PD Editorial: Gov. Brown's appropriately cautious approach to state budget

What goes up must come down.

Despite occasional claims to the contrary, this simple explanation of the law of gravity also applies to the stock market and the economy. And as the market has sputtered over the past several months, so too has California’s revenue. Which is why Gov. Jerry Brown cautious approach to state spending makes sense.

The budget for 2016-17 is due next month, and Brown delivered a revised spending plan that generally holds the line on new spending while putting money than legally required into the rainy-day reserve fund.

“In any scenario,” he said, “there are no halcyon days ahead.”

That wasn’t what some of his fellow Democrats in the state Legislature wanted to hear, but they need to heed Brown’s warning. After several years of running ahead of expectations, state tax revenue is falling short of Brown administration projections, missing the target in April - a key month for tax collections - by about $1 billion. The governor’s revised budget proposal assumes almost $2 billion less in tax revenue than initially forecast through June 2017 and warns of potential deficits beginning in 2018.

“The surging tide of revenue is beginning to turn,” Brown said. Ignoring that would be a mistake, as anyone who remembers the deep deficits and steep cuts caused by the Great Recession knows. But this isn’t an austerity budget. Brown is proposing a $173 billion spending plan for the upcoming fiscal year, including a $7 billion increase in general fund expenditures and targeted investments for some priority needs.

Brown requested an extra $30 million to fight wildfires and $10 million to help complete an earthquake-warning system. His revised budget includes $3.2 billion in state and federal funding for affordable housing and homeless programs, an endorsement of a proposed $2 billion bond for housing for the mentally ill homeless - to be repaid from the Proposition 63 tax surcharge on million-dollar incomes - and language intended to expedite infill development of multi-family housing.

Proposition 98 spending on K-12 schools would top $71 billion, a 52 percent increase since the recession, and there is $25 million in new funding to help California State University reduce the time required for students to graduate.

As Brown often points out, the current economic recovery already is two years longer than the post-war average.

With its over-reliance on capital gains taxes, California is susceptible to rapid swings from budget surpluses to deep deficits. Few in Sacramento are eager to deal with the state’s roller-coaster tax code, so adequate reserves must be a high priority. Brown’s budget plan includes $8.5 billion in reserves, and the nonpartisan legislative analyst says it would be “prudent” for the Legislature to “pursue a target at least as large” as the request by the governor.

To reinforce his call for caution, Brown turned to Aesop’s fable of the thrifty ant and the spendthrift grasshopper. “When you’re in the late summer,” he said, “you should remember winter’s coming down the road.”