TAHOMA, Calif. – California Gov. Jerry Brown released a $98 billion general fund spending plan Wednesday with no sign of a deficit, an unusual prospect for the state that has faced severe budget gaps ahead of budget talks in recent years.

The governor’s budget proposal for fiscal 2014, which starts July 1, continues the conservative approach to bond sales Brown has followed over the last two years, reducing issuance. It also changes the funding source for some transportation bonds, and shifts responsibility for university capital expenditure debt service.

“I am determined to avoid fiscal mess that the last few governors had to deal with,” Brown said at a press conference Thursday. “The deficit is gone, the wall of debt remains.”

Brown put forward a multi-year plan that maintains a $1 billion reserve and pays down the “wall of debt,” as Brown describes the deferrals and intrafund borrowings that have propped up the state budget in recent years.

General fund spending is projected to grow by 5% next fiscal year – to $97.7 billion from $93 billion in fiscal 2013. The proposal also repays $4.2 billion of borrowing and expects to reduce the debt, which had totaled $35 billion in 2011, to $4.3 billion by fiscal 2017.

The governor’s budget planning bolstered by the November passage of Proposition 30 in November, which is estimated to add $6 billion annually to state spending by temporarily raising sales taxes and income taxes on the wealthy.

The nonpartisan Legislative Analyst's Office had projected last month that the state would be tackling a $1.9 billion deficit this year.

Ana Matosantos, the governor’s finance director, said at the news conference that differences with the LAO result from more revenues collected from the shutdown of redevelopment agencies and a different assessment of special fund borrowing.

The January budget proposal kicks off legislative deliberations over the budget. The governor follows up with a revised proposal in May that takes into account updated financial information.

Brown’s budget pitch also showed the governor wants to continue to rein in excess bond sales.

The administration said it will continue to require general obligation bond programs to demonstrate they have an immediate need for new bonds and to use unspent bond proceeds before issuing new debt. Such practices reduced the amount of unspent bond proceeds to about $5 billion at the end of November, excluding the fall GO bond sale, from $14 billion in December 2010, administration officials said.

The governor said that the state has $38 billion in authorized infrastructure bonds that have yet to be sold, yet he called the sum “relatively small” compared to California’s infrastructure needs.

His budget proposes lowering debt-service costs for transportation-related bonds by implementing a new weight fee revenue bond program, which will stream payments directly to debt service from weigh fees instead of indirectly through the general fund. The structure is expected to result in a higher credit rating for those bonds.

Brown threw some cold water on legislative proposals for a new state bond authorization for school construction.

“Central to this discussion must be a consideration of what role, if any, the state should play in the future of facilities funding,” his proposal said.

Brown said the acceleration of state bond issuances for school facilities over the last 15 to 20 years, as well as problems in the current program should be examined.

As part of the governor’s plan to take a harder line on state university spending, Brown proposed shifting general obligation and lease revenue debt service for university capital improvement projects into their budgets, requiring them to factor the costs into their overall fiscal decision-making processes. The state now separately funds that debt service.

“Any new UC capital expenditures will be subject to approval by the Administration,” Brown said in the budget proposal. “Further, there will be limits on the amount of the budget that can be spent on capital expenditures. If UC elects to restructure its debt as a result of this proposal, it is expected that it will make resources available for instruction.”

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