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Jerry Brown's New Budget Sets Up Election Year Tug of War With Fellow Dems

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After an online leak forced him to advance state budget roll-out press conferences in Sacramento, Los Angeles, and San Diego from from Friday to Thursday, Governor Jerry Brown unveiled his new Prop 30 surplus era California budget proposal and set up a likely tug of war over spending with fellow Democrats.

Brown faced a $26.6 billion state budget deficit when he took office again three years ago. Now he has a very different problem.

"With a decade of intractable deficits behind us, California is poised to take advantage of the recovering economy and the tens of thousands of jobs now being created each month," declared Brown in an early morning press conference webcast from the State Capitol. "But given the vagaries of the business cycle, we must be ever vigilant in the commitment of public funds. Wisdom and prudence should be the order of the day."

The budget Brown unveiled is missing spending on social welfare and some environmental programs near and dear to many Democratic hearts, both programs which withered after the budget spiraled out of control and new programs.

Instead, Brown used more than $11 billion to pay off past budgetary borrowing, part of ending the "Wall of Debt" he pledges to wipe out by the end of the coming gubernatorial term for which he has not yet declared but for which he is a shoo-in.

Brown's budget contains only a 1.6 percent increase in spending on health and human services.

It has a 2.1 percent increase in corrections and rehabilitation, with much of it forced by federal court requirements to end overcrowding even faster than has already been achieved by Brown's "realignment" of lesser offenders from the state prisons to local jails.

Nevertheless, Brown insisted that "California is still that generator of dreams and great initiatives," including high-speed rail.

His budget contains $250 million in proceeds from the cap-and-trade, greenhouse gas emission fees to the high-speed rail project and another $600 million in greenhouse gas cap and trade proceeds to additional environmental projects, including infrastructure for zero-emission vehicles.

That is part of a 2.3 percent increase for natural resources.

In contrast, Brown's budget contains a whopping 9.0 percent increase in K-12 education spending

With that, per pupil spending will rise to $12,833, an increase of $848 over the current year.

There is also a 5.0 percent increase in spending for the University of California system, a 6.3 percent increase for the California State University system, and a 7.3 percent increase for the community colleges.

Brown also proposes to put $1.6 billion into a rainy day fund, the first such state deposit since the early days of the governorship of Arnold Schwarzenegger, who championed the rainy day fund. Schwarzenegger's rainy day fund constitutional amendment, viewed by Democrats as a back-door automatic spending cap -- as distinguished from the de facto spending cap that a governor can wield with his or her veto pen -- will be re-written to tie the rainy day fund not to historical spending but to volatile capital gains revenue. That measure had been delayed from the November 2012 ballot until this coming November.

Brown also chilled talk of new taxes to be enacted by the Democrats' legislative supermajorities.

"I went up and down the state campaigning for Proposition 30. I just think we want to do everything we can to live within our means before going back again and trying to get more taxes."

He specifically rejected calls for an oil extraction tax, after billionaire environmentalist Tom Steyer said last month that he will push for such a tax in the legislature. Steyer can of course always do an initiative. Which would draw heavy opposition from oil companies who expect to generate plenty of state revenues with increased drilling.

"I don't think this is the year for new taxes," said Brown.

Brown spent much of 2012 campaigning for his ballot initiative to raise taxes, Proposition 30. Without its passage, he wouldn't be enjoying a budget surplus this year and, according to the Legislative Analyst Office, which correctly pegged past budget deficits, and other budget forecasters, for many years to come.

Brown also identified a little over $200 billion in future unfunded pension obligations for public employees of all stripes in California, roughly 40 percent of it to local school teachers, which some public pension reformers consider the most alarming situation. Brown will address that later in the year on a separate track.

Many Democrats want to take these new state budget surpluses out for a spin. One can only imagine how hog wild they would go with likely energy revenues from increased fracking, which some still want a moratorium on even though a new regulatory regime has just gone into effect.

If those revenues were in play, on top of the new surpluses produced by Prop 30 and earlier rounds of cuts, Brown would probably be more amenable to new spending.

As it is, Brown is a naturally frugal fellow. I once had a brunch with him in which we ate hard-boiled eggs. He drank black coffee. I had a coke.

Of course, he is also a pragmatist. But he doesn't like to begin by negotiating against himself.

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