STATE BUDGET:
Governor Revises Budget With $9 Billion in Additional Spending, No Tax Changes

Governor Jerry Brown this morning released his revised state budget proposal, calling for $199.3 billion in total general fund and special fund spending in 2018-19 – an increase of $9 billion from his January budget proposal – and proposing no major tax changes.

The May revision also shows that spending for the current fiscal year is $2 billion over the enacted budget.

Asked whether he would support tax changes such as a tax on services, the governor said he is “absolutely confident” that even if he met personally with every state lawmaker to advocate such a tax, no such change will be made this year. He said, however, that his director of finance is putting together a “framework” for tax changes that can be pursued if the political will exists.

While Governor Brown indicated that any tax changes could be pursued by the next governor, many members of the Legislature remain focused on making changes this year, and likely will continue discussing their proposals with the administration.

Brown noted that because the state has an extremely progressive tax structure, a small number of high income earners are responsible for paying the bulk of the tax revenue. He said any “reforms” to stabilize funding thus would require reducing income tax on high earners, which he said would be nearly impossible to do in California’s current political climate. He additionally noted that the property tax is a very stable source of revenue.

During a Capitol press conference, the governor focused on keeping the budget stable and preparing for the next recession. To avoid having to make major cuts later, he said, the state should save money now, and not commit to ongoing, growing programs.

“It’s time to save for our future, not to make pricey promises we can’t keep …,” Brown said. “Let’s not blow it now, we’ve worked too hard for that.”

Asked about legislative proposals to increase funding for a variety of programs, including those intended to help the homeless, the governor said the state already is “overextended.”

Since the January budget was released, projected revenue has increased $2.6 billion for the current fiscal year and $3.7 billion for 2018-19. This includes a projected increase of corporation tax revenue of $50 million in 2017-18 and $150 million in 2018-19 due to expected repatriation of foreign income.

Governor Brown touted the growth of spending for K-14 education and health programs, saying “there is no other state that even comes close” to California’s level of spending on these programs. “School funding is at an all-time high,” the governor said, and Medi-Cal health spending “has more than doubled” in recent years.

The release of the “May revise” historically marks the beginning of serious budget negotiations between Democratic legislative leaders and the governor. The deadline for the Legislature to approve a budget bill is June 15. The budget can be approved with a simple majority vote, but any taxes in the spending plan still would require at least a two-thirds vote of the Legislature.

State Controller Betty Yee reported Thursday that for the first 10 months of the 2017-18 fiscal year, total revenue of $107.13 billion is $4.72 billion above estimates in the enacted budget, and total fiscal year-to-date revenue is $10.25 billion higher than for the same period in 2016-17.

 

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