKS.

The compromise also calls for restoring $63 million in court funding. Although it was less than the $100 million lawmakers sought, the head of California’s court system called it a good first step and hoped the Legislature will restore more money later.

“We hope that as the state’s economy improves, the branch’s budget will improve so that we can rebuild the kind of access to justice the public deserves,” said Chief Justice Tani Cantil-Sakauye in a statement.

Health care providers such as doctors, pharmacists and hospitals are still hoping to prevent a 10 percent reduction in the amount the state pays for Medicaid reimbursements, even though it was left out of the budget plan. They say the reduction would jeopardize care for the low-income patients who depend on the program, known as Medi-Cal.

Throughout negotiations, Brown had vowed to resist pressure to restore services that were cut or eliminated during the recession. An improving economy and the sales and income tax increases approved by voters last fall have brightened the state’s budget picture considerably.

It’s not clear whether the governor will be able to contain the spending a second time, especially if state tax revenue rises considerably in the new year.

“It doesn’t close the door on anything,” said San Francisco Democratic Sen. Mark Leno, who is co-chairman of the Joint Legislative Budget Conference Committee. “Actually it opens the door, I think, not once but twice for us.”
By Judy Lin
Associated Press