Brown budget: More spending but fiscal restraint | January 17, 2014 | Pleasanton Weekly | |

Pleasanton Weekly

Column - January 17, 2014

Brown budget: More spending but fiscal restraint

by Jeb Bing

Vowing to keep the state on a path to long-term fiscal stability, Gov. Edmund G. Brown Jr. has proposed a balanced budget that pays off more than $11 billion in debt and builds a lasting rainy day fund while continuing to invest in public schools and expand health care coverage for millions. This is certainly good news for Pleasanton and especially the school district that has faced troubled financial times since 2008. Now, with a decade of intractable deficits behind us, California is poised to take advantage of the recovering economy and the tens of thousands of jobs now being created each month.

But given the vagaries of the business cycle, let's hope the governor and state legislators are vigilant in their commitment of public funds. Brown said that "wisdom and prudence should be the order of the day." But then he quickly ordered modest pay raises for state employees, no doubt deserved after several years of salary freezes, and has committed more funds for welfare projects.

Remember that when Brown took office, the state faced a massive $26.6 billion budget deficit and estimated annual shortfalls of roughly $20 billion. The state has eliminated some of these deficits with billions of dollars in cuts and new temporary revenue approved by California voters. Independent experts agree that California's unfunded public employee pension obligations are becoming more and more of a budget problem, both for state and local governments. Just five years ago, the California Public Employees Retirement System (CalPERS) reported that its unfunded actuarial accrued liabilities in its main pension fund for state and local governments was over $49 billion, consisting of about $23 billion for the state and $26 billion for other public agencies. Showing a bigger problem, a report by the bipartisan Little Hoover Commission found that the top 10 public employee pension systems in California, including plans for both state and local government workers, faced a combined $240 billion shortfall as of 2010.

Fortunately, the significant details of Brown's proposed 2014-15 state budget include maintaining long-term fiscal stability, strengthening and investing in the state's "Rainy Day Fund" and continuing to pay down the wall of debt, which is the most immediate liability constraining the ability of the state to emerge from its fiscal troubles.

Specifically, the budget makes a $1.6 billion payment into the Rainy Day Fund, also known as the Budget Stabilization Account, which marks the first deposit since 2007, and also directs $967 million to a Special Fund for Economic Uncertainties. And, in lieu of Proposition 58 and ACA 4, the budget proposes a constitutional amendment to bolster the Rainy Day Fund.

The budget also continues to address the $25 billion "Wall of Debt," directing more than $11 billion to pay off past budgetary borrowing. This debt, which totaled $34.7 billion in 2011, will be eliminated entirely by 2017-18 under this budget.

Investing in education, the budget provides an infusion of $10 billion in new Proposition 98 funding this year. For K-12 schools, funding levels will increase by $3,410 per student through 2017-18, including an increase of more than $2,188 per student in 2014-15 over 2011-12 levels. This reinvestment provides the opportunity to correct historical inequities in school district funding with continued implementation of the Local Control Funding Formula, which directs additional resources to students who need the most support: English language learners, low-income students and foster youth.

The budget also provides the second year of guaranteed increases in funding of $142.2 million each for the University of California and the California State University systems, predicated on a continued freeze on increases in student tuition and fees.

Strengthening the state's infrastructure, the budget reflects the release of the state's five-year infrastructure plan, last produced in 2008, and includes an $815 million package of investment to address critical deferred maintenance projects in state parks, on highways, local streets and roads and at K-12 schools, community colleges, courts, prisons, state hospitals and other state facilities. Implementing federal health care reform, the budget invests $670 million in new General Fund dollars to expand Medi-Cal benefits, including mental health, substance abuse, adult dental and specialized nutrition services.

Although Brown with the Legislature's agreement has addressed pension reform and too-early, too-hefty retirements, pension debt reduction should continue to be a top priority as considerations get underway on the new budget plan.


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