PD Editorial: Striking the right balance on state budget

  • Gov. Jerry Brown points to a chart showing the volatility of Capitol gains revenues that the state depends on for budgeting, during a news conference where he unveiled his proposed 2014-15 state budget in Sacramento, Calif., Thursday Jan. 9, 2014. A robust economic recovery and surging revenue propelled by voter-approved tax increases has sent California's general fund spending to a record high, marking a dramatic turn-around for the state. With the an increase in tax receipts, Brown is proposing a spending plan that includes a 8.5 percent increase in general fund spending coupled with a dedication to pay down the state's debt by more than $11 billion.(AP Photo/Rich Pedroncelli)

A good year on Wall Street is good news for California's treasury. And, as anyone who with mutual funds or a 401(k) account can tell you, 2013 was a very good year for investors.

In turn, 2014 is shaping up nicely for Gov. Jerry Brown, who delivered something for almost everyone in his budget for the coming fiscal year.

Brown's $155 billion spending plan, unveiled Thursday, benefits from robust growth in tax revenue, most notably capital gains taxes, which have tripled since 2010. Operating from a position of fiscal strength, he is proposing an 8 percent increase in general fund spending while still projecting a year-end surplus of $1.9 billion.

With fellow Democrats eager to restore programs cut during the recession, Brown offered a $4 billion boost for K-12 education, which would raise per-pupil spending to $12,833. At UC and CSU, tuition would be unchanged for a second year.

Medi-Cal would get a $670 million increase for expanded mental health, substance abuse and adult dental services for the poor. Brown also wants to make an $815 million downpayment on deferred maintenance for parks, schools, roads and other crumbling facilities.

Republicans have little influence in Sacramento, where Democratic supermajorities control the Legislature. The governor nevertheless addressed a major GOP concern in his budget -#8212; the state's wall of debt.

In the fiscal year that begins July 1, Brown proposes to pay off $11 billion. By 2018, he wants to retire $34.7 billion in debt to local government and bondholders, most of it accumulated during the recession.

Brown also wants to funnel $1.6 billion into a rain-day fund for state programs and to expand a separate reserve fund for public schools.

Brown, of course, isn't the first governor to champion a rainy-day fund. But the temptations of spending more and taxing less -#8212; often in combinations that exceeded any surplus -#8212; have proven too strong. We hope this time will be different.

This budget reflects economic strength in parts of California, including the Bay Area. It's also a product of temporary tax increases that begin to expire in 2016 and a capital gains windfall that could end anytime.

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