Brown's Budget Mantra: Caution

In the middle of his "good news" budget press conference Thursday morning, Gov. Jerry Brown took a moment to fondly remember a Jesuit teacher he had at St. Ignatius High School in San Francisco.

"Father Clark taught economics," said Brown, who referred to a jagged line the instructor drew for the class. "And I still remember him going to the blackboard and saying, "You know what this is? It's the business cycle.'"

Brown had his own chart, which looked like the Sierra Nevada, with jagged peaks and deep valleys representing the unpredictable boom and bust of California's capital gains revenue.

His point: "It's a very simple matter. If you don't remember anything else, just remember everything that goes up comes down."

He clearly relishes his role as the Capitol's Cassandra, warning of impending doom just around the corner.

"We've had 10 recessions since World War II," Professor Brown said, "but nobody ever plans for it. So it's always a surprise -- oh my gosh, the budget's dropped $40 billion!"

At least for now, state revenue is running billions ahead of the governor's own projections.  And, to be sure, Brown's proposed spending plan reflects that.

His $122.6 billion general fund budget keeps higher education tuition flat, adds billions for K-12 education and drops another $2 billion into the voter-approved rainy day fund.

Brown also offers a fix for a state tax on managed care organizations (MCO)  that's set to expire July 1. That expiration would leave a $1.1 billion gap (state and matching federal funds) in the budget unless it's fixed.

The governor has been working with insurers to develop a compromise plan they can live with. The MCO tax will provide more funds for Medi-Cal recipients, which, thanks to the Affordable Care Act,  now number more than 13 million Californians.

And he linked passage of that tax to something relished by Republicans and Democrats alike: More funding for services to the developmentally disabled.

The governor's spending plan already includes $130 million in additional funds for the developmentally disabled, but passage of the MCO could be used to supplement those funds.

Initial reaction from Republicans was lukewarm.

"It's a bit unconscionable that one would tie the funding for the developmentally disabled community to a tax that has nothing to do with them," said Assemblywoman Melissa Melendez (R-Lake Elsinore). "I think we can fund that community with the resources we have."

The governor called a special session of the Legislature last summer urging lawmakers to deal with the MCO tax before it expired. But there was no action, as Republicans refused to go along with the revenue plan. Brown is offering this plan, which health insurers support, in hopes of solving this dilemma sooner rather than later.

Other highlights in the budget:

• $24.6 million to fund 126 state workers tasked with creating the state's first licensing and operating rules for marijuana growers, dispensaries, etc. The money would be spread among several oversight agencies, including Consumer Affairs and Food and Agriculture.
• $323 million to address the drought and another $215 million to fight wildfires.
• A 10-year transportation proposal to spend $16 billion on highway and roads maintenance.
• A new $65 fee on vehicles and changes to gas and diesel taxes to generate $1 billion a year to help pay for highway maintenance. The fee would apply to electric and hybrid vehicles, which pay less in taxes since they use less gasoline than other cars.
• A cost-of-living increase for low-income seniors and disabled individuals, the first since 2006.

For their part, Democrats expressed restrained praise for the governor's plan. "While I appreciate the governor's continued conservative approach reflected in his budget, we must discuss the needs of Californians still impacted by the deep cuts of the recession," Sen. Mark Leno (D-San Francisco) said in a written statement.

State Senate President pro Tempore Kevin de León added, "We still have to take a closer look at strengthening our health care system for the poor and developmentally disabled that has been starved for far too long."

Today's budget is just the first move by a governor who clearly wants his legacy to include fiscal prudence.

"You know this is not a candy store where you can pick out whatever you want," Brown said. "But there'll be a tendency just to do everything and I'll have to straighten it out in the end."

Father Clark would be proud.