Despite a surge of revenues, Gov. Jerry Brown holds the line on spending in his final budget. He says state overdue for recession and needs to build reserves to cushion impacts.
As billions of extra tax dollars poured into the state treasury this year, advocates for virtually every category of state spending ramped up pressure for increases in the 2018-19 budget that Gov. Jerry Brown had proposed in January.
Higher education officials wanted more state aid to hold down tuition, advocates for the poor sought higher welfare grants and health care spending, while mayors wanted help dealing with rampant homelessness.
All were targeting what the Capitol calls, i.e. ungrammatically, the governor’s “May revise” that sets the stage for the final month of budget dickering.
The notoriously stingy – he would say fiscally responsible – Brown acknowledged the clamoring during a speech to water officials last Thursday, saying, “Most people who come to Sacramento want more. If you add up all the mores, we’re totally bankrupt.”
A day later, he released his revised budget, projecting an additional $8 billion in revenue, but rejecting pleas for permanent high-dollar increases in spending beyond those required by law. He would devote most of the windfall to padding reserves and one-time gestures, such as $2 billion for repairs and upgrades to state facilities.
Noting again that previous governors had happily spent surges in revenue only to confront deficits later, Brown told reporters, “Life is giddy at the top…but I’m not giddy.”
He warned anew that the state’s economy, which is currently booming, is overdue for a recession and that socking away extra funds now would cushion the blow.
While spending advocates inside and outside the Legislature are obviously disappointed that Brown didn’t cave in to their demands, Friday’s revision isn’t the last word. Rather, he and his fellow Democrats in the legislative leadership now will negotiate on a final version for enactment by June 15.
He may be compelled to give a little here and there, but is likely to deflect pressure for big changes in baseline spending, such as that for health and welfare programs, with offers of one-time or limited increases.
This is Brown’s 16th and last budget, and it’s been something of a tradition, albeit not a proud one, for outgoing governors to bequeath budget deficits to their successors. Brown did it in 1983, as his first stint as governor ended, forcing Republican George Deukmejian – who died last week – to cut spending and raise some taxes and fees to close the gap.
It was cosmic payback, in a sense, that when Brown returned to the governorship in 2011, he inherited an immense deficit from Republican Arnold Schwarzenegger and was forced, like Deukemejian, to raise taxes and cut spending.
No matter what Brown and legislators decide in the next month, he will not be leaving a deficit to his successor. “I’m trying to leave the most responsible plan I can to the next governor,” he said Friday.
Nevertheless, he’s absolutely correct that the state is overdue for a downturn and because the budget has become even more dependent on income taxes from the state’s highest-income residents, during his governorship, the negative fiscal impact of recession will be even greater.
His “rainy day fund” and other reserves are just a fraction of the $60 billion in lost revenue that his budget staff says a moderate recession would trigger over three years.
Brown has been a cautious steward of the state’s finances, certainly, but his unwillingness to seek reform of a very unbalanced tax system could become a stain on his fiscal legacy.