Seeking to capitalize on another year of unexpectedly strong tax revenue collections, Gov. Jerry Brown asked state lawmakers Wednesday to fully fund California’s rainy-day cash reserve fund to $13.5 billion by next summer, the largest cash reserve in state history.
Brown said the decision will help the state ready itself for the next recession, which he believes is already overdue.
“The only way you can prepare is to watch your spending every year and build up the rainy-day fund,” he said at a news conference in Sacramento to unveil his proposed $190.3-billion budget for the fiscal year that begins in July.
In 2014, voters approved a substantial overhaul of the state’s existing cash-reserve rules, a plan championed by Brown along with legislative Democrats and Republicans. That law mandates cash deposits until the reserve totals 10% of the state’s general fund. Brown and Democrats have taken advantage of successive years of tax revenue growth to pre-pay some of the required deposits, allowing the reserves to grow faster than otherwise expected.
“We have our piggy bank waiting for the next governor,” Brown said as he showed off a chart showing the increase in reserve funds. “The whole point is to think ahead and minimize the pain that is coming.”
The decision was hardly a surprise for close watchers of the state budget. In the seven years since he returned to the governor’s office, Brown’s primary focus has been to ensure the state would not again face short-term deficits in the tens of billions of dollars. Though total spending has still grown since 2011, advocates for a variety of social services programs have frequently been disappointed that Brown refuses to go along with plans to fully restore some of the services cut during the depths of the recession.
In all, the budget proposal assumes a $6.1-billion windfall of tax revenues in the coming fiscal year. Brown wants lawmakers to commit $3.5 billion of that to the rainy-day fund while setting aside $2.3 billion as an operating reserve for unexpected costs like those due to recent wildfires. Only $800 million of the cash would be used to fund programs, with much of that on one-time items.
Republicans in the Legislature urged the governor and majority Democrats to consider using the unanticipated revenues to cut taxes or offer a refund to Californians.
“It’s a strange world where politicians are celebrating that the government took too much money from taxpayers, but that’s exactly what is happening with this budget surplus,” Assembly Republican leader Brian Dahle (R-Bieber) said. “My question is: When do California taxpayers get a break?”
Brown rejected those calls in a question-and-answer session with reporters.
“The problem with that is, you return it and then you’ve got to cut, lay off teachers and raise tuition at the university because you’re going to run out of money in a couple of years,” he said.
In his final spending plan before leaving next January due to term limits, Brown also proposed creating a wholly online community college curriculum “targeted at people who are already in the workforce” and need to update their skills. The program is expected to cost $20 million a year, with a one-time cost of $100 million for implementation. The administration believes that there are 2.5 million Californians between the ages of 25 and 34 with no college degree.
Mandated funding for K-12 education would grow to $78.3 billion, mostly due to the requirement that schools receive a sizable earmark of annual tax revenues. The governor went beyond those requirements in the new proposal by adding $3 billion to the program that targets disadvantaged schools, the Local Control Funding Formula he championed in 2013.
Brown also proposed full funding of a law passed last year that waives all fees for first-time California community college students. The decision, which will cost $46 million in the coming fiscal year, was applauded by those who believe that it will serve as an incentive for those who otherwise wouldn’t enroll.
The budget plan also assumes $4.6 billion in new transportation funding, sparked by last year’s increase in the California gas tax. Most of that, $2.8 billion, will be spent on repairs to roads, highways and bridges.
Brown dismissed concerns that California should hunker down for angry clashes with Republicans in Washington, even though the budget assumes robust funding for healthcare still being provided through the Affordable Care Act. Approximately $64 billion dollars in federal funds — about two-thirds of every dollar expected from Washington — will go to Medi-Cal, the state’s healthcare program for the working poor.
“I wouldn’t want to portray a California-Washington battle,” he said.
Jan. 11 1:34 p.m.: This article was updated to reflect that the 2014 rainy-day fund was placed on the ballot with support from both Democrats and Republicans.
Jan. 10 11:58 a.m.: This article was updated with additional information about the governor’s budget as well as reaction from the Assembly Republican leader.
This article was originally published at 10:20 a.m. on Jan. 10.