LOS ANGELES — California Gov. Jerry Brown signed a $122.5 billion general fund budget Monday that adhered to his admonitions to legislators to use billions in savings for one-time purposes and bolster reserves.
The budget also includes $3.8 billion in bond funds and $44.6 billion in special funds for a total of $170.9 billion in state expenditures planned for fiscal 2016-17.
Brown has warned legislators not to increase spending even though revenues came in ahead of projections nearly every month over the past 12 months. The governor reminded legislators during his May revisions to the budget that the volatility inherent in the state's budget, because of a dependent on capital gains income taxes, could lead to a deficit in a downturn.
Since the 1990s, state leaders have increased spending during economic growth, only to struggle with deficits when the economy turned south, Brown said in his May revise speech.
"So, instead of pulling back in the last two recessions, the state of California accelerated its spending and therefor made the budget cuts all the more painful," he said.
The budget includes a $2 billion additional deposit in the state rainy day fund on top of the $1.3 billion contribution required by the state constitution, bringing the total balance to $6.7 billion. The budget also includes a regular reserve of $1.75 billion to cushion against a drop in revenue. Another $2 billion was earmarked for deferred maintenance and state building construction.
He also approved $270 million in bonds for jail construction. Democratic leaders fought unsuccessfully to cut the jail funds, which they would have preferred to be spent on rehabilitation programs.
Little progress was made in efforts to raise taxes or fees to fix the state's dilapidated highways, but a controversy over spending on salaries by the state's transportation agency has slowed efforts to find a solution.
The budget sets aside $400 million in General Fund money for allocation later in the session for affordable housing programs. That money would be coupled with the governor's proposed legislation requiring ministerial "by right" land use entitlements for multifamily infill housing developments that include affordable housing.
"This would help constrain development costs, improve the pace of housing production, and encourage an increase in housing supply," according to the governor's budget summary.
In addition, legislation will authorize a $2 billion bond from a portion of future Proposition 63 mental health revenues to develop and administer affordable housing programs for the homeless and mentally ill.
The expenditure plan for the state's Cap and Trade program that extends out to 2020 will be completed later in the session.
The California Federation of Teachers released a statement saying the 2016-17 budget indicates the need to extend Proposition 30 taxes.
UCLA Anderson Senior Economist Jerry Nickelsburg warned in June in his forecast that the potential expiration of Proposition 30 temporary income tax hikes enacted in 2012 leaves the state government vulnerable in times of recession. A referendum to extend the higher taxes will be on California's November ballot.
According to the teacher's union, the current budget has "much to like for K-12 for higher education," thanks to current funding possible through Proposition 30 taxes.
The budget included a minimum guarantee of funding for K-14 schools of $71.9 billion – a 52% increase over the past five years.
"While this is a good budget, there's much more to be done. If we allow Prop 30 to expire, California's budget faces a $4 billion shortfall in year one," according to the teacher's union. "That's why voting to extend Prop 30, the California Children's Education and Health Care Protection Act of 2016, is so important this November."
