By Wyatt Buchanan, San Francisco Chronicle
Gov. Jerry Brown took office two years ago promising that he had the know-how and the fiscal prudence to guide the state out of its financial crisis, and on Thursday he delivered a budget without a deficit.
It's the first time since 2007 that leaders at the Capitol haven't had a deficit to contend with and the first time since the late 1990s that the outlook over future years shows surpluses instead of deficits.
"This is new. This is a breakthrough," Brown told reporters at a news conference where he presented his spending plan for the 2013-14 year that begins July 1.
The governor promised discipline in spending - K-12 public schools and higher education received significant increases in funding - and in paying off the state's accrued debt.
He's likely to face opposition from Statehouse liberals who would rather see funding restored to programs that have been slashed in recent years, but Thursday his plan was widely praised by Democrats and Republicans.
Some in the GOP did, however, question whether the governor was being too optimistic with his deficit projections.
Paying 'wall of debt'
Even without a shortfall, California still has significant debt from accounting gimmicks used over the past decade. Brown estimated that what he calls the "wall of debt" would shrink from its current $27.8 billion to $4.3 billion over the next four years under his plan.
"That's the context of this budget, to fix the long-standing problem. We have fixed it. We're on the road to sustainable balance. It will not be easy - there will be some disagreements, there will be some heartburn," Brown said.
He vowed to be conservative with spending "instead of just enjoying the momentary high and then having the hangover many years later."
The budget picture could have been bleak and dominated by spending cuts, but past cuts combined with voters passing Brown's tax-raising Proposition 30 have significantly changed the financial status of the state.
Overall, the budget proposes $97.65 billion in general fund spending, a 5 percent increase over the $93 billion in the current year's spending plan. The general fund is the main account that pays for services like K-12 public schools and higher education, health and human services, courts and prisons.
Including special fund accounts, made of specific taxes and fees that have to be spent on services related to those revenues, and bond funds, California's total budget for 2013-14 would be $145.8 billion.
As was expected, the governor revived his plan to change how schools are funded. It would give schools the same base amount, but increase funding to those districts serving students from low-income families, who are not fluent in English or are in foster care.
"Aristotle said, 'Treating unequals equally is not justice.' And people are in different situations. Growing up in Compton or Richmond is not like it is to grow up in Los Gatos or Beverly Hills or Piedmont," Brown said.
Overall, K-12 schools and community colleges will receive $56.2 billion, up from $53.5 billion in the current year.
Another major piece of the budget is Brown's decision to expand the Medi-Cal program as part of implementing the federal Affordable Care Act. The federal government is paying all of the costs for the coverage for new people for the first few years, but Brown's budget includes the state paying $350 million for coverage of people already eligible for the program but who are not enrolled.
The governor said he is weighing whether to have the newly covered in a state-run program or whether each county will have its own program. For the first time in years, the state budget did not include cuts to health care and other social services, particularly those that take care of California's poor, sick, elderly and disabled residents.
Still, the governor's proposal prompted a demonstration by advocates frustrated that the governor did not restore funds that had been cut in the past from health and social services programs. "It is time to start reinvesting," said Pete Woiwode, an organizer with the California Partnership, a coalition of antipoverty organizations, who helped lead a rally in front of the State Building in San Francisco on Thursday.
As for higher-education spending, the governor has proposed $125 million each for the University of California and California State University systems, on top of the $125 million each received due to the passage of Prop. 30.
It's less than what both had asked for, and UC leaders already have said they would increase tuition if they didn't get what they said they needed, and officials of both systems said it was too soon to know whether they would seek increases. Brown and other Democratic leaders at the Capitol, however, said they expect no tuition or fee increases at UC or CSU.
"They have no ability to come back and talk to us next year about their budget if they take the money we gave them this year as an increase and then decide to do something that makes college more expensive for students in the way of fee increases," said Assembly Speaker John Pérez, D-Los Angeles.
One part of Brown's plan that did draw some criticism was his sparing trial courts from budget cuts by transferring $200 million in a courthouse construction and maintenance fund to local courts' operating budgets. Chief Justice Tani Cantil-Sakauye said she considers that to be a $200 million budget cut.
"This budget doesn't answer our problems," Cantil-Sakauye told reporters. "Many courts are on reduced hours and not able to provide full justice to the public."
And while Republicans were generally pleased with the plan, some did question whether California truly has no deficit.
"Reality is always a little different than how the governor describes it," said Senate Republican leader Bob Huff, R-Diamond Bar (Los Angeles County). He said problems in Europe, in the federal government and the weak housing market all portend more financial troubles for California.
Lawmakers will now hold hearings on the plan and await an updated plan with new revenue numbers in May. They have a June 15 constitutional deadline to pass a budget or else they aren't paid until a spending plan is approved.
Budget deficits projected in January spending proposals:
2008: $14.5 billion
2009: $41.6 billion
2010: $18.9 billion
2011: $25.4 billion
2012: $9.2 billion
Chronicle staff writers Nanette Asimov, Victoria Colliver and Bob Egelko contributed to this report. Wyatt Buchanan is a San Francisco Chronicle staff writer. E-mail: firstname.lastname@example.org