Gov. Jerry Brown released his May state budget revision on Monday, a document that proposes additional cuts and budget balancing measures but which Republican leaders said went too far on taxes and not far enough on reforms.

The May revise, unveiled Monday morning, proposes to reduce the amount of taxes needed to balance the budget by $3 billion, improve debt management, offers tax incentives to spur job creation and would pay off most of the state's $34.7 billion debt that has accumulated over the last decade, according to Brown.

“California’s economy is growing, but we still face a $10 billion structural deficit and a wall of debt for years to come,” said Brown. “California’s finances were plunged into turmoil by the Great Recession and a decade of short-term fixes and fiscal gimmicks. This is not the time to delay or evade. This is the time to put our finances in order.”

As part of the revisions, Brown is planning to further downsize state government, proposing the elimination of 43 boards, commissions, task forces, offices and departments, among them the Departments of Mental Health and Alcohol and Drug Programs, which Brown said will be cut as services are returned to the local level. He also proposes to merge the Healthy Families Program into the Medi-Cal program.

Brown is proposing to sell off “underutilized” state-owned properties such as the Los Angeles Coliseum, the Montclair Golf Course in Oakland, the Capital Area Development Authority in Sacramento and the Ramirez Canyon property in Southern California.

The governor also said he intends to restore honesty to the budget process by addressing revenue shortfalls in departments such as the Department of Corrections and Rehabilitation and Department of Mental Health, which he said were underfunded last year by $465 million.

Brown said he plans to spur job creation through a number of tax incentives, including restrictions on enterprise zone credits to create new jobs only, reduced sales tax on equipment purchases to encourage manufacturing jobs and a revamped hiring tax credit.

He said the revised budget also will increase funding to public schools by $3 billion, but the state still owes schools billions . Brown said the state has spent years shortchanging schools, which resulted in schools having to borrow to balance their budgets.

Brown's budget received a mixture of praise and criticism.

Senate Republican Leader Bob Dutton (Rancho Cucamonga) and Senate Budget Vice Chair Bob Huff (R-Diamond Bar) said in a joint statement that Senate Republicans believe Brown is moving in the right direction by making education and law enforcement funding a top priority, and they also credited Brown for embracing what they said were Republican proposals of paying down state debt and providing some job-creation incentives.

“But the May Revise goes too far on taxes and not far enough on reforms,” they said.

They said that Brown didn't curb government spending in the May revise, which they said still “still sets the state on a course of excessive spending growth in the future – spending that relies on tax increases.”

Republicans also said it's “ridiculous” to ask voters for five years of new taxes with an estimated $6.6 billion in new revenues.

Instead, they called for a hard spending cap, pension reform and business-regulation relief.

California Chamber of Commerce President and Chief Executive Officer Allan Zaremberg weighed in, saying, “The only path out of this on-going crisis is a bi-partisan, comprehensive budget solution that solves both short and long term budget issues.” Such a solution, he added, needs to “recognize and correct the costly impact that our regulatory climate has on jobs here.”

State Controller John Chiang appeared optimistic that the May budget revision was heading in the right direction.

“The test of a budget’s soundness involves looking at its sustainability, honesty, and whether it positions California for lasting economic prosperity,” Chiang said in a Monday statement. “While the particulars will be ironed out in the days ahead, I commend Governor Brown for presenting a plan that appears to avoid one-time gimmicks, begins reigning in the state’s borrowing, and offers fundamental and cost-effective reforms for the delivery of local and state services.”

California Community Colleges Chancellor Jack Scott called Brown's budget “a fiscally responsible, balanced approach to lead the state in the right direction.”

Scott commended Brown for allocating $350 million to reduce the colleges' present deferral funding of $961 million, following nearly $1 billion in cuts over a three-year period. He said the funds will give colleges badly needed resources in this difficult year and will assist them to provide both job training and the first two years of a college education.

“We hope that Californians can vote on a tax extension that could provide education for thousands of students,” said Scott.

At the same time the California Federation of Teachers, which pointed out that even with the additional funds public education's proposed spending in 2011-12 will be $7 billion less than it was in 2007-08, suggested that increasing taxes by 1 percent on the wealthiest 1 percent of Californians would raise $2.5 billion for education and services.

Some of the harshest criticism came from a coalition of redevelopment supporters, who said that Brown's continued plans to eliminate redevelopment – which they said were illegal according to the by California Legislative Counsel and numerous constitutional and redevelopment experts – will harm local job creation and the economy.

“The governor has repeatedly claimed he wants to end the gimmicks and wants honest budgeting,” said Chris McKenzie, executive director, League of California Cities. “But his proposal to eliminate redevelopment will result in more of the same. It is illegal, will not provide the State any budgetary relief and, by destroying local economic growth, will actually reduce State and local revenues.”

Rather than supporting redevelopment's total elimination, the groups are backing SB 450 (Sen. Alan Lowenthal) and SB 286 (Sen. Roderick Wright), which the group said would implement reforms, increase accountability and allow redevelopment agencies to voluntarily and legally contribute $2.7 billion to schools over 10 years to help offset state general fund obligations.

“We’re confident legislators will reject the Governor’s illegal proposal and instead act to reform redevelopment to preserve this critical local job-creating tool for future generations,” said John Shirey, executive director, California Redevelopment Association.

On the other end of the spectrum, Jean Ross, executive director of the California Budget Project, a nonpartisan public policy research group, said Brown's approach remained “the only credible path” to a balanced budget, but regretted his decision to retain the Enterprise Zone Program while proposing to close parks and cut services to vulnerable members of society.

 

The May Revision can be found at www.ebudget.ca.gov/.

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