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Brown Budget Damps California Spending Expectations

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May 14 (Bloomberg) -- California Governor Jerry Brown increased spending on education by $2.9 billion and projected that the state would have an $850 million surplus at the end of next year after voters boosted sales and income taxes.

While revenue in the current year is up $2.8 billion, next year it will be down $1.3 billion, compared with January projections, said Ana Matosantos, Brown’s finance director. The state Legislative Analyst’s Office had calculated the increase at $4.5 billion at the end of April.

He unveiled a $96.4 billion spending plan today for the fiscal year that begins July 1, down from $97.7 billion he recommended in January. Brown cautioned that the revenue increases could be temporary, noting that the “uncertain economic recovery” and other factors could jeopardize California’s progress.

“This budget builds a solid foundation for California’s future by investing in our schools, continuing to pay down our debts and establishing a prudent reserve,” Brown said today in Sacramento. “But California’s fiscal stability will be short-lived unless we continue to exercise the discipline that got us out of the mess we inherited.”

Brown, who served two terms as governor from 1975 to 1983, returned in 2011 facing a $26.6 billion deficit and a $35 billion “wall of debt” -- his term for internal and external borrowing and delayed payments to schools and community colleges. The governor said spending cuts and higher taxes are projected to reduce such obligations to $4.7 billion by 2017.

Standard & Poor’s in January raised the state’s credit rating to A, sixth highest, the first increase since 2006.

To contact the reporters on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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