Rainy-day plan ignites spending debate
Gov. Jerry Brown cautioned lawmakers that even though there is a budget surplus, they should not overspend as he delivers his annual State of the State speech before a joint session of the Legislature at the Capitol in Sacramento, Calif., Wednesday, Jan. 22, 2014. Brown delivered a dual message in his annual address to the Legislature, that a California resurgence is well underway but is threatened by economic and environmental uncertainties.(AP Photo/Rich Pedroncelli)
SACRAMENTO Republicans and Democrats reacted favorably to Gov. Jerry Browns announcement on Wednesday that he supports the creation of a new rainy day fund that would help the state government amass reserves to weather tough financial times and chisel away at its mountains of unfunded debt.
But despite the apparent agreement, there are enormous differences of opinion over how that fund should be set up and what it will mean for future spending plans.
As he called for a special legislative session to hammer out the rainy-day fund details, Brown looks like a fiscal hawk. But hes playing a middle-of-the-road role, as he tries to soften a Republican-backed rainy-day fund measure already slated for the November ballot while reining in legislative Democrats and liberal interest groups that are more interested in ramping up new spending programs than paying down old debts.
During 2010-2011 budget negotiations, Democrats back when they needed Republicans to pass a budget agreed to put ACA 4 on the ballot in exchange for Republican budget votes. Democrats agreed to the deal, then tied up this measure in the rules committee. Republicans are still sore that it missed the 2012 ballot.
Of course, placing it on the ballot and convincing voters to approve it are two different things. Public-sector unions have been highly critical of the rainy-day plan and could spend the money to defeat it if they decide to fight. Thats why the GOP should be happy to have a popular governor as a potential ally here even if they have to agree to a few changed provisions.
As the Brown administration explained at a press briefing on Wednesday, voters approved Proposition 58 in 2004, which diverts 3 percent of annual revenues into a reserve fund. But the state has suspended the diversion every year over the past six years, the Legislature can tap the funds at will, and the deposits are made in good times and bad ones.
The administration said that ACA 4 would be an improvement, but It does not give the state a realistic option to pay off its liabilities. Brown also is concerned that the proposed measure does nothing to address the sharp ups and downs of Proposition 98 (the school-funding law) and bases deposits on a complicated formula of historical revenue data, rather than real-time economic data.
So the governor offered a plan that would deposit money in a rainy-day fund based on spikes in capital-gains revenues, doubles the size of the account, allows the Legislature to use the money for debt payments rather than savings, caps the amount of money that can be withdrawn in emergencies and makes a few other budgeting changes.
Republican senators applauded the effort, but offered some caveats. While Republicans are open to alternatives to a bipartisan agreement passed in 2010 , we want a strong locked box that protects taxpayers monies instead of a piggy bank that can be raided on the whim of the majority partys desire to spend, said Sen. Jim Nielsen, R-Gerber, in a statement. Assembly Republicans echoed those points. Republicans also are waiting to see all the details.