SACRAMENTO >> With California’s years of budget woes fading in the rear view mirror and a few billion extra dollars padding state coffers, Gov. Jerry Brown unveiled his first draft of the next state budget Thursday morning — including the framework of a new tax on managed health care plans that will prevent a cutoff of federal funds.
Still preaching fiscal restraint and prudence, Brown pitched a $122.6 billion general-fund budget plan that he says makes significant increases in funding for education, health care and state infrastructure, while also bolstering the state’s rainy-day fund and continuing to pay down state debts and liabilities.
“This budget, relative to the budgets of the last decade of a half, is in good shape,” Brown told reporters at a news conference in the state Capitol.
The governor pitched a proposal for the new managed health care plan tax after several months of negotiations with health insurers, some of whom had not been taxed in this manner before and initially balked at the idea, two Capitol sources close to the talks said. The tax structure California uses now must be phased out by the end of the fiscal year because it doesn’t comply with new Obama administration rules that dictate how health care plans may be taxed by the states.
Currently, the state taxes only plans that accept Medi-Cal patients and uses all the money it collects to help finance the health insurance program for low-income Californians, which now covers one-third of the state’s residents after it was greatly expanded under the Affordable Care Act. The new tax must hit all plans whether they accept Medi-Cal patients or not. Brown last year called a special session on health care funding and urged the Legislature to tackle the problem, but lawmakers failed to act by the end of last year’s legislative session.
Brown’s proposal provides a net reduction in taxes paid by the private health care industry, secures funding for general fund Medi-Cal expenses, and provides an opportunity for targeted rate increases for developmental disability services.
Brown said he wants this tax formula set within a month or so, but for now, “there’s no deal — there are some ideas, understanding of a very complex way to help California at no cost, and we are inviting people to help us accomplish that.”
The budget proposal Brown unveiled Thursday is his long-range plan. As the state’s revenue and spending picture becomes clearer, he’ll develop a revised plan to roll out in May. The Legislature will then have until June 15 — a deadline set by the state constitution — to negotiate and pass the budget.
Brown’s budget deposits another $2 billion into the state’s rainy day fund, boosting it to 65 percent of its constitutionally set target.
The budget plan boosts school spending per student to $10,591 in 2016-17 — an increase of nearly $3,600 compared to 2011-12. Brown also proposes a $1.6 billion early education block grant that combines three existing programs to promote local flexibility, focusing on disadvantaged students and improved accountability.
MCGUIRE SEES PROMISE
Senator Mike McGuire praised much of the Governor’s budget proposal released this morning, especially for the strong action it takes on several of the Senator’s highest priorities.
“For too long, California schools have been near or at the bottom in public education funding in America,” he said. “We have made great strides over the past year with the largest investment of funds in our public schools in over a decade. Today’s proposal takes those commitments even further and will benefit hundreds of thousands of students across California.”
McGuire also noted the importance of the Governor’s office continuing its commitment to build the state’s rainy day fund with a supplemental deposit of $2 billion — bringing the new total to approximately $8 billion.
Key to today’s budget proposal was $3.5 million dedicated to helping Lake County recover from the devastating impacts of the Valley Fire. McGuire and Assemblymember Bill Dodd spent months securing the budget allocation.
“These funds will be immediately put to work to ensure County and emergency services don’t miss a beat serving local communities. We’re grateful for the partnership with Governor Brown and appreciate his continued dedication to Lake County,” McGuire said.
The budget also includes the governor’s transportation package, first outlined last summer, to provide $36 billion over the next decade to improve upkeep of the state’s crumbling highways and roads, expand public transit and improve trade routes. There’s another $807 million — of which $500 million comes from the general fund — for critical backlogged maintenance.
McGuire expressed concern over transportation funding.
“California’s roads, highways and bridges are crumbling. Democrats and Republicans alike need to come together if the federal government can strike a deal on infrastructure. We have to be able to as well. This has to be among our top priorities this year,” McGuire said.
FOCUS ON ENVIRONMENT
The environmental centerpiece of Brown’s budget is his plan to spend $3.1 billion from fees collected on big polluters under the state’s cap-and-trade program to curb greenhouse gas emissions.
