Budget talks won’t be easy for governor

When Gov. Jerry Brown releases his latest budget plan Tuesday, he will already have a major fiscal victory under his belt, having cut a deal to strengthen the state’s reserve fund.

But over the next few weeks, spending negotiations with lawmakers will still present a series of challenges for the governor, who has emphasized his stewardship of California’s finances as he runs for reelection.

The governor is trying to secure new funding for the state’s troubled $68-billion bullet train project by tapping into fees on polluters, a proposal that has frustrated environmental activists and some lawmakers who would like to see the money spent elsewhere.

He’s also confronting higher-than-expected healthcare costs, now that one-quarter of the state’s population is enrolled in Medi-Cal, which serves poor residents.

More people are signing up for the program than previously anticipated as California continues to implement President Obama’s federal healthcare overhaul, and there’s a backlog of 900,000 applications still waiting to be processed.

In addition, Brown will be facing pent-up demand for more money dedicated to social services, such as childcare and home care for the elderly and disabled, which were cut deeply during the recession.

During last year’s budget talks, the governor was able to blunt his fellow Democrats’ push for new spending by convincing them there wouldn’t be enough money available.

But revenue has outpaced Brown’s original projections by billions of dollars, and Assembly Budget Chair Nancy Skinner (D-Berkeley) said lawmakers will be more resistant to his calculations this year.

“He tried that once,” she said. “It will be harder to justify.”

The Legislature is required to pass the next budget by June 15. It goes into effect July 1, once the governor signs it.

During this year’s give-and-take, Brown will be working for the first time with new Assembly Speaker Toni Atkins (D-San Diego), who was sworn in on Monday to replace John A. Pérez (D-Los Angeles).

During her first speech as speaker, while Brown sat behind her in the Assembly chamber, Atkins said the budget should be “lifting up the most vulnerable.”

After the recession and the accompanying budget cuts, many Californians have been “holding on with white knuckles,” she said. “Their dreams were put on hold.”

Brown, on the other hand, has repeatedly said there won’t be enough money to fund every worthy program.

“I know there’s a line of people a mile long that says, ‘You know what, you haven’t done this, you haven’t done that, and you haven’t done the other thing,’” Brown said this month. “That’s always going to be true. And I just have to say I’m going to err on the side of prudence.”

The reserve-fund proposal, which would stockpile cash to cushion the state against future economic downturns and be used to help pay off debt, is a key part of Brown’s financial plans.

Republicans and Democrats have expressed support for the measure; if passed by the Legislature, as expected, it would be placed on the ballot in November.

The state has reaped almost $2 billion more revenue in the current fiscal year than Brown estimated in January, according to the most recent figures from the nonpartisan Legislative Analyst’s Office. But that doesn’t necessarily mean there will be a lot more money to spread around.

Because of California’s law on education funding, much of the money will be directed to schools and community colleges. The state is also required to put more money into its largest pension fund for public employees because retirees are living longer.

Some of the additional revenue could also be needed for healthcare.

Anthony Cava, spokesman for the California Department of Health Care Services, said officials originally estimated 1 million to 2 million people would join Medi-Cal by the end of 2014.

But by the end of March, the state already had registered 1.9 million new enrollees.

The federal government pays the full cost for anyone who became eligible under Obama’s law. The state must pay half for those who were eligible before the Affordable Care Act.

Cava said the state is still calculating how many enrollees were previously eligible.

Brown could face difficulties this year as he tries to lock down funding for the bullet train.

Bond funding for the project has been tied up in court, and Brown wants to use money generated by polluters who pay for the right to release greenhouse gases into the atmosphere, part of the state’s cap-and-trade program.

Under the governor’s previous proposals, one-third of that money would be spent on the bullet train each year.

Sen. Hannah-Beth Jackson (D-Santa Barbara), who sits on a budget subcommittee, would rather spend the money on mass transit projects in heavily congested areas than on laying the first strips of track for the bullet train in the Central Valley.

“I know the governor is really focused on high-speed rail,” she said. “But there’s more we can do before spending so much money on a project that’s not as tested.”

Senate leader Darrell Steinberg (D-Sacramento) has offered his own plan for spending cap-and-trade income, which would direct less money to the bullet train than Brown wants and put much more toward affordable housing.

Sen. Holly Mitchell (D-Los Angeles) said she preferred Steinberg’s proposal.

After all, she said, “the bullet train won’t come anywhere near” her district.

chris.megerian@latimes.com