But the governor, who took over five years ago at a time of huge budget shortfalls and deep cuts, told lawmakers that another recession is certain and that state officials must prepare for it by squirreling away money and not expanding state services too ambitiously. Brown echoed the arguments he made two weeks ago when he laid out his budget proposal for the 2016-17 fiscal year, setting the state for a spring of battles with legislative Democrats eager to restore the cuts made during the recession.
"We live in a world today that is profoundly uncertain," Brown said. "Here at the state Capitol we often think we have more control over things than we actually do. But the truth is that global events, markets and policies set the pace and shape the world we live in."
The governor said no economists have accurately predicted the 10 recessions since World War II and noted that the state's deficits between 2000 and 2016 were seven times as large as its surpluses.
"Schools, child care, courts, social services and other vital state programs were deeply affected. So, too, were our universities, which had to reduce classes and double tuition," he said. "I don't want to make those mistakes again."
But anticipating pushback from Democrats and advocates, Brown stressed that the state has responded to growing inequality, saying California "has not been passive." He cited a new income tax credit for the working poor, a minimum wage that increased to $10 in January, the state's staggering increase in health coverage for low-income residents and its expansion of an in-home care program for the elderly and disabled.
"While the benefits of these programs are enormous, so, too, are the costs -- both now and into the future," he said.
Brown used those increased costs to pitch another cornerstone of his budget proposal: A new tax to fund Medi-Cal, which is necessary because of a change in federal rules that will leave the state without $1 billion in health care revenue this summer. Brown, who needs Republican votes to enact the new tax formula, insisted, "This is not a tax increase, no matter what anyone tells you. The arithmetic is simple: California comes out a clear winner."
The governor also stressed his other budget priorities: Investing in state infrastructure, continuing to rethink the state's water system and fighting climate change.
He ended on a high note, listing the litany of gains California has made since he took office.
"This morning I have talked a lot about the difficulties that lie ahead, but let’s not forget how far we have come. In 2011, the state deficit was $27 billion, our credit rating was the worst in the nation and unemployment was 12 percent," he said.
"Now, the budget is in surplus. Standard & Poor's has raised the state's credit rating three times. We have paid down accumulated debt -- $26 billion worth. We created a solid rainy day fund to offset the next economic downturn. We have increased funding for schools 51 percent. We are covering, under Medi-Cal, 13.5 million people, a 74 percent increase. We enacted -- for the first time -- an earned income tax credit. We raised our minimum wage, to $10 an hour, and that’s 38 percent higher than the federal minimum. And two million new jobs have been created and unemployment has dropped in half. Of course, the global recovery has a lot to do with that, so we should applaud, we can't take total credit."
He continued: "Yes, it is clear that California is still The Great Exception. We dare to do what others only dream of. Difficulties remain, as they always will. That is the human condition. And finding the right path forward is formidable. But find it we will, as we have in the past and as we will again -- with courage and confidence."
Brown's speech was warmly met by the Legislature, and in particular Democratic lawmakers. They largely praised the governor and his approach, while acknowledging that they will be pushing for some new spending in the 2016-17 budget negotiations that will unfold in the coming months.
Assembly Budget Committee Chair Shirley Weber, D-San Diego, said Brown is often quick to reject social services proposals made by lawmakers -- but then comes around. She cited the earned income tax credit --- which is expected to put $380 million back in the pockets of working families -- saying Assembly Democrats pushed the credit for several years before Brown included it in his budget last year.
"He’s had a cautious approach, but that's him, we know that. We know his heart is right, he loves California, he is going to focus on what's good for California, but he's cautious because he doesn't want us to once again be in another bust and boom cycle," she said.
Los Angeles Democratic Sen. Holly Mitchell, who has been a vocal critic of Brown's lack of investment in social services, said she was happy to hear him acknowledge the state's income inequality. Mitchell, who entered the Legislature in 2011 as the state was still facing huge deficits, said she's optimistic that lawmakers in both houses can band together and restore at least some of the cuts made during the recession.
"We are so far from where we were my first year in the Assembly ... there was so little money, we were simply trying to levy cuts that did the least amount of harm," she said. "Now, there's money on the table and that gives us an opportunity to build upon -- we have got to invest in people. He talked about infrastructure and the roads -- I agree with all of that -- but we also have got to invest in California’s most viable commodity and that's her people. And so that's what I will work with colleagues in the Legislature to advocate for."
Mitchell, Weber and others cited a need to increase funding for programs for the developmentally disabled, for housing and homeless services, and for families on welfare.
Sen Mark Leno, D-San Francisco, who chairs the Senate's budget committee, said he sees an opening for funding some of those priorities through the proposed Medi-Cal tax.
"We are talking about $1.1 billion that he has left unallocated, which I believe is an open-door invitation for us, number one to pass it, and then to put our imprint on how we would like to see those dollars appropriated," he said.
Read the full text of the governor's speech:
