State lawmakers set to approve budget with increased spending

The Legislature is expected to approve a budget Monday that bets on California’s economy to continue growing and sets the stage for higher state spending in coming years.

The plan, which is not supported by Gov. Jerry Brown, includes $749 million more in discretionary spending than the governor has proposed. And because some of the increases would be phased in over time, those additional costs in future years would be $1.2 billion or more.

For example, a boost in payments to disabled residents would start halfway through the fiscal year and cost $66 million in the next budget. The full cost of the proposal, however, would be $132 million annually.

“You’re putting the camel’s nose into the tent here,” said Mike Genest, who served as Gov. Arnold Schwarzenegger’s finance director. “And we know the rest of the camel is coming in.”

The ruling Democrats said their budget makes crucial investments in government programs for needy Californians, and they reject concerns from Republicans and the governor that their proposed spending would reach unsustainable levels.

“You have reserves in the case that you’ve miscalculated,” said Assembly Speaker Toni Atkins (D-San Diego).

Under state law, legislators have until midnight to approve a spending plan — or their pay stops. A new budget is required to take effect July 1, and negotiations between Brown and lawmakers have been ongoing.

Democratic lawmakers built their budget plan on revenue estimates from nonpartisan legislative analysts that are higher than projections from the Brown administration. Although the governor has allowed some additional spending in previous years, he has always insisted on using his lower revenue targets, even as tax receipts outpace his numbers.

“It’s a dialogue,” Atkins said. “We have to make our case.”

Brown has been reluctant to commit to more spending because California’s income is notoriously unpredictable. In addition, the state still faces hundreds of billions of dollars in long-term costs for retirement benefits and overdue road maintenance.

“When you spend today, you’re really paving the way for massive cuts tomorrow,” the governor told business leaders last month. “The better path is stable, careful, sustainable budgeting, and that’s what we’re going to have.”

Some financial analysts have urged lawmakers to accept Brown’s approach. Gabriel Petek, who tracks California finances at the Wall Street ratings agency Standard & Poor’s, said higher spending would likely make the state budget “more precarious.”

Others disagree. Chris Hoene, executive director of the California Budget & Policy Center, which advocates for low-income families, noted that lawmakers’ additional spending requests are accompanied by larger deposits into the state’s rainy-day fund and more money to pay off debt.

The governor’s argument, he said, “doesn’t hold water.”

“If you can make investments when you have the money, that’s a good idea,” Hoene said. “If you have to then walk back from those because of a downturn later, those are the tough decisions that you have to make.”

It’s not always easy to determine how much a spending increase would cost the state in the future. A summary released by legislative leaders included only details on a single year of funding for most of the changes.

The lawmakers’ budget plan, for example, would allocate $40 million, starting Jan. 1, to make public healthcare available to children who are in the country illegally.

Jesse Melgar, a spokesman for Sen. Ricardo Lara (D-Bell Gardens), the lawmaker who pushed for the funding, said the proposal’s future costs have not yet been analyzed. H.D. Palmer, a spokesman for Brown’s Department of Finance, said the administration estimates the annual price to be $132 million.

Child care is another area in which funding would grow, from $261 million in the next budget to $388 million annually after that.

There’s also $45 million to expand dental benefits for adults enrolled in public healthcare starting Jan. 1. Annual costs would be double that amount.

A proposal to partly roll back a recession-era cut in state payments to doctors who serve poor patients is slated to cost about $37 million in the next budget. The biggest part of the restoration wouldn’t start until April, only a few months before the end of the fiscal year, so a full year of spending would be much higher, about $110 million.

Jim Mayer, president of California Forward, a public policy organization, urged lawmakers to be more transparent when phasing in new funding. Although multi-year figures are available for people who know where to look or whom to ask, they’re rarely included in press releases and public statements.

“There should be no ambiguity about that,” Mayer said. “It should be very clear that this is a growing liability.”

Slowly ramping up spending is one way Democratic lawmakers have persuaded Brown to accept larger budgets than he has originally proposed. In 2013, the final budget included $50 million for higher welfare payments with the understanding that costs could triple in the following year.

That year, then-Assemblyman Jeff Gorell, a Camarillo Republican, memorably described Democrats’ plans as “the mullet budget”: “It’s conservative up front, but it’s liberal in the back.”

This year, the top Republicans on the joint budget committee, Assemblywoman Melissa Melendez of Lake Elsinore and Sen. Jim Nielsen of Gerber, sent a letter to Brown saying the Democrats’ budget “is not sustainable.”

“While the state’s coffers have rebounded in recent years,” they wrote Friday, “we should be careful not to repeat the fiscal mistakes of the past by gambling on overly optimistic economic projections.”

chris.megerian@latimes.com
Twitter: @chrismegerian