California: Gov. Brown Spikes Social Spending as Tax Revenues Plummet

Gov. Jerry Brown of California September 22, 2015 in Seattle, WA.
Matt Mills McKnight-Pool/Getty Images
Newport Beach, CA

Californian Democratic Governor Jerry Brown reached a final budget deal with the state’s Democrat controlled Legislature that will increase spending on low-income housing subsidies and child care by $400 million, even though California state tax revenues are plummeting.

Earlier this month, Governor Brown’s May Revision of the 2016-17 State Budget  finally acknowledges that state revenues are falling fast, while state spending is about to accelerate. Tax revenue forecast was slashed by $1.9 billion, reflecting poor April income tax receipts and more sluggish sales tax receipts than expected.

On the spending side, Medi‑Cal is experiencing higher payments to providers, developmental disability services are spiking and the statewide minimum wage increase to $15 per hour will eventually raise General Fund costs by an estimated $3.4 billion.

In spite of this grim financial trends, the Legislature’s leadership was able to extract a substantial spending increases for key Democrat communities in the budget year beginning July 1.

State Sen. Mark Leno (D-San Francisco) cheered the negotiated settlement with the Senate and Assembly: “We’re on a very good path right now and I think we can all be proud of what we’re going to be delivering to the people of California.”

The Governor’s office responded that the increased housing subsidies come with strings attached that require lawmakers loosen regulations to streamline the process for approving and building new housing developments.

Brown also had agreed in the budget final version to acquiesce to the Democrat’s demand for a $2-billion bond measure to increase mental health spending on the homeless, in exchange for the Legislature not trying to block Brown’s diversion of an extra $2 billion into the state’s rainy-day fund in case of an economic recession.

The budget deal also ramps up the rates paid to state-subsidized child care providers in keeping with the California’s minimum wage increase. The cost of the extra funding is just $39 million in 2016‑17 budget.

The $15 per hour will eventually raise General Fund costs by an estimated $3.4 billion by 2020. But the good news for Brown, he will be out of office and his successor will have to deal with the budget crisis.

Democrat Assembly Caucus Vice Chairwoman Cristina Garcia (D-Bell Gardens) told the LA Times, “This is going to be the biggest appropriation in a decade.” She added, “We’re trying to be progressive and think about the future.”

Lawmakers also repealed the 20-year-old maximum family grant rule, which prevents mothers from receiving additional welfare assistance if they have another child. Chris Hoene, Executive Director of the ‘California Budget & Policy Center’, a nonprofit that advocates for programs aimed at low-income families, said “It’s been a long overdue process of eliminating a rule that everyone knew was unfair.”

About 130,000 children in 95,000 families on Medi-Cal will now receive an extra $136 per month per child. Frank Mecca, Executive Director of the County Welfare Directors Association of California commented, “It’s the difference between making a rent payment or being put out on the street.”

To honor Brown ‘s commitment that state schools place a lower cap on out-of-state student enrollment, the budget agreement boosts funding for both the University of California and California State University systems for admitting more in-state students.