Brown Urges Fiscal Restraint Amid California Policy Shift

California Governor Jerry Brown called on lawmakers to hold down spending as new tax revenue flows in, while he seeks to overhaul education funding and environmental laws, and build a high-speed rail line and $14 billion water-tunnel system.

“Fiscal discipline is not the enemy of our good intentions, but the basis for realizing them,” Brown, a 74- year-old Democrat, said in his State of the State address.

Brown, who was governor from 1975 to 1983, won office again in 2010 on a pledge to repair the crippled finances that plagued the world’s ninth-biggest economy for the past 12 years with $213 billion in combined deficits as political infighting prevented permanent fixes.

He convinced voters in November to approve the highest statewide sales tax in the U.S., at 7.5 percent, and to boost levies on income starting at $250,000 -- reaching 13.3 percent on those making $1 million or more, the most of any state.

That extra money, combined with previous spending cuts, means the state will end the next fiscal year with an $851 million surplus, the first in a decade, according to the governor’s budget.

The governor has urged restraint, saying lawmakers need to focus on repaying $35 billion of internal borrowing, which he calls he “wall of debt,” accumulated in the last decade through transfers between state accounts, to fill previous shortfalls.

School Funding

Brown said he wants to change how California doles out money for education and eliminate many spending mandates, such as one that requires schools to reduce class sizes. He has proposed changing formulas used to calculate how much each school gets, so that low-income districts receive more and to improve the education of poor children learning English.

The governor also said a $68 billion high-speed passenger system “is the future,” even though federal funding remains in question and polls have shown waning public support for the project.

He also said the state must spend $14 billion to build a pair of tunnels 40 miles (64 kilometers) long to divert water to Southern California. That plan promises to reopen a long- simmering dispute between northern Californians and those in the more populous south, much of which is semi-desert.

Voters rejected a similar plan to divert water from the Sacramento-San Joaquin River Delta in 1982.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: William Glasgall at wglasgall@bloomberg.net

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