12/12/2013 05:02 am ET Updated Feb 11, 2014

California Democrats Propose More Education Spending

SACRAMENTO -- Getting a jump on a state budget process that typically begins in January, Assembly Speaker John Pérez on Wednesday released a "blueprint" for the coming year that includes establishing a rainy-day reserve, paying down borrowing debts, bolstering higher education, and making a down payment on a transitional kindergarten program for all California 4-year-olds.

The blueprint's release comes on the heels of a positive report from the nonpartisan Legislative Analyst's Office last month that forecast, absent any new actions by the Legislature, that the state would end the 2014-15 fiscal year with a surplus of $5.6 billion.

Other than identifying a goal of establishing a $2 billion reserve in the next fiscal year, the Assembly plan includes no dollar amounts for accomplishing any of its goals, which in aggregate would amount to about $3.6 billion in spending, through a combination of debt repayment and new programs.

Pérez said specific figures would be dependent on revenue projections included in Gov. Jerry Brown's budget proposal, budget committee hearings, and negotiations with Brown and the state Senate.

"This isn't the end document. This is the beginning document," said Pérez, D-Los Angeles.

Although it is unusual for the Legislature to begin its budget process before the January release of the governor's budget proposal, a spokesman said the Brown administration had no objections.

"The governor is continuing to finalize the decisions on the budget he will send upstairs," said H.D. Palmer, spokesman for the Department of Finance. "It will be based on the broad principles of paying down budgetary debt and building up a reserve."

The blueprint, Pérez said, lays out two primary objectives of the Assembly's Democratic majority: ensuring long-term stability of state finances and spending on targeted programs designed to bolster the economy and increase opportunity.

College and university administrators praised the plan's proposal to not only fund a promised 5 percent increase in state funding for higher education next year but to also provide additional funds to expand enrollment.

"After years of disinvestment in higher education caused by a severe economic downturn, the Chancellor's Office welcomes the recognition by Speaker Pérez that California community colleges play a central role in the economic vibrancy of our state," said Vice Chancellor Dan Troy.

University of California Vice President Patrick Lenz said additional state funding above the 5 percent increase "will address enrollment growth -- potentially adding an additional 2,200 freshmen and community college transfers."

Pérez, who helped steer the state through several years of multibillion-dollar budget shortfalls, said great care will be taken to ensure the state does not spend one-time revenue windfalls on ongoing obligations that could lead to another cycle of deficits whenever the economy falters.

Instead, the Assembly plan suggests much of the windfall revenues be used to pay off debts and to make investments in economic development such as infrastructure projects and small-business loan guarantees.

A key element of the plan is to create a rainy-day reserve designed to grow until it reaches $10 billion in 2017-2018. It proposes that the reserve be funded by excess revenues from taxes on capital gains whenever those revenues exceed historical averages.

Pérez proposes that a constitutional amendment establishing the rainy-day reserve be put before voters next November, replacing what he considers to be an inferior budget-reserve proposal already scheduled to appear on that ballot.

Given that the Standard & Poor's 500 Index has gone up 23 percent this year, a spike in capital gains taxes is likely, and Pérez believes lawmakers will be able to set aside money next summer to be locked into the reserve fund, pending voter approval next fall.

Republican lawmakers and governors have long sought a constitutional amendment to establish a reserve fund, but Democrats have historically opposed such proposals because they typically have included caps on annual growth in state spending.

By setting aside windfall capital gains taxes, Assembly Democrats believe the state can both fund a sizable budget reserve to protect against future economic downturns and also allow future state spending to increase in concert with statewide economic growth.

"Historically, there have been huge fluctuations in tax revenue from high net-worth individuals," Pérez said. "Let's look at the spikes and be thoughtful about not using the spikes." ___


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The Most Beautiful and Imaginative Public Schools in the World