Gov. Jerry Brown unveils cautious budget for deficit-free state

SACRAMENTO — California may finally be free of deficits, but Gov. Jerry Brown unveiled a cautious budget Tuesday, saying the state’s financial condition remains treacherously unstable.

Brown put lawmakers on notice that he had no desire to ratchet up spending despite a multibillion-dollar windfall of tax receipts in recent months. Saying there is no evidence that the surge will last, he reduced his revenue estimates for the budget year that begins July 1.

Only schools would get a substantial boost beyond what the governor proposed in January, before state income spiked. Most other programs would get little to compensate for cuts absorbed year after year as Sacramento ran deficits.

“This is a prudent budget,” Brown said at a Capitol news conference. “We’re sailing into some rather uncertain times.”

The announcement was far from a victory lap for a governor who plugged the deficit, won a high-stakes campaign to raise taxes and hails from a political party with a tight grip on the Capitol. Brown focused as much on what the state cannot do as on what he hopes to achieve.

He cautioned that the economic recovery has been more dribble than rebound. He said federal tax changes are cutting into workers’ paychecks and, by extension, state revenue. He warned about fallout from financial turmoil in Europe.

His spending plan notes — but does not address — other looming financial problems, such as the spiraling cost of healthcare for retired state workers.

Even as he pledged to send more money to schools, Brown tightened his general-fund plan to $96.4 billion, $1.3 billion less than he outlined in January.

“The money is not there,” he said. “Anybody who thinks there is spare change around has not read the budget.”

That did little to mollify Democrats who want to replenish funds for social services and other programs.

One of Brown’s most reliable allies in the Legislature, Senate leader Darrell Steinberg (D-Sacramento), said he found the governor’s budget “disappointing” in its failure to “begin making up for some of the damage done to tens of thousands of Californians.”

But Brown vowed to continue to resist pressure from fellow Democrats and interest groups to restore some money to adult dental care and to doctors who treat the poor. For upcoming contract negotiations with the state’s big public-employee unions, the governor said the state “is aiming low.”

“Everybody wants to see more spending,” he said. “That’s what this place is, it’s a big spending machine.”

“I’m the backstop at the end,” he said. “And I’m going to keep this place in balance.”

Education

The governor proposes spending about $1.6 billion more on schools than he outlined in January.

Brown wants to spend most of it — about $1 billion — on helping the state implement new standards for writing and math. The funds could be used for textbooks and testing materials or to train teachers, for example.

The governor said he hoped that money would help build political support for his proposal to direct extra resources to school districts that serve the highest concentrations of poor students and non-native English speakers.

That proposal is among his most controversial ideas. It sets the stage for fraught negotiations with lawmakers who want to spread education money more widely, to serve all districts with disadvantaged students.

“Any change in formula has to result in an increase in funding for all schools,” said Assembly Speaker John A. Pérez (D-Los Angeles).

Brown did make a concession to lawmakers: He scrapped a plan to give community colleges responsibility for high-school equivalency programs and other adult-education offerings.

The new proposal would leave responsibility for such programs with K-12 districts, as legislators had requested.

Healthcare

Sacramento will oversee the expansion this year of Medi-Cal, California’s healthcare program for the poor, to more than 1 million Californians who do not have health insurance now.

Under Brown’s plan, the newly insured would be offered the same benefits as those already covered by the public program, a shift from January. Then, the governor did not include stays in rehabilitation facilities and other long-term care for those who will become eligible for Medi-Cal for the first time next year.

But Brown held the line against a bipartisan push in the Legislature to restore dental care for adults in the program, which had been cut to help balance the budget.

Overall, his administration anticipates $1.2 billion more for Medi-Cal this year than last year, to conform to the federal Affordable Care Act.

Brown estimates the extended coverage will mean counties spend less on care for the indigent — money that comes from Sacramento. He estimates that sum at $300 million. Counties say it is too soon to know what that number will be.

Social services

As the state assumes more financial responsibility for healthcare, Brown wants to shift other costs to the counties. He is asking them to spend the $300 million on social welfare programs, including food assistance and childcare, in the next budget year.

The sum would rise to $900 million the following year and $1.3 billion the year after that.

Brown acknowledged that it is not yet clear how much the healthcare overhaul will save counties, that some people will remain uninsured and that local governments will have to care for those residents.

The California State Assn. of Counties called the governor’s plan “too aggressive.”

It would “force counties to cut into the safety-net services they provide today, including trauma care, emergency services, burn care and public health programs,” said Matt Cate, the group’s executive director.

Asked about restoring social service cuts made to help balance the budget in years past, Brown was unequivocal: “No,” he said. “The money is not there.”

Prisons

Brown’s proposal would offer some help to counties that are struggling to handle the inmates the state now requires them to keep in their jails along with parolees who are now supervised locally. He would restore $72 million to county probation departments.

Brown acknowledged the costs for counties was higher than the state had allowed.

But mostly, the spending blueprint for corrections reflects his opposition to federal court orders to further reduce prison crowding. The governor included no money to pay for the plan he recently submitted to judges, under threat of contempt charges, to remove thousands more inmates from state lockups.

Brown, who filed his prison plan under protest and does not support it, is appealing to the U.S. Supreme Court for relief from the population cap. If the state loses, he said, “I’m sure we could find funds” for the plan.

That drew a quick rebuke from Don Specter, an attorney for inmates.

Brown’s “budget makes it clear that he is flouting the court orders once again, and we will ask the court to hold him in contempt for his conduct,” Specter said.

Environment

The governor wants to shift $500 million from the state’s Greenhouse Gas Reduction Fund and loan it to the general fund.

The money would come from a system to limit carbon emissions by factories and other big polluters. It allows companies to pay for credits to produce more than their share of carbon emissions.

Borrowing those proceeds would be “extraordinarily disappointing,” said Kathryn Phillips, director of Sierra Club California. “The governor will be delaying opportunities to use those funds to actually get critical reductions in global warming pollution,” she said.

If the state puts off the reforestation and energy-efficiency projects that money would otherwise pay for, she said, that would delay the positive effects of those projects.

Brown’s Department of Finance said in a letter to lawmakers that the loan was appropriate because state agencies need more time to design the best possible programs to help the environment.

chris.megerian@latimes.com

Times staff writers Evan Halper, Patrick McGreevy, Paige St. John and Anthony York contributed to this report.