PD Editorial: A cautious approach for uncertain times

Gov. Jerry Brown’s budget proposal for 2017-18 can be summed with a single word: prudent.

Brown used it himself during his budget briefing. It may not be what legislative Democrats, with their newly regained supermajorities, wanted to hear. But it’s a message they can’t afford to ignore - especially this year, with Republicans preparing to flex their political muscles in Washington.

“We’re in very uncertain times,” Brown said Tuesday at a briefing on his budget proposal for the fiscal year that begins on July 1. “We’re very subject to a lot of unpredictability.”

Consider: The current economic expansion already is one of the longest since World War II, and growth in GDP and employment slowed down in 2016. State tax revenue, which surged above the most optimistic forecasts in recent years, is now running below projections, and budget deficits are back on the horizon even if there isn’t a downturn in the economy.

Then there’s the Trump factor. No one knows what President-elect Donald Trump and the Republican majorities in Congress will deliver or how it will affect California’s fiscal picture.

With all that in mind, Brown prudently - there’s that word again - asked lawmakers to hold the line on spending and, in a budget dedication to the late first dog Sutter Brown, to “save some biscuits for a rainy day.”

The nonpartisan legislative analyst delivered a similar message Friday, recommending that lawmakers consider setting their “target for state reserves at - or preferably above - the level the governor now proposes.” If the state collects more tax revenue than Brown’s budget anticipates - and Legislative Analyst Mac Taylor believes it will - spending levels could be increased in the May revsion.

For all the talk of tightening belts and building reserves, the proposed budget still is a hefty $177.4 billion, including a $122.5 billion general fund. Big picture numbers include $67.3 billion for K-12 and higher education, $59.8 billion for health and human service programs and $13.7 billion for corrections. Brown proposed a $4.2 billion down payment on highway maintenance, and he wants to add $2.1 billion to the reserve fund, bringing it to $7.9 billion. Left unaddressed, again, are $236 billion in unfunded liabilities for pensions and retiree health insurance - another reason to maintain a health reserve.

This year’s budget, more than most, depends on decisions to be made in Washington.

California receives about $105 billion a year in federal funding, much of it for health and safety programs, including $16 billion to cover costs for 3.7 million people who qualified for Medi-Cal coverage following approval of the Affordable Care Act. Brown said taking away their health insurance “isn’t very consistent with decency,” but the president-elect pledged once again on Wednesday to repeal the landmark health law, and Congress has taken the initial steps to follow through.

California, which is home to the nation’s busiest international ports, also stands to be a big loser if Trump seeks to rescind free-trade agreements or a trade war erupts with China. The state’s ports handled $165 billion worth of exports in 2015, and California’s largest trading partners are Mexico, Canada and China.

“This is going to be a rough ride,” Brown said. “We can’t tell where we will be in a few months.”

Until we know what’s going to happen, it would indeed be wise to keep some biscuits handy.