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Jerry Brown's New Budget for Post-Crisis California: Discipline Begets Opportunity

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Don't look now, but California has gotten back on track. I've been writing about this emerging reality for the better part of a year, but the rest of the fact-based media has acknowledged it's reality now with the chronic state budget crisis over and the new state budget balanced. California's economy continues to be in recovery, though still with one of the highest unemployment rates in the country, dwarfed only by its low-tax/low-regulation neighbor Nevada.

California's generation-long chronic budget crisis is over, but, while the sun is shining, metaphorically speaking, happy days aren't here again. (To reference the Democratic Party's New Deal theme song.) Not just yet.

With an eye to how California's recovery can be a precursor to recovery in Washington, Governor Jerry Brown presented his new state budget proposal on Thursday morning. He says that thanks to the landslide passage of his Prop 30 revenue initiative and past budget cuts which were three times as large as the new temporary tax hikes, the state budget is at last balanced, with a small budget surplus and minor budget reserve of $1 billion. When Brown took office, the state faced a $26.6 billion budget deficit and estimated annual gaps of roughly $20 billion, as the state reeled from the great global recession and the defeat of an unpopular temporary tax program.

Brown's state budget got quite respectful reviews from both sides of the aisle, with Democrats lauding the end of the state's chronic budget deficits and Brown's new Prop 30 revenues and Republicans pleased by his insistence on reining in new spending initiatives. The 74-year old governor unveiled the fiscal plan in a very lively hour-long press conference, betraying no ill effects from his recently concluded prostate cancer treatments. He got no push-back from any media critics, either, including his devoted enemy of nearly 40 years, Sacramento Union-turned-Sacramento Bee columnist Dan Walters.

Here's a sampling of headlines. New York Times: "Back From the Fiscal Abyss, California Balances Its Budget." Wall Street Journal: "State's Rare Sight: A Budget Surplus." San Jose Mercury News: "California Gov. Jerry Brown Wins Praise For Eliminating Budget Deficit." Orange County Register: "Brown Releases Restrained State Budget."

Governor Jerry Brown unveiled his new state budget proposal on Thursday, which eliminates California's chronic budget deficit for the first time in a generation.

Brown's new budget adds $2.7 billion a year to K-12 education, with per pupil spending up $2,700, partly making up for losses in recent years. It also adds a half billion to the University of California and California State University systems.

He is holding the line in other areas, addressing California's "wall of debt" -- which he says was nearly $35 billion when he took office and will get down to a little over $4 billion in the next few years -- rather than restoring programs ravaged during the recession.

"It's very hard to say no," Brown noted. "That's basically my job. It's like a governor on a machine. When a machine tries to exceed a certain speed, the governor then depresses the speed. That is the metaphor for 2013.

"I accept my role of saying no. Yes, there is inequality and hardship. but I want to take the money we do have and put it into our schools and colleges and help people help themselves. Education is the social program that I think will give us the biggest return on our investment."

He won't restore funding for a variety of programs cut during the great global recession.

"That kind of yo-yo political economy is not good," he said. "You give benefits, then yank them back when times are bad. I want to advance the progressive agenda, but consistent with the amount of money the people made available."

But Brown is expanding Medi-Cal, known as Medicaid nationally, as part of the implementation of President Barack Obama's national health care law.

As Brown's Prop 30 provides a rising tide for all schools, he is pursuing a rebalancing of education funding designed to bolster support for poor schools and schools with large numbers of students who struggle with English. He also aims to end most categorical spending programs, giving spending control to local school boards and administrators, something which some teachers union leaders are already balking at.

Says Brown: "40 percent of our students are low-income; over 20 percent are challenged in speaking English. We have to disproportionately fund schools that have disproportionate challenges. As Aristotle said, treating unequals equally is not justice."

As for higher education, Brown says he wants teaching resources to be deployed more effectively. Brown is a fellow alum of UC Berkeley, and has long had his criticisms of how the great public university conducts itself. UC, he says, needs to ramp up online teaching. And it needs to have its professors spend more time in the classroom.

Expect to see more of Brown at UC and CSU board meetings in the future. He was a very active participant in the latest UC Board of Regents meeting, as one regent told me with more than a small degree of surprise, but he thinks that his message didn't really get across on that occasion.

Now that he's through his characteristic period of immersion in the details of a new proposal, and with Prop 30 in place as a sort of antithesis to the old Prop 13 era, Brown is surfacing with bigger picture thoughts about how it all fits together.

Governor Jerry Brown says he's "rarin' to go."

He discussed some of that on the record at his budget press conference.

"The fruits of prosperity," he observes, "have been disproportionately channeled to capital and away from labor. The top 1 percent in California has 22 percent of the income now. That used to be only 10 percent of the California's income 30 years ago." Which is why he's fine with the temporary tax hike on the highest income folks, who as he pointed out in the Prop 30 campaign can in any event write much of it off on their federal taxes.

In contrast to the rampant prosperity at the top, he notes: "The middle class is hollowed out, people at or near the bottom are struggling hard. But state government must still live within the means of what we have." And he's loathe to push for more spending programs or revenues with state government still needing to prove its responsibility and the economy not yet in full-throttle recovery.

Meanwhile, the chronic budget deficit -- caused by policies of unsustainable tax cuts and spending from the dot-come boom and its aftermath -- is gone, but the "wall of debt," i.e., borrowing from other programs and lenders, remains.

To get in this improved situation, Brown said, "We've cut massively. 25 percent out of colleges. $10 to $11 billion deferrals to schools. Health care. Aid to the aged, the blind, and the disabled. Big cuts to CalWorks. Ending redevelopment. Cutting the Williamson Act (which funds the preservation of agricultural and open space lands)."

On the other side of it, "we have new taxes for seven years, plus passage of the proposition (Prop 39) that made back a billion in so-called single sales factor (ending a billion dollar corporate tax break benefiting out-of-state companies that was part of the very complex 2009 state budget deal)."

California's problems and challenges have been similar to those of the nation.

"America is over-committed," Brown said. "That's the problem in Washington."

He hit some of the high points in rapid-fire fashion.

"I see California not as the failed state that a couple of characters keep writing. It's not. I see the challenge in dealing with the complexity of California. Aging society, productivity growing more slowly and going not to workers but to the owners of capital. Climate change is increasing ...

"I would like to do something that will make California a leader and example of what Ameria has to do. A combination of fiscal discipline and imaginative investment in technology, environment and all the rest. California can be a model. We just have to keep Republicans and Democrats on the playing field that gets us to the end."

And does "getting us to the end" include another term as governor for Brown? He hasn't made any announcements. But longtime readers know that I've been convinced all along that Brown, whom I've known for decades, will go for it.

Here's what he said, incidentally, on Tuesday, when he spoke about prisons, the then forthcoming state budget, and his now completed prostate cancer treatment: "I'm ready. I'm rarin' to go. And don't expect me to leave too soon."

Brown will deliver his State of the State address at 9 AM on January 24th before a joint session of the California state legislature in the State Capitol.

You can check things during the day on my site, New West Notes ... www.newwestnotes.com.

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