Gov. Jerry Brown proposes $122.6 billion California budget; touts health insurer tax compromise

File: California Gov. Jerry Brown talks about new efforts to cope with climate change during a panel discussion at the 18th annual Milken Institute Global Conference on April 29, 2015 in Beverly Hills.
File: California Gov. Jerry Brown talks about new efforts to cope with climate change during a panel discussion at the 18th annual Milken Institute Global Conference on April 29, 2015 in Beverly Hills.
David McNew/Getty Images

Gov. Jerry Brown proposed a $122.6 billion budget plan for California on Thursday that includes billions more in spending for education, health care and state infrastructure, increases the state rainy day fund to $8 billion and takes steps to pay down debts.

"Relative to budgets of the past, this budget is in good shape," Brown said of his 2016-17 spending plan. "We also ought to look at what's the capacity of the state, and what's the taxpayer willingness to spend more."

The budget also includes a $1.1 billion compromise on a new tax on health insurers to replace one that will expire in June. Brown said the tax is critical to maintaining the state health care program for the poor, which is projected to cover 13.5 million people by 2017, nearly a third of the state's population.

The budget would keep tuition flat for another year at University of California and California State University schools, while a voter-approved minimum funding guarantee will send funding for public schools and community colleges soaring along with state tax revenues.

Per-pupil spending would increase to $10,591 under Brown's plan, a $368 per-pupil increase over 2015-16. Brown also wants to direct money from other sources to compensate public schools for earlier lean years, which would increase spending to $14,500 per student in 2016-17.

The substantial investments proposed by Brown's administration underscore the state's soaring economic recovery. The state faced a $26 billion budget deficit when Brown took office in 2011, forcing deep cuts to social welfare programs, schools and universities.

The state's economy is highly reliant on volatile capital gains revenues from the wealthy, which are soaring along with the state's economy, and Brown warned again Thursday of the inevitable boom-and-bust cycle, proposing to end the fiscal year with an $8 billion rainy day fund.

Republicans cautioned against expanding social welfare programs that will require long-term funding. Assembly Minority Leader Chad Mayes, R-Yucca Valley, said the state must not spend money "as if it will reappear every year."

"Democrats should pay attention to the legislative analyst and Governor Brown's warnings about overspending, and balance the need to invest in critical infrastructure projects to improve our roads, schools and dams with one-time money," Mayes said in a statement.

Special funds and bond money will push overall state spending to $170.7 billion, but the Legislature and governor only are responsible for allocating money from the general fund.Brown's announcement sets the stage for a months-long debate with lawmakers over spending priorities.

Despite the large spending increases, Brown acknowledged there is not money for everything on lawmakers' wish lists.

"It's not a candy store where you can pick out whatever you want," he said.

Advocates also have been pushing the state to raise reimbursement for doctors who provide care in the Medi-Cal program, which was cut by 10 percent during the recession. Brown did not propose an increase Thursday.

Senate President Pro Tem Kevin de Leon, D-Los Angeles, said the state afford to can maintain its fiscal stability while helping the most vulnerable Californians.

"We still have to take a closer look at strengthening our health care system for the poor and developmentally disabled that has been starved for far too long," he said in a statement.

Brown called special sessions last year to address the health care tax and a $59 billion backlog in transportation infrastructure spending, but neither gained traction. He said Thursday that he'll get more involved in talks with lawmakers on both issues this year.

He said his administration has been deep in talks with health insurers to come up with a fair proposal to plug the $1.1 billion health care hole. The plan still needs Republican votes.

"We'll get whatever people think is right. It takes a few Republicans to join in with the Democrats," he said.

The budget plan also reflects Brown's transportation proposal to spend $3.6 billion a year on infrastructure improvements, funded through a combination of vehicle registration fees, increases to the diesel and gas taxes, and diverting money from the fees charged to polluters.

Republicans have rejected tax increases, arguing that the state should instead return diverted transportation money and make major cuts to Caltrans.

Here's a look at some of the numbers:


Schools get the lion's share of California tax revenue thanks to the voter-approved Proposition 98. Brown proposes directing $71.6 billion from the general fund to public schools — an increase of $2.4 billion from the current year and more than $24 billion higher than state spending at the depth of the recession. Brown wants to direct additional money to public schools, bringing per-pupil spending to $14,500 in 2016-17. Higher education would also see an increase of 3.4 percent increase, to $30.4 billion in all.

Health care

Spending on Medi-Cal, the state's health care program for the poor, is projected to increase 8 percent, to $19.1 billion in 2016-17, as California forecasts 13.5 million enrollees. That's nearly a third of California's population, and it includes about 170,000 children in the country illegally who are expected to receive full coverage starting May 1.


Gov. Jerry Brown is bringing back his transportation funding proposal to address an estimated $59 billion backlog in road repairs. He wants to raise $2 billion from a new $65 fee on all vehicles, and increase gasoline and diesel taxes to generate $1 billion annually. The $3.6 billion-a-year spending plan is less than the $6 billion annually that experts have estimated the state should invest.

Rainy day

Brown is proposing to put $2 billion more than required into the state's rainy day fund, which would bring its balance to $8 billion by the end of the upcoming fiscal year. Still, he warns that the state has $224 billion in liabilities, nearly all stemming from unfunded retirement liabilities for state and University of California employees.


Spending on corrections rises only slightly, to $10.55 billion from $10.4 billion in the current fiscal year. It includes $116 million to keep inmates in private prisons in other states, $6 million for repairs at the California Rehabilitation Center east of Los Angeles and $29.3 million for community rehabilitation programs through a voter-approved lowering of penalties for some drug and property crimes. That figure is far less than advocates had predicted.


The budget proposes a one-time sum of $323 million to address drought in the coming fiscal year. With reservoirs and groundwater supplies "significantly depleted," the budget proposes protecting water supplies, conserving water and providing emergency assistance to farm workers, fish and wildlife. There is also an extra $215 million in anticipation of extra costs to fight wildfires as a result of the drought.


The proposal allocates $385 million from the Proposition 1 water bond voters approved in 2014 for projects such as improving the state's water delivery system. Brown is proposing $100 million to protect the Central Valley from flooding, $80 million to restore a critical resting stop on the Salton Sea for migratory birds and another $60 million in habitat restoration in the Sacramento-San Joaquin River Delta.

Read the official summary of Brown's 2016-17 budget below:

Gov. Brown 2016-17 budget proposal

This story has been updated.