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California Lawmakers Reach Budget Agreement With Governor

June 21 (Bloomberg) -- California lawmakers and Governor Jerry Brown said they reached agreement on welfare funding in the next fiscal year, clearing the way for approval of the most populous state’s budget.

The disagreement over welfare was the final sticking point preventing Brown from signing the state’s $92 billion budget for fiscal 2013, approved June 15. Lawmakers are scheduled to vote next week on a package of bills that would complete California’s second consecutive on-time budget.

The agreement between Brown and his fellow Democrats in the Legislature would limit welfare payments to two years instead of four, according to a Brown press release. It also cuts subsidies for child care by 8.7 percent while maintaining $250 million in payments to cities, counties and school districts intended to compensate for the loss of redevelopment agencies.

“This agreement strongly positions the state to withstand the economic challenges and uncertainties ahead,” Brown said in the statement. “We have restructured and downsized our prison system, moved government closer to the people, made billions in difficult cuts, and now the Legislature is poised to make even more difficult cuts and permanently reform welfare.”

Brown needs only Democratic legislators to approve the budget because the party holds a majority in both chambers of the Legislature. Voters in 2010 eliminated the requirement for two-thirds of lawmakers to approve budgets in favor of a simple majority.

Tax Increases

The cornerstone of the budget is Brown’s plan to ask voters in November to temporarily raise the state sales tax, already the highest in the U.S., to 7.5 percent from 7.25 percent. The proposal would also boost rates on income of $250,000 or higher, with those making $1 million or more, now taxed at 10.3 percent, raised to 13.3 percent, the most of any state.

The Democratic governor’s appeal for higher taxes is aimed at closing a $15.7 billion deficit. If California voters reject the measure, Brown’s budget calls for cuts of $6 billion more in spending, almost all of it from schools.

Under the agreement, the state would cut about $880 million from welfare spending, about half of that from the general fund. Recipients would be eligible to collect assistance for two years, unless they can demonstrate they are in job training. If they are, they can continue to receive benefits. Those with small children would be eligible for exemptions from the rule.

Poor Children

The agreement also eliminates California’s health insurance program for poor children, who would instead receive care under Medi-Cal, a state-run plan for low-income residents.

The budget Democrats passed June 15 must still be signed by Brown. It includes a one-year, 5 percent payroll reduction for California employees that would reduce the general fund by $400 million. Brown has proposed achieving that by having staff members work 9.5 hours on four days instead of 8 hours in five days. The details are under negotiation with labor unions.

The budget also relies on a $450 million rainy-day reserve, about half of what Brown had proposed earlier in the year. Senate President Pro Tem Darrell Steinberg, a Democrat from Sacramento, said that combined with the revenue from the higher taxes, the spending plan eliminates the state’s persistent deficit and would leave the state with a surplus within four years.

“These are sober decisions,” he told reporters. “But we are on the back end of these deficits. If we can pass those taxes in November, we are done with deficits here in California.”

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