The governor’s budget continues to build the “rainy day” fund with a $2 billion allocation and starts to address the chronic shortfalls in both MediCal and transportation spending. The budget proposes substantial increases, but the governor correctly is warning that the economy will change again—the only question is when. The state is still digging out from decisions made when Gray Davis was governor and defined benefit pensions for law enforcement were enriched so employees could retire at 50 with a 3 percent multiplier instead of 2 percent.
As that change was adopted by cities and counties, the pension crisis that exists today was born.
Educators will be particularly happy with the governor’s budget allocating almost $72 billion to k-12 education—that’s up a staggering 51 percent since the depths of the recession impact in 2011-12. Per student spending would average $14,500, up about $366 from the current year.
The governor fired a warning shot on the $9 billion school construction bond that proponents are targeting for the November ballot. He labeled the program too complex and needing legislative action to reform it.
Brown was equally critical of the proposed initiative that would make the taxes established by voters when they approved Proposition 30 in 2012 permanent. That includes a tax on the highest earners of 13.2 percent. He argues that the state has plenty of money without extending the tax and that high level, when compared with no state income tax states such as Nevada and Florida, invite people to look elsewhere for residences.
Battles over initiatives and other propositions likely will dominate the fall election campaign. The presidential race is expected to draw a significantly higher turnout that two years ago and pro-tax liberal groups will want to try to ride that to pass both bond measures and tax measures.
There’s been talk about another water bond and another measure that already has been submitted to the Attorney General’s office would divert any remaining money in the high-speed rail bond as well as an unspent money from the 2012 water bond (no storage money has been allocated or proposals solicited) to dams or groundwater storage.
Legislative budget committees will now begin hearings on his proposals and likely will come to agreement on less controversial elements. The serious lifting will take place in May and June after the governor submits his revised budget. Assuming revenues continue to roll in at their current pace or better, the battle likely will be about how to spend additional money—a nice challenge to have.