Jerry Brown, Democratic legislative leaders reach budget deal

SACRAMENTO — Gov. Jerry Brown and Democratic legislative leaders have reached an agreement to reduce California’s welfare rolls and cut back other social service funding, a deal that enables them to enact a state budget on time and focus on persuading voters to authorize tax hikes in November.

The agreement announced Thursday averts a potential showdown between Brown and members of his own party, who sought to soften some of his demands for steep cuts. It also paves the way for the governor to sign the budget lawmakers passed last Friday.

Democratic leaders and Brown spent this week negotiating their lingering disagreements, and agreed to split the difference on various budget-cutting proposals.

For example, the deal calls for stricter work requirements and tighter time limits for welfare recipients, as Brown wanted. But monthly checks would not be reduced, and there could be exemptions made for those close to finishing job training programs.

“This agreement strongly positions the state to withstand the economic challenges and uncertainties ahead,” Brown said in a statement. “We have restructured and downsized our prison system, moved government closer to the people, made billions in difficult cuts and now the Legislature is poised to make even more difficult cuts and permanently reform welfare.”

The final spending plan will probably be slightly smaller than the $92.1-billion budget approved by the Legislature last week. But even with a final deal in place, the state budget faces hurdles.

The spending plan hinges on voters approving more than $8 billion in tax increases. Brown’s initiative, which qualified for the November ballot Wednesday, would raise the state sales tax by one-quarter of a cent for four years and hike income taxes on California’s wealthiest residents by one to three percentage points for seven years.

If voters reject the taxes, billions of dollars would be cut from California schools, and the academic year could be shortened by three weeks.

The nonpartisan legislative analyst’s office also has cast doubt on calculations involving property tax money that once funded community redevelopment agencies, which are being dissolved this year. The office said there probably would be much less money available than Brown and lawmakers are counting on to help plug the state’s $15.7-billion deficit.

The budget also assumes California will rake in $1.9 billion in tax revenue related to Facebook’s public offering. But that calculation is based on a $35 share price, and the stock stood at just under $32 per share as of Thursday. Overall stock market fluctuations could lead to multibillion-dollar swings in California tax revenue.

Passing the budget last week, without a single Republican vote, allowed lawmakers to meet a June 15 constitutional deadline and continue receiving their paychecks. However, several critical issues — welfare, child care, college scholarships and healthcare — remained unresolved until Thursday’s announcement.

“In each of these areas we were able to find a middle ground with the governor that we believe minimizes the impact on people in need, while at the same time assures significant ongoing savings,” Senate President Pro Tem Darrell Steinberg (D-Sacramento) told reporters.

Democratic lawmakers ceded to Brown’s proposal to eliminate the Healthy Families program, which provides health insurance to almost 900,000 poor children. Under the compromise, children will be shifted into Medi-Cal over the course of a year.

To assuage concerns that it will be harder to find healthcare in the Medi-Cal program, administration officials guaranteed that there would not be a gap in coverage for any child.

However, healthcare advocates blasted the decision.

“What the governor has proposed will undoubtedly ensure that those kids now have a harder time getting access to care,” James Hay, president of the California Medical Assn., said in a statement.

Funding for state-supported child care would be cut 8.7%, more than the 5% Democratic lawmakers had wanted. The budget also calls for stricter standards for Cal Grants, the state’s college scholarship program. Newly awarded Cal Grants would be valid only at colleges that graduate a sufficient number of their students.

Modifications to the budget passed last week are expected to be vetted during a committee hearing Monday and voted on by the full Legislature Tuesday.

Brown’s office did not say when he would sign the budget. But Thursday’s deal meant an end is in sight for a process marked in previous years by delays and drama.

chris.megerian@latimes.com