Finance

California Passes Optimistic $156.4-Billion Budget

by | June 16, 2014

By Chris Megerian and Melanie Mason

Flush with optimism from California's resurgent economy, lawmakers approved a $156.4-billion state budget that expands preschool for children from poor families, increases welfare payments and provides critical funding for building the nation's first bullet train.

The state's financial turnaround has allowed the Democratic-led Legislature, with the blessing of Gov. Jerry Brown, to spend more freely just a few years after the recession prompted deep cuts to government services. And if tax receipts outpace expectations, the budget could send even more money to schools, public universities and local governments.

Lawmakers also are addressing more of California's lingering financial problems, stockpiling cash in a rainy-day fund and chipping away at pension costs.

"This is a much brighter day than what we've seen in years past," Senate Budget Chairman Mark Leno (D-San Francisco) said.

The spending plan -- which includes a $108-billion general fund, $7.3 billion larger than last year's -- now goes to Brown, who has until the end of the month to sign it. He can still veto items he dislikes.

The budget marks lawmakers' first major effort to combat global warming with revenue from the state cap-and-trade program, which charges fees on polluters when their carbon emissions exceed set limits.

Over the next several years, billions of dollars from those funds could flow to affordable housing, mass transit and environmental programs in a broad effort to get Californians to drive less and consume less energy.

A quarter of the money will be used for building the $68-billion bullet train, a decision that may draw legal challenges from groups that oppose the project and view it as an improper use of cap-and-trade revenue.

Republicans criticized the money for high-speed rail, and Senate Republican leader Bob Huff (R-Diamond Bar) called the budget a "missed opportunity."

"You're enacting policies to make California unnecessarily expensive, drive people into poverty and then propose new government programs to subsidize their life in poverty," Huff said.

Long-term costs for public employee retirements and overdue maintenance continue to weigh on state finances, and the budget starts tackling the $74-billion shortfall in the teacher pension fund. Under the plan, schools, teachers and the state will contribute more money to the fund in an attempt to close the gap over the next three decades.

The budget also deposits $1.6 billion into a reserve fund, a down payment on the state's effort to create a cushion for future economic downturns. Voters will have an opportunity in November to approve a constitutional amendment that would set aside money in the fund every year and help pay off the state's debt and long-term costs.

Despite the budget's increasing size, some cuts remain in place. Most notably, doctors who participate in Medi-Cal will continue receiving reduced payments even as hundreds of thousands of new patients enroll in the state's public healthcare program. Brown's resistance to increasing the payments disappointed lawmakers from both sides of the aisle, who fear fewer doctors will agree to care for Medi-Cal patients.

"The Senate wants to do this, the Assembly wants to do this and the governor understands we need to," Assembly Speaker Toni Atkins (D-San Diego) said. "So we are working as of tomorrow to figure out how soon we can do this. But we have to make sure we can pay for it."

Other programs for California's poor are being boosted. Beginning next April, welfare payments for a family of three in such high-cost counties as Los Angeles would increase to $704 per month, up from $670.

Over the next few years, preschool enrollment is expected to increase by 43,000 4-year-olds from low-income families. There's also more money for subsidized child care.

The budget already had been negotiated among Brown and top Democratic lawmakers before Sunday's vote, tamping down the drama in the Capitol. Still, controversy bubbled over a series of new policy proposals that were included in budget-related bills, sometimes after little public vetting.

For example, Brown has pushed new limits on how much money school districts can keep in their reserve accounts. Administration officials say the schools won't need to stockpile as much cash because the state will have its own rainy-day fund, but angry district officials called the proposal a ploy by the powerful teachers union to make more money available while negotiating contracts.

The California Teachers Assn. spent $4.7 million to help elect Brown in 2010 and donated nearly $290,000 to lawmakers, mostly Democrats, for this year's campaigns.

Lawmakers from both parties criticized the governor for inserting the proposal late in the budget process, but Democrats ensured the bill passed.

Another measure approved by the Legislature would modify California's new rules for granting driver's licenses to immigrants here without documentation, eliminating the requirement for applicants to submit affidavits saying they cannot prove legal residency.

Ronald Coleman, a lobbyist for the California Immigrant Policy Center, said the change would provide "peace of mind" that applying for a license won't increase the risk of deportation for immigrants who are here without those papers.

A separate budget-related bill, also approved Sunday, would remove the ban on drug felons receiving food stamps and welfare payments. Democrats say the measure would help former inmates reintegrate into society, but Republicans were critical.

"In what universe does it make sense to give cash benefit cards to drug users?" Huff said.

More budget bills have yet to be considered by the Legislature. Democrats are angling to pass two new taxes, on fireworks and insurance. The levy on fireworks -- 10 cents per pound, to be paid by distributors -- is intended to finance the safe destruction of illegal pyrotechnics. The other tax -- 15 cents per insurance policy for residential and commercial renters -- would fund earthquake research.

(c)2014 the Los Angeles Times

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