May 13--REPORTING FROM SACRAMENTO -- Gov. Jerry Brown sent legislators a revised version of his state budget on Friday, insisting that lawmakers hold overall spending flat while still offering support to a $2 billion bond to help the homeless.
"We have the money, and it's a serious problem," Brown said at a state Capitol news conference.
The governor's $173.1 billion budget blueprint reflects a noticeable erosion in state tax revenues compared to estimates from just four months earlier.
"Right now, the surging tide of revenue is beginning to turn," he said.
Even so, state government spending would rise by $2.4 billion compared to Brown's earlier budget plan. Michael Cohen, the governor's budget director, attributed that rise to the February enactment of a new tax on healthcare plans, which does not require general taxpayer funds to administer.
Analysts said the weaker growth in tax revenues is because of a tumultuous winter on Wall Street and its impact on the capital gains earned by some of California's wealthiest taxpayers.
The state's high-income earners provide the largest single share of tax revenues, and changes in the value of their stock portfolios often have meant steep peaks and valleys in available budget dollars.
Democrats praised Brown's endorsement of tackling homelessness among the mentally ill.
"Homelessness plagues communities across our state," said Senate President Pro Tem Kevin de LeD-Los Angeles), one of the original authors of the plan.
The $2-billion bond would not have to go on the ballot, but would have to be approved on a bipartisan vote in both houses of the Legislature. It would be repaid by a surcharge on incomes of Californians who earn more than $1 million a year.
In the months since his initial budget proposal, Brown's actions on everything from a tax that boosted funding for the disabled to raising the statewide minimum wage has suggested to some a possible change of heart by the fiscally cautious governor. Democrats, for example, have urged the governor to embrace a $1.3-billion proposal for more affordable housing and an $800-million boost in early child care and education programs.
On Friday, Brown urged legislators to hold the line on expanding the size and role of state government. His revised budget offers a few new ideas, though all have relatively low price tags. Among them, the governor is proposing $10 million in new spending for California's early earthquake-warning system and $30 million in additional dollars for help in the event of wildfires and to deal with the impacts of the ongoing drought.
The unveiling of the revised budget kicks off what likely will be an intense month of negotiations between Brown and legislative leaders. By law, legislators must make any revisions and send a final spending plan to the governor by June 15.
The state's new fiscal year begins on July 1.
Brown has spent most of the year warning of looming budget deficits and shortfalls in state spending that would harken back to almost a decade's worth of budget red ink in recent years. And he has tried to square those projections with his promises made to voters in 2012 that a temporary tax, Proposition 30, would provide the needed funds to help stabilize future budgets.
A coalition of labor unions and healthcare groups is now poised to place an extension of the 2012 income tax hike on the Nov. 8 ballot. Those taxes, imposed on the state's most wealthy taxpayers, would otherwise begin to expire in 2018.
The Brown administration projects that if voters pass that tax proposal, the state will maintain a slight surplus of tax revenue through the summer of 2020. If they don't, the deficit could rise to as high as $4 billion.
Still, Brown downplayed the danger. "We can manage that deficit if we have to," he told reporters Friday.
The revised budget reaffirms the relatively good news for public schools offered by the budget proposed in January -- in all, a 52% increase in K-12 spending over the past five years. And it continues to urge lawmakers to take action on finding a long-term fix for California's crumbling infrastructure, an issue that remains stalled in the Capitol.
The governor and his staff tried to inject some levity into the otherwise staid budget presentation by invoking the Aesop fable of the ant and the grasshopper, the story that depicts the perils of not planning for the potential problems of the future.
"The notion is when you're in the late summer, you should remember winter's coming down the road," Brown said, smiling.
john.myers@latimes.com
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