Brown’s Last Budget Looks Good, Falls Short in Vision

  • 07/17/2018
  • Paul Rosenberg

By Paul Rosenberg, Senior Editor

On June 27, Gov. Jerry Brown signed his 16th and last state budget. It totaled $201.4 billion dollars, with the largest cash reserve, a hallmark of the fiscal conservatism that has especially characterized his second two-term stint as California’s governor, which began in 2011.

These eight years are concluding with far more optimism and praise from allies than his first two terms, from 1975 to 1983. Brown’s unbroken string of balanced budgets, achieved while paying down short-term debts and building up long-term reserves, stands in stark contrast to the fiscal mayhem that preceded him. The Schwarzenegger years produced only two balanced budgets. They were smoke-and-mirror affairs based on a wide array of unsustainable gimmicks, which the legislative analyst’s office had warned against at the time.

“When I took office back in 2011 with the state facing a $27 billion deficit, I pledged to work with the legislature to fix California’s financial mess,” Brown said in his signing announcement. “Today, the final budget I sign delivers on that pledge and prepares us for the future.”

Not only does his last budget fill the constitutional “rainy-day fund” to its maximum level, with $2.6 billion of deposits beyond what’s required, it also creates two new reserves: the Safety Net Reserve Fund, with sub-accounts for CalWORKs and Medi-Cal, and the Budget Deficit Savings Account. All these are intended to cushion the impact of a future downturn, when the need for such spending typically increases, even as the state’s capacity declines.

“Focusing on One-Time Expenditures,” is touted as a key feature of the budget in the Department of Finance Budget Summary. “After accounting for costs to continue existing programs, the Budget makes few new targeted ongoing commitments,” the summary explains. “Instead, in recognition of the growing risks that the state budget faces, the Budget commits $4 billion in one-time General Fund spending, focused on infrastructure, homelessness, and mental health.”

Brown’s main accomplishment has been working within the pre-existing economic and political framework, sporadically allying himself with those seeking to alter it in a more progressive direction. He did that in 2012 via Proposition 30, which increased sales and top income tax rates, primarily to fund education, then was extended for 12 years in 2016, via Proposition 55. He also benefited from Proposition 25, passed in 2010, when he was elected, which eliminated the need for legislative super-majorities, which Republicans had long used with crippling effects.

The new budget reflects this legacy with significant spending increases addressing many different top-tier concerns: education, healthcare, housing and homelessness, environmental protection and food security.  For example, the budget expands the state’s earned income tax credit program, which is expected to benefit more than 2 million households in 2018-19 with $420 million in tax credits.

Existing programs fare relatively well, especially education. California State University Chancellor Timothy White was quick to offer praise.

“By providing sufficient funding to the California State University in the state’s 2018-19 budget, Gov. Brown and the legislature made a wise decision that will provide California and Californians with both immediate and far-ranging benefits,” White said.

CSU gets an ongoing increase of $197.1 million, plus $161.1 million in one-time funding to expand enrollment, address deferred maintenance and bolster campus efforts to support student well-being.

The UC system gets an ongoing increase of $98.1 million, plus $248.8 million in one-time funding to support legal services for undocumented students, faculty and staff, and to address student hunger and basic needs and other costs, including deferred maintenance.

The community college system gets a $522.8 million increase for its new funding formula and a one-time expenditure of $100 million to set up an online community college, along with $20 million in ongoing funding to support its annual operation.

Finally, the budget provides $3.7 billion to fund full Implementation of the Local Control Funding Formula for K-12 education. This brings the total increase in school funding since 2011-12 to more than $4,600 per student, perhaps the clearest single indicator of how Democratic state governance matters.

But the budget shies away from new long-term spending commitments, focusing new spending primarily on one-time expenditures, such as a variety of commitments on homelessness. These include $500 million for one-time Homeless Emergency Aid block grants to localities, $15 million in one-time funding within three years for a pilot program addressing homelessness among seniors, a one-time $50 million allocation to provide services for homeless individuals with mental illness, and one-time increases to support shelter services for domestic violence survivors ($10 million) and homeless youth ($1 million).

