Storm warnings in Gov. Brown’s budget proposal

Gov. Jerry Brown’s budget proposal on Tuesday reminded us of California weather – always hoping for the best but preparing for the worst.

This week’s rain hasn’t been nearly as dramatic as predicted. Similarly, we’re hopeful that the most dire predictions for the coming year won’t be as bad as Gov. Brown is hinting they might be. Regardless, we approve of the governor’s cautious approach to spending and his continued emphasis in setting aside “some biscuits for a rainy day,” in his 2017-18 budget proposal.

Those “biscuits” amount to roughly $1.6 billion. Unfortunately, that might not be enough.

Like the governor, we see storm clouds gathering on California’s fiscal horizon.

First, his $179 billion budget includes a $2 billion deficit, due to projections that revenues will fall.

Second, the state is bracing for protracted battles with Donald Trump’s new administration – starting with the anticipated death of the Affordable Care Act. Medi-Cal covers 7.9 million Calfornians and another 1.4 million get their insurance through the ACA. Both program are reliant on federal reimbursements of around $20 billion. If Trump and Congressional Republicans kill it without a replacement, that loss will blow through California’s budget like a E5 tornado. The budget makes no reduction, for now, in either program.

But that’s not the worst-case scenario. If the Trump administration retreats on the nation’s commitment to free trade, it could shake our state’s entire economy. The governor’s budget document notes that $165 billion worth of goods were exported from California ports in 2015, starting with $22 billion in farm products, many of which are grown in our valley. California’s largest trading partners are Mexico and Canada under the North American Free Trade Agreement, which Trump denounces. Next comes China, which Trump accuses of unfair trading practices.

“Changes to existing free trade policies could cause prices to spike, and could lead to job losses as the economy adjusts,” the budget states. “This would particularly hurt lower-income workers, who would face higher prices on the goods they buy.”

There are other reasons for caution.

If state policymakers fail to slow spending, Brown said, there would be a $1.6 billion deficit because of what he believes will be slowing tax collections and job growth. And so the governor proposes to trim the rate of increase in public school spending by $1.6 billion, though education still would get a 3 percent increase to $73.5 billion. The governor proposes other savings in areas ranging from construction to limiting increases for state-funded child care.

There are many, many programs and priorities that – if they survive the legislative sausage making to come – will have important impacts here.

▪ $248 million dedicated to the Strong Workforce Program through the state’s community colleges and workforce boards.

▪ $22 million for innovation and entrepreneurship on UC campuses.

▪ $300 million for criminal rehabilitation, which is crucial since the governor’s pet initiative, Proposition 57, will release several thousand inmates from state prisons; hopefully these programs will give them something to do other than resume their criminal activities.

▪ Another proposal will generate $4.3 billion for roads and transportation, a portion of which is much more likely to flow Merced and Stanislaus counties now that they’ve joined San Joaquin in passing dedicated sales taxes to fund road improvements.

This is supposed to be figured out by June 15. Hopefully, by then, all those dark clouds will have dissipated.

This story was originally published January 11, 2017 at 12:45 PM with the headline "Storm warnings in Gov. Brown’s budget proposal."