>>> Governor Jerry Brown used a picture of a big piggy bank while unveiling his new budget proposal yesterday. It was his way of demonstrating that much of the surplus should be saved for the recession he believes is around the corner. >> We have had 10 recession since World War II. We have to get ready for the 11th. This is a message that I've given year after year. Fortunately, we haven't hit that yet. But we will. >> Also part of the last budget proposal during his final year in office, more money for K-12 education and billions in new gas tax funds aimed at state transportation projects. Joining me is Katie or. -- Orr. How much money does the governor want to stash away? >> I have to say everyone at the conference was thrilled to see a new chart with the piggy bank. Spice it up a little bit. [ laughter ] the governor is proposing putting three and half billion dollars into the rainy day fund on top of what is required by law. So that would fully fund that rainy day fund at $13.5 billion. He is also proposing putting more money into a different reserve fund. Of the state's rejected $6 billion surplus, he is proposing that more than $5 billion actually be put away in reserved -- reserve funds. >> Wears a surplus coming from? >> It has been a good year financially in terms of tax revenue here in California. And so, times are good as the governor was saying. We haven't had the recession that he has been forecasting for several years. He and others are certain that it will come. However, even though the revenues have been good, there is a lot of uncertainty especially at the federal level that is making Governor Jerry Brown even more cautious than he typically is. >> Tell us a little bit more about what they were saying about the federal governments new tax laws and how they could impact California? >> The federal tax bill that was recently passed won't have a direct impact on the state budget but it does have an impact on state taxpayers. We have been seeing bills up here in Sacramento being floated as possible workarounds to that tax bill. For instance, Senator Kevin de Leon who is running for U.S. Senate has a bill that would allow taxpayers to make charitable deductions to the state instead of paying taxes. That would be one way they would still be able to make deductions on their federal tax returns. Yesterday at his news conference, Governor Brown said that he is interested in these proposals. However, he does not know if they will actually work and if the IRS would actually allow that to happen. There is also some concern too that Republicans are going to start moving to cut spending and welfare and Medicare and Medicaid at the federal level. If that went through, that could be a big hit to the state's budget. >> Back to the governor's budget, can you give us an overview of some of the major highlights in this budget? >> One of the big proposals from the governor is fully defending the local control funding formula for K-12 schools 2 years early. He would increase a per-pupil spending and give more money to the schools. However, there are people who say that even with these increases test scores and student outcomes are not improving. So is this really working the way the governor had proposed that it would? I think this is going to be one of the storylines to follow through this budget process because I was for speaking -- I was speaking to several members of the legislature. They had the same concerns. California still lagging behind some of the other states in terms of per-pupil spending. Again, another priority of his is putting $4 billion into transportation infrastructure. This is money that comes from the guest -- gas tax. Half of that would go towards fixing bridges and highways and roads throughout California. >> What has been the reaction so far from Democrats and others who pushed to have some social service programs restored? >> I think everybody agrees that putting money away is a good plan. A recession is inevitable. However, there are lawmakers whose who say -- lawmakers who say that services have not fully recovered since the last recession and they are still trying to make up that money. I think it is the classic kind of battle we see up here in Sacramento. The governor saying we have to save and be more conservative and Democrats saying we have an obligation to provide services for people in the state. We need to spend a little money to do that. >> Republicans had a lot to say about the fact that there was a surplus at all. >> Yes. Their message was if we have a surplus, we should give that money back to taxpayers in the form of a rebate. That message was met with a no go from Democrats and the governor. They were saying, listen, if we give this money back to people then we will have to cut services down the line. This is not extra money. This is just money we have now to help us through downturn in the future. Republicans have made that argument that if we have extra should go back to the citizens. >> I am wondering how much of this year's budget relies on air -- and increasing cash from the cannabis budget? >> Not very much. I think they are anticipating more of that money will come in in the future if the federal authorities allow the market to move forward. However, a lot of that money too is designated to go to certain places. It won't all go into the general fund. For this year, we have not seen a huge impact from cannabis sales. >> The governor said that he has enjoyed the run of good economic times he is seen in the last years. He had a dire warning of things to come. Is that how he ended this? >> He said at the next governor, good luck, baby. [ laughter ] spoken like a man who is not going to have to deal with it anymore after this year. Yes. That is exactly it. He was saying basically, the darkness is coming. The next governor is going to be on a cliff. He is just trying to sell his proposal to put the money into the reserve funds. This is just a proposal. He will be meeting with lawmakers to come to an agreement on a final budget. I think it is safe to say that he will get some of what he wants but Democrats will get some of what they want as well. >> I've been speaking with Katie Orr. Katie, thanks a lot. >> You are welcome.
Gov. Jerry Brown proposed a $131.7 billion spending plan Wednesday, his last as California's governor.
The proposal by the Democrat is up 5 percent from last year's budget but largely avoids spending on new programs. It uses surplus money to boost the state's rainy day fund by $5 billion, which Brown says is necessary to prepare for his prediction of a looming recession.
"It's not exciting, it's not funding good and nice things, but it's getting ready and that is the work of a budget," Brown said.
Brown's budget plan comes as California wages a multi-front battle with Republican President Donald Trump that has, so far, had little impact on the state's finances. California's tax collections over the past six months are billions above projections.
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Brown's budget is his opening proposal in five months of spending negotiations with the Legislature, which must approve a balanced budget by June 15. Last year, he signed a $125 billion budget that boosted payments for Medi-Cal doctors and dentists who provide care for the poor and increased funding for education and social services.
Brown has generally shies away from new ongoing spending that he says the state can't afford to sustain, preferring to use much of the state's higher revenue for one-time expenses like new state buildings or paying down debts for the pensions and health benefits of retired state workers.
His caution often puts Brown at odds with senior Democrats in the Legislature, who prefer to use the state's increasing inflow of tax revenues to lower college costs and strengthen the California's social safety net for the needy.
Assembly Democrats last month proposed $4.3 billion in new spending, including an expanded tax credit for the working poor and health coverage for immigrants living in the country illegally. They also proposed boosting reserves, including the state's Rainy Day Fund, by $3.2 billion.
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Brown, who leaves office in a year, has focused much of his second stint as governor on stabilizing the state's long-term budgeting during a period of fiscal prosperity. Taking the reins as the state clawed out of the devastating Great Recession, he backed a ballot initiative that forced the state to save money and pay down debts.
He's presided over a stark turnaround in California's fiscal fortunes while warning that the next recession — and a steep drop in revenue — could be just around the corner. The state's budget has grown 45 percent since 2011, when he took office and includes more than $50 billion in additional revenue.
