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Republicans back Brown's concept of a fund for debt and rainy days

SACRAMENTO — Gov. Jerry Brown has both Democrats and Republicans on board with the broad outlines of his plan for stockpiling some cash and paying off debt.

But as the special legislative session Brown called on the issue opened Thursday, it was clear that, as lawmakers like to say, the devil could be in the details.

Republicans, whose votes the Democratic governor needs to place his measure on the fall ballot, want tighter controls on the reserve fund than the governor has proposed. One senator said there might be a loophole in the plan that could help Brown fund the state's troubled bullet train network — a project most Republicans oppose.

On the other side of the aisle, Senate leader Darrell Steinberg (D-Sacramento) has publicly balked at Brown's insistence that lawmakers act on his proposal now rather than later this year. Democrats also could hold out for the restoration of more healthcare and social service funds cut during the recession.

Assembly Speaker John A. Pérez (D-Los Angeles), an early proponent of a rainy-day fund, said there was plenty of room for compromise. Although lawmakers took no action on the governor's plan Thursday, Pérez scheduled an initial hearing on the topic for Monday.

"We'll figure out what it is we need to address to make this solid concept something people can come together on," he said in an interview.

By calling the special session, which runs concurrently with the Legislature's regular session, Brown has put Republicans on the spot in this election year.

They can withhold the two votes he needs in the Senate, now that the Democrats have lost their supermajority there, and torpedo the measure. Or they can help pass Brown's plan, hoping voters — who have the power to restore Democrats' complete control of the Capitol — will see them as collaborators on a proposal that could have broad popular appeal.

Brown failed to win Republican support for a tax-hike ballot measure in 2011, the last time he needed their help with a high-profile financial issue. But this time, the governor is engaging Republicans on an issue they generally favor.

"It's a fiscally conservative goal Republicans have been seeking for years," said Assemblyman Jeff Gorell (R-Camarillo), vice chairman of the Assembly budget committee.

After spending much of Brown's term watching from the sidelines, Republicans are eager to jump into the fray.

"I'm just very happy the Republicans can be the fiscal conscience for the taxpayers," said Sen. Jim Nielsen (R-Gerber), vice chairman of the Senate budget committee. "That's good for the people of California."

Brown's proposal is aimed at taming California's volatile finances, which have soared and crashed along with the stock market and national economy. Under his measure, spikes in revenue from capital gains taxes would be set aside in a reserve fund and used to prevent budget cuts when the state faces a deficit, or to pay debts and other long-term costs, such as public pensions.

Some of the reserve money would be earmarked for education, ensuring that schools received support when an economic downturn hit.

Gorell said he'd like to see stronger requirements for how much would go into the reserve, possibly tacking on a requirement for an additional deposit from the general fund.

"We want some confidence we're capturing enough money," he said.

Republicans also said Brown's plan would make it too easy to withdraw money from the fund, which would require a majority vote of the Legislature and an emergency declaration from the governor.

Another provision in the governor's measure would allow lawmakers to spend the money on public works instead of selling bonds approved by voters. Brown is pitching this part of the plan as a way to avoid more debt: By using cash instead of borrowing, the state wouldn't incur interest.

Nielsen is concerned that the provision is geared toward funding the bullet train, which is tied up in lawsuits that are preventing the sale of bonds for the project. If the court ultimately rules against the state, Nielsen said, money intended for the rainy-day fund or debt payments could instead be used for the train.

"I believe [Brown] looks at this as a win-win on high-speed rail," he said. "We Republicans plan to hold his feet to the fire."

H.D. Palmer, a spokesman at the Department of Finance, said the governor's proposal was not written with any project in mind.

Steinberg said he'd like to see strong provisions in the final measure to ensure that the state pays down debt and tackles the cost of unfunded public pensions. And although he says he wants the state to start saving, he also wants to restore spending on government services.

"There's a lot of unmet need when it comes to infrastructure, when it comes to education, when it comes to health and human services," he said in an interview.

Assembly Budget Chairwoman Nancy Skinner (D-Berkeley) said Brown's proposal still leaves enough room to fund programs for the poor.

"If it were restricting any ability to use an increase in revenue for needed programs," she said, "then it would not be wise."

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