Brown proposed spending $500 million of that money on his controversial high-speed rail plan; another $500 million for low-carbon fuel programs, such as rebates for people who buy electric cars, hybrid trucks and zero”’emission trucks and buses; $400 million for urban rail programs, and $150 million to remove and replace many of the 22 million trees across the Sierra and other rural parts of California that have died during the drought.
Other programs he proposed funding from cap-and-trade fees would boost renewable energy, restore wetlands, and pay for energy efficiency and weatherization of state buildings.
California’s four-year drought also received attention. The governor unveiled a plan to spend $323 million on drought relief. Among the priorities: spending $77 million for beefing up firefighting crews and equipment, $42 million for building rock barriers in the Delta to limit encroachment of salinity into water supplies, $30 million to fund rebates for people who buy water-efficient toilets and appliances and $26 million to assist unemployed farmworkers with food aid and other relief.
“The world is expensive, and drought and climate change are part of the future,” Brown said, “so I wouldn’t be surprised if those costs continue to rise.”
Brown also proposed spending $100 million in bond funding to shore up Delta levees and $60 million to pay down deferred maintenance at state parks, such as repaving roads, fixing roofs and modernizing campgrounds. Brown’s plan reflects the increase of the state’s minimum wage to $10 per hour, effective Jan. 1.
The budget proposal provides $380 million for the second year of the state’s Earned Income Tax Credit, which helps the state’s poorest working families, as well the first cost-of-living increases since 2006 for aged, blind and disabled Californians in the Supplemental Security Income/State Supplemental Payment program.
A NOTE OF CAUTION
But despite all this budgetary largesse, Brown cautioned that too much more permanent spending, combined with another recession, would be devastating — a scenario that could plunge the state back into deficits ranging up to $43 billion within a few years.
“We’ve had 10 recessions since World War II — we know we’ll get another recession, but nobody ever plans for it,” Brown said, noting he instructed his Finance Department to model projections for an average-sized recession in the next few years.
Brown previously has said Proposition 30 of 2012 — a temporary increase in income taxes for the wealthiest Californians and sales taxes, which has brought the state’s public-school funding roaring back from deep cuts — should be allowed to expire. Two coalitions — one of labor unions, the other of health and children’s advocacy groups — each have proposed ballot measures to extend the tax hikes anyway.
Brown avoided answering Thursday whether he would actively oppose such a measure. But he said any extension that undermines the state’s rainy day fund would put the state at grave fiscal risk.
But as usual, Brown can expect pushback on his plan from Democrats in the Legislature who want to go further in restoring deep cuts made to health, social services, education and other areas during California’s red-ink years.
State Senate President Pro Tem Kevin de Leon, D-Los Angeles, issued a statement saying he looks forward to negotiating the budget’s details in coming months. Brown’s plan “espouses a clear-eyed focus in maintaining California’s fiscal stability and I will continue being a partner in this endeavor. We can do this without having to overlook critical investments that steer the future of the state and lift our most vulnerable citizens.
“This budget reflects historic investments in our children’s education that will make a tremendous difference,” de Leon added. “But we still have to take a closer look at strengthening our healthcare system for the poor and developmentally disabled that has been starved for far too long.”
Assembly Republican Leader Chad Mayes, R-Yucca Valley, issued a statement saying that having additional money is good news but the state mustn’t spend it as if it will reappear every year.
“We’ve made this mistake before,” he said. “Democrats should pay attention to the Legislative Analyst and Governor Brown’s warnings about overspending, and balance the need to invest in critical infrastructure projects to improve our roads, schools and dams with one-time money. These investments will benefit us for generations.
“Additionally, we must pay attention to those left behind by an economic recovery that has largely benefitted the wealthy,” Mayes continued. “Assembly Republicans will be focused on restoring California’s middle class and providing opportunities for those trapped in the cycle of poverty. This starts by making sure that such programs are effective and run efficiently. It’s time to invest in people and infrastructure to build a stronger California.”
