Revised California Budget Reinforces Brown's Manifesto of Moderation

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Gov. Jerry Brown presents his revised state budget on May 14, 2015, at the state Capitol. (John Myers/KQED)

It was an animated Gov. Jerry Brown, fielding yet another question about Democrats wanting additional boosts to state spending, who uttered a sentence that pretty much sums up his entire approach to governing.

"I don't want to get caught in the jaws of the persistent, fiscal instability of the state government of California," said a somewhat exasperated Brown. He then said, matter-of-factly, "There it is."

There it is, indeed: A manifesto of moderation, it seems, that's guided Brown more than anything other since his return to Sacramento in 2011.

And it's no surprise why. The governor's approach, in the early days, helped him forge a middle ground between no new taxes and permanent new taxes. Then it was a deal on public employee pensions. Then, a new water bond. All along, Brown seems to have been trying to find some kind of narrow passage between political battle lines -- especially the lingering one with his fellow Democrats over the size and role of state government.

That can be hard to do when there's suddenly a lot of unexpected cash. Take Thursday's revised budget: Last June, Brown's fiscal advisers assumed the 2014-15 budget year would end with $70.2 billion in personal income taxes collected. Now, they are pegging the total tax take this year at almost $75.4 billion.

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Over the course of three fiscal years (last year, this year, next year), the Brown administration has now raised its general fund revenue estimates by $6.7 billion.

Spending has gone up, too, driven largely by the constitutional school funding guarantees under Proposition 98. But the revised spending plan also includes a recalibration of the Brown manifesto, changes made in the face of new demands that the governor hasn't done enough to help some of those in need.

Brown's Tax Break For the Working Poor

The best example of the course adjustment may be Thursday's rollout of a new state earned income tax credit (EITC) -- a staple of federal tax policy since 1975 and one embraced with additional tax credits in more than two dozen other states. Last year, the Legislature asked for a detailed review of EITC options from the nonpartisan Legislative Analyst's Office. In that report, the LAO concluded that 10 million Californians -- more than one in four -- lived in a household in 2012 that benefited from the federal EITC. Advocates have long praised the tax break at as an effective way to put more money back into the pockets of the working poor.

There have been three legislative proposals in the past four years to create a state tax credit, and Assembly Democrats placed it on their budget wish list just days ago.

On Thursday, the governor tried to not sound like a newcomer to the idea. "I've always liked the earned income tax credit," said Brown.

His proposal is smaller than other EITC ideas, and thus would cost less, about $380 million in the coming year and assumed to exist for at least the next four years. Brown defended his proposal's size in the Q&A with reporters, while still conceding there are some who think he hasn't done enough on the issue of income inequality.

"I've heard that," said the governor at his budget news conference. "And I thought this would be a reasonable response."

Brown Cuts a Deal With UC

Reasonable can be read by some as "moderate," and the tax credit isn't the only example of that in Brown's revised budget plan. It's also one way to describe the deal struck with the University of California and UC's politically savvy president, Janet Napolitano.

In a nutshell: Napolitano called off any in-state tuition increases for the next two school years in exchange for Brown adding $146 million to the state's UC spending in the fiscal year to come -- earmarked for maintenance, energy efficiency and help in filling in the university's long-term employee pension shortfall. (The pension money, which will come from Proposition 2 debt payment funds, totals $436 million over three fiscal years).

That kind of moderation seems to have resolved at least the short-term fight with UC's leadership. Napolitano, a veteran politician herself, saw it as a deal worth taking.

"Obviously, one always wants more money from the state," she said in an interview with KQED News. "But I think this is a very, very fair deal for us."

And Brown was careful to squelch any idea that he'd given away too much, especially on the help for UC's pension debt.

"This is not free money," he said Thursday.

So what's next? The 32 days between the revised budget's release and the constitutional deadline for the Legislature to place a spending plan on Brown's desk will be fascinating to watch. Perhaps the moderating strategy, even if it means new expenses, isn't over. For example, Brown's budget director suggested on Thursday that there's room to talk about another fiscal fight: The effort by doctors and other advocates to restore the recession-era cuts in fees paid to doctors who take Medi-Cal patients.

Even so, there's probably some kind of tipping point -- perhaps only known to Brown and his closest advisers -- for what's a reasonable expense, and what's a harbinger of a new era of money mistakes. And perhaps that tipping point is tied to the Capitol's growing sense that a gubernatorial legacy is now coming into sight.

"One thing we know is that when governors leave town with big deficits, they're more scorned than praised," said Brown toward the end of his budget presentation. "I think it's all balance."