LOS ANGELES — Legislators are expected to push back against California Gov. Jerry Brown's $169.3 billion fiscal 2017 spending plan even though April's revenues came in $1.9 billion shy of projections.
Brown released a revised state
It represents a 5% increase from last year's budget.
"The surging tide of revenue has begun to turn," Brown said Friday during a press conference. "Quoting Aesop's fable of the ant and the grasshopper: 'It is best to prepare for the days of necessity.'"
Department of Finance Director Michael Cohen said the state entered April on a cash basis up slightly compared to the January forecast.
"The poor April cash receipts is a major factor in the change in the forecast," Cohen said.
The May Revision revenue forecast has been reduced by $1.9 billion, reflecting poor April income tax receipts and more sluggish sales tax receipts than expected.
With less revenue projected, Brown's budget revision also reflects a $1.3 billion reduction of money set aside for the state's rainy day fund.
Brown said the May Revision reflects the principle that no significant new ongoing spending commitments should be made.
Despite all the doom and gloom, Brown also said during the press conference that he thinks "California has done remarkably well."
"We have made commitments to increasing minimum wage and in bringing more people into Medi-Cal," the governor said, referring to California's version of the Medicaid healthcare program for people with low incomes.
Even without increased spending, California faces deficits in coming years, Brown said.
"We only have so much funding, and any new and large programs need to be funded by additional funds, and those new funds have to be approved by the taxpayers and the legislature," the governor said.
Brown cautioned against making the mistakes that previous governors have made in approving new spending when the economy was riding high only to be caught short by deficits when things slowed down.
"When you are at the peak everyone feels good, so they don't understand why you don't want to commit to more spending," he said.
He also cited a Moody's Investors Report in which California was named one of the states least prepared for a recession.
The governor said that the reason that Moody's categorized the state in that way is because of its revenue volatility.
"A lot of people, and myself included, have a hard time getting used to this, because we never used to be like this," Brown said. "This has been the new reality since the mid-90s. That is why we are trying to build up reserves."
The top 1% of taxpayers account for 50% of the state's revenue.
If voters in November approve an extension of the temporary income tax increase they adopted in 2012, the state will face smaller deficits in coming years, but only if it does not increase spending, Brown said.
If the tax extension does not pass, in 2019 California would be looking at a $1.7 billion deficit even with current spending levels, Cohen said. By 2020, that deficit would rise to $4 billion.
The changes to the budget from January were the passage of minimum wage, an increase of roughly $450 million to pay the state's share of Medi-Cal, and the new revenue forecast based on April revenues coming in $1.9 billion below expectations, Cohen said.
State lawmakers are supposed to adopt a final spending plan by June 15.
