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Gov. Brown Unveils 2014 California Budget, Says Prudence Is Key

Above: Gov. Jerry Brown spoke at a news conference in San Diego on the day he released his $155 billion proposed budget for 2014-15.

Gov. Jerry Brown said Thursday in San Diego that California's finances are healthy, but long-term liabilities require a prudent state budget in the upcoming fiscal year.

Brown spoke at a news conference on the day he released his $155 billion proposed budget for 2014-15. He introduced his spending plan in Sacramento and was also going to speak in Los Angeles.

An improving economy will allow the state to pay down debt and put some money into reserve accounts, which would be used in years when volatile capital gains tax revenues come up short, the governor said.

"Some people would say let's go on a spending binge, but I say it's time for wisdom and prudence," Brown said. "Pay down our debt, put it in a rainy day fund, and be prepared for the next downturn."

California has about $355 billion in long-term liabilities, including $217.8 billion in unfunded pension costs to retired state employees and $64.6 billion in deferred maintenance, according to data provided by the governor's office.

Brown is proposing to increase spending on K-12 schools and community colleges, and provides more money to the University of California and California State University systems -- as long as they don't increase student tuition and fees. Colleges will need to come up with more creative budgets that don't depend on rising fees or out-of-state tuition, he said.

The governor also wants the state to pay down its $11 billion debt to school districts and local governments, which have seen funding cuts and payment deferrals in recent years -- causing the agencies to make tough budget choices.

The state would begin issuing refunds to schools in the next fiscal year, and cities and counties the year after, state Department of Finance Director Michael Cohen said.

In all, the state owes around $25 billion in deferred payments and loans that the governor calls "a wall of debt."

Randy Ward, the San Diego County superintendent of schools, said, "Gov. Brown is prudent to pay down the billions of dollars in deferrals that have crippled schools in recent years. That move, plus his proposal to put aside additional funds in order to stabilize school funding even in years state revenue dips, will go a long way towards making schools whole -- and keeping them that way."

Dianne Jacob, the chairwoman of the San Diego County Board of Supervisors, said she was encouraged by the budget proposal overall but disappointed the county government would not be immediately repaid the $60 million it's owed.

"For years the state ignored its fiscal crisis by relying on budget gimmicks, shifts and delays," Jacob said. "It's encouraging that Governor Brown has started tackling the problem and changing the culture of Sacramento."

Spending in the general fund, which pays for basic state services, would increase 8 percent over this year to $106.8 billion, with most of the hike going to schools, under the proposal.

California is coming out of several rough budget years as the recession and weak recovery buffeted the state's revenue from capital gains taxes.

Capital gains became a large part of the state's income in the 1990s as Californians became wealthier, but annual revenue from the taxes has swung wildly in recent years -- while obligations remained constant, the governor said.

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