California Gov. Brown Sees Uncertainty as He Proposes Budget

Published May 11, 2017
Dow Jones Newswires

California Gov. Jerry Brown presented a slightly more optimistic $124 billion budget Friday, but continued to warn that the state's fiscal plan is precarious and a repeal of the Affordable Care Act could spell disaster in later years.

Mr. Brown, a Democrat, prioritized increased spending on schools, child care, transportation and a reduction in the state's pension liabilities.

He also cautioned prudence, saying "the world of Washington is changing by the hour," making it difficult to predict what kind of future funding shortfalls the state might face.

Moreover, he said, the state is poised for a slowdown after its eighth year of economic recovery, which has been fueled by a sustained stock market rally and higher taxes on high-income individuals.

"I don't think even more spending will be possible," Mr. Brown said. "We have ongoing pressures from Washington and an economic recovery that won't last forever."

California typically experiences large swings in its finances, with years of surpluses often followed by dramatic deficits.

Including special funds and bonds, which are pools of restricted money that can only be used for specific projects, total proposed spending next year is $183.4 billion.

Thursday's proposal must be voted on by the state legislature, where Democratic lawmakers control both houses and have typically pushed for more spending.

The proposed budget preserves about $400 million of cuts first proposed in January by the governor.

State Assembly Speaker Anthony Rendon, a Democrat, called the proposal "better" than the initial January proposal but said it could nevertheless be made "even better."

"The state's fiscal position is strong, giving us the flexibility to avoid cuts and to make targeted investments," Mr. Rendon said.

Meanwhile state Senate Republican Leader Patricia Bates called the proposal a "lemon of a budget" saying that the state could not afford its increased spending.

"Now is not the time for the legislature to create new spending we cannot afford," she said.

On Thursday, the governor also warned that defunding the Affordable Care Act, or eliminating funding for Planned Parenthood, could send the state budget into turmoil.

California has gone further than most states in embracing the Affordable Care Act and the state will face deep cuts if portions of the health-care law are repealed, Mr. Brown said, though he did not give specifics.

"What we have to do is ugly, and no one wants to take that up yet," Mr. Brown said. "So what we are doing is we are going to fight as hard as we can so that doesn't happen."

Write to Alejandro Lazo at alejandro.lazo@wsj.com

(END) Dow Jones Newswires

May 11, 2017 17:57 ET (21:57 GMT)