Politics

Gov. Jerry Brown signs rare on-time state budget

Thursday, June 30, 2011

Gov. Jerry Brown on Thursday signed a rare on-time budget a day before the start of California's fiscal year, a package that is a combination of spending cuts, fee hikes and the promise of higher tax revenue that might never materialize.

Brown signed the $86 billion spending plan after majority Democrats passed it without Republican support. They acted for the first time under a voter-approved law that allows budgets -- but not tax increases -- to be passed with a simple majority, rather than a two-thirds vote.

Lawmakers also were motivated to complete a deal because the same law halted their salaries and living expenses until they passed a balanced budget.

In signing the budget, Brown said general fund spending is at its lowest level since the 1972-73 fiscal year when measured as a share of the state's economy. Cuts enacted Thursday and this spring will affect nearly every aspect of California government, from universities and state parks to in-home services for the elderly and mothers trying to work their way off welfare.

"We really have some retrenchment here across a wide spectrum of important government services," Brown told reporters after signing the budget bills behind closed doors. "These are really hard decisions, and going forward Californians are going to have to think hard about what we want from our universities, from our police and sheriffs, from our safety net for the most vulnerable."

In years past, lawmakers sometimes went months beyond the start of the fiscal year before approving a budget, including last year's record stalemate, which ended in October.

While California has a spending plan for its new fiscal year, Brown has warned that the state will continue to have ongoing deficits unless it can find a way to bring its annual tax revenue in line with spending obligations.

The latest budget includes cuts to higher education, welfare, health care for the poor and disabled, in-home supportive services, state parks and other core functions of government. It also relies on optimistic projections that tax revenue will be about $12 billion higher in the coming fiscal year than projected in January, largely because the wealthy are doing so well.

If that higher revenue does not materialize, more cuts would have to be made during the middle of the fiscal year. That would include authorizing school districts to reduce their school year by seven days.

The new spending plan projects a $5 billion shortfall for the fiscal year that will begin July 1, 2012, and puts $500 million into reserves.

Brown has said the best way to avoid ongoing deficits is to find new ways to raise revenue. The Democratic governor was unable to renew several expiring tax increases this year, but has vowed to fight for more tax revenue at the ballot next year to help the state pay down debt and restore education funding.

California had started the year with a projected $26.6 billion shortfall, forcing Democrats to adopt billions of dollars in cuts to social service programs, higher education and corrections.

Budgets for the California State University and University of California systems have been cut $750 million each for the coming year, prompting officials to say they will need to raise tuition again. Funding to operate the state court system has been cut by $350 million, and 70 of California's 278 state parks, beaches and historic areas will close by July 2012 because of cutbacks to the nation's largest state park system.

The remaining budget package the Legislature passed this week relies on further spending cuts and projections of greater-than-expected tax revenue from an improving economy to close the remaining $9.6 billion deficit.

While the governor projected $6.6 billion in higher revenue in his May revision, the new package projects an additional $4 billion in higher tax revenue and an additional $1.2 billion coming in this past spring.

Brown has indicated he will pursue a ballot measure in November 2012, but so far has given no details on what taxes he would include. That means it will be up to voters to decide the biggest issue the governor promised but failed to deliver this year -- an increase in taxes to help end the state's ongoing budget mess.

Brown promised voters during his campaign for governor last year that he would not impose tax increases without a vote of the people.

He had hoped to ask Californians to extend for up to five years a series of temporary increases in the sales, vehicle and income taxes approved by the state Legislature in 2009. But he was unable to get two Republican votes in each house of the state Legislature to put that measure on the ballot.

The last of those tax increases will expire Thursday.

While the budget passed with only Democratic votes in the Assembly and Senate, Republican lawmakers on Thursday said it represented a victory for them because the 2009 tax hikes were not renewed.

"This is much-needed relief, and it's the result of Assembly Republicans standing together to represent the only special interest group we represent, and that's the hardworking taxpayers," said Assembly Minority Leader Connie Conway during a news conference with other Republican assembly members at a Sacramento Ford dealership. "Despite their efforts, we kept politicians out of the taxpayers' wallet."

In addition to higher fees for community college and university students, the new budget imposes an extra $12 fee on vehicle registration and a $150 annual assessment on rural property owners for fire protection. Those levies are almost certain to be challenged in court because they did not get the two-thirds vote required for tax increases.

The budget also makes major changes to the 400 community redevelopment agencies throughout the state, which were set up to improve blighted neighborhoods but have been criticized in recent years as providing a pot of money for a wide array of private development projects. Under the budget plan, $1.7 billion in redevelopment tax money would be diverted to school districts and other local services. Redevelopment officials have said they will sue.

The budget also shifts responsibility for low-level offenders from the state to counties, helping the state meet a federal court mandate to reduce its prison population.

Budget talks accelerated after Brown vetoed a Democratic spending plan passed on the Legislature's June 15 constitutional deadline and the state controller withheld lawmakers' paychecks after determining the package was not balanced, as required under the terms of last year's Proposition 25.

Rank-and-file lawmakers have lost about $400 a day in salary and living expenses since then, or a total of roughly $4,000 each. Their base salary is $95,291 a year, not counting per diem expenses that can add another $20,000 or $30,000.

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Associated Press writer Juliet Williams contributed to this report.

(Copyright ©2014 by The Associated Press. All Rights Reserved.)

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