A good indication of what’s not in the budget can be found in the California Budget & Policy Center’s analysis of healthcare spending, under the heading, “Budget Package Aims to Address Health Care Affordability and Financing, but Includes None of the Policy Expansions Advanced by the Legislature.”

“While the budget agreement promotes long-term efforts to improve California’s health care system, it does not incorporate any health care coverage expansions or affordability policies that the Legislature had advanced,”the California Budget & Policy Center noted.

For example, the budget package:

  • Does not expand eligibility for Medi-Cal to undocumented immigrant adults.
  • Does not provide state-funded assistance to moderate-income Californians [up to 600 percent of the federal poverty line] who buy health insurance on the individual market, including through Covered California.
  • Does not end Medi-Cal’s “senior penalty” by extending no-cost coverage to seniors with incomes between 123 percent and 138 percent of the poverty line.

Beyond that,  several key concerns were only partially addressed. The state’s robust growth under Brown’s stewardship — almost twice the national average — has increased state revenues, but high housing costs have kept California’s poverty rate at 20 percent, using the cost-of-living-sensitive Supplemental Poverty Measure, the highest in the nation. The CalWORKs program provides modest cash assistance for more than 830,000 low-income children while helping parents overcome employment barriers.

“The annualized maximum CalWORKs grant for a family of three has been well below the deep-poverty threshold (50 percent of the federal poverty line) for the past 11 years,” noted, California Budget & Policy Center, however.

The Senate proposed to end that, phasing in grant increases within three years, but the budget only provides a modest one-year increase, with further progress dependent on future budgets.

Similarly, while healthcare coverage has been significantly expanded, taking advantage of the Affordable Care Act, a single-payer universal healthcare bill, which passed the State Senate this past year, has been shelved indefinitely in the Assembly.

And then, there’s the cost of mass incarceration. The budget summary presents corrections as a success, arguing that Brown’s tenure has reversed a costly long-term expansion of the prison system (12.5 percent annual budget increases within two decades, with frequent spending over-runs), with the goal to give offenders the greatest opportunity for rehabilitation—thereby reducing recidivism and increasing overall public safety in a cost-effective manner. It argues that in contrast, within the past eight years, annual corrections spending growth has been reduced to 2.7 percent while focusing more dollars on health care and rehabilitation.”

But critics say that much more could be done.

“Despite the ongoing decline in incarceration, spending on state corrections remains high,” Scott Graves, of the California Budget & Policy Center wrote in April.

The $12.1 billion in corrections spending is $2 billion higher than the 2012-13 level, after adjusting for inflation. Combined with county spending, total costs top $20 billion statewide.

The prime driver in reducing incarceration was a 2009 federal court order requiring California to reduce overcrowding in its prisons, which Brown and the legislature responded to with a public safety realignment,” moving certain lower-risk prisoners to county jails. California also passed two propositions (47 in 2014 and 57 in 2016), which shortened sentences, and provided more flexibility in probation and parole. But the changes fall far short of the comprehensive rethinking that’s called for — and could save the state billions each year.

Writing in The Nation on June 22, Graves explained,

As one key step forward, state leaders could create a sentencing commission to review California’s sentencing laws and suggest some common sense changes. The commission would evaluate the impact of sentence length on individuals who are involved, or might potentially be involved, with the corrections system. The goal would be to modify sentences in order to make sure they are proportionate to the seriousness of the crime as well as to the risk that an individual will re-offend.

There’s already a model for this: alternative sentencing options that have been initiated in several counties. are being tried out at the local level in various counties across the state.

The common theme in all these budget areas — housing, poverty, healthcare, mass incarceration — is that Democrats are still largely focused on doing a better job working within a policy framework driven by Republican ideas, either reflecting them or trying to fend them off. What’s needed is a new willingness to think outside that outdated, discredited box. That will be the test to whomever is elected next November.

This story was updated July 18 to provide the correct name for California Budget & Policy Center, the current name of the California budget analysis group from a few years ago.

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