Lawmakers eye state’s budget surplus: How to spend it?

Published: Jan. 5, 2014 Updated: Jan. 6, 2014 11:23 a.m.

With the California Legislature opening Monday, the mood will be even brighter than in this 2011 file photo, when Gov. Jerry Brown signed legislation cutting the state's budget deficit by $11.2 billion. This year, Brown and lawmakers are looking at a surplus of more than $2.4 billion.


An analysis released by the Legislative Analyst’s Office in November projects that state coffers will hold a surplus of more than $2.4 billion by the end of June. Those excess funds are expected to grow to $5.6 billion by June 2015. The analysis recommends building an $8 billion reserve fund by 2016-17.

SACRAMENTO – California lawmakers are returning to session Monday after some positive news during the off-season: State revenues are looking good.

Revenue collections, bolstered by Proposition 30’s sales and income tax hikes, are booming and are anticipated to show a surplus of more than $2.4 billion in June. That means this year’s budget battles will be over how to spend instead of where to cut.

Democratic leaders in both chambers are preaching budgetary restraint, saying they want to balance limited new spending with savings and paying down the state’s debt. They’ll hear Gov. Jerry Brown’s take on Friday, when the third-term Democrat is scheduled to release his preliminary spending plan.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, said he is urging one-third of any excess funds to go toward a reserve fund, one-third toward debt, and one-third toward new spending or restoring programs that were slashed in recent years.

“That’s an intelligent way to do it,” Steinberg said. “I don’t think we can spend all the surplus dollars.”

Assembly Speaker John Perez, D-Los Angeles, has called for a constitutional amendment to create a rainy-day fund, which would lock away some money from flush years to bridge shortfalls during an economic downturn.

Democrats continue to hold sizable majorities in the Assembly and Senate. Major leadership changes are looming by the year’s end, with Perez and Steinberg – the top leaders in each chamber – in the final year of their final term.

Republicans say they will continue to focus on additional policies to boost job creation, as well as measures to fix issues with implementing the federal health care law. One proposal from Assemblyman Curt Hagman, R-Chino Hills, would allow Californians to keep insurance policies that do not comply with the federal law through December.

“Many of those who were applying (through the exchange) haven’t gotten acceptance yet, and we still don’t know how many people lost their coverage,” Hagman said.

Lawmakers also are working on several reforms in response to an FBI affidavit leaked last fall alleging that state Sen. Ron Calderon, D-Montebello, accepted tens of thousands of dollars in bribes from an undercover agent posing as a Hollywood executive. Steinberg said he supports a measure from Sen. Jerry Hill, D-San Mateo, which would prohibit certain types of political spending, such as some funding maneuvers described in that document.

A number of big issues remain: Recent court rulings have jeopardized the future of Brown’s high-speed rail plan, federal judges still have not signed off on the latest plans to reduce the state’s prison population, and an $11 billion bond proposal for water infrastructure updates is expected to be retooled.

As lawmakers discuss debt issues, a key question will be how to cover the huge liabilities within the teachers’ pension system. In an interview with the Washington Post, Brown acknowledged the pension problem: “We will get at it. We will have the funding.”

But tackling such an issue in an election year can be tricky business.

“Nobody wants to take on big, heavy lifting just before people go to the polls,” said Senate Minority Leader Bob Huff, R-Diamond Bar.

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