June 20 (Bloomberg) -- California Governor Jerry Brown stripped $38 million out of the budget for the most populous state as he signed a record $156.3 billion spending plan for the year beginning July 1.
The line-item vetoes by Brown, a 76-year-old Democrat seeking re-election, were mostly technical amendments in a plan that boosts expenditures 5.8 percent from the current year, according to H.D. Palmer, a spokesman for Brown’s Finance Department. The 10 budget changes were the smallest number since 1982, according to the department.
The signing ceremony in San Diego today was the earliest since at least the 1960s, reflecting accord with Democrats who control the Legislature. A surge in revenue, mostly from capital-gains levies and temporary income- and sales-tax increases, has taken the state from a $25 billion deficit three years ago to a record surplus.
“This on-time budget provides for today and saves for the future,” Brown said in a statement. “We’re paying off the state’s credit card, saving for the next rainy day and fixing the broken teachers’ retirement system.”
The budget adds $1.6 billion to the state’s reserve fund, the first deposit since 2007, according to the governor’s office. It also directs the state, school districts and teachers to increase contributions to the California State Teachers’ Retirement System. The second-largest U.S. public pension, with $184.8 billion in assets as of May 31, had been projected to run out of money by 2046.
Neel Kashkari, Brown’s Republican challenger in the November election, called the spending plan a “Christmas tree budget,” criticizing it for setting aside revenue from auctioning carbon-emission credits for Brown’s $68 billion high-speed rail proposal.
Kashkari, in a statement, called the budget “nothing more than a giveaway for special interests, paid for by working families.”
Lawmakers approved the spending package June 17 in a compromise with Brown, who had pushed to set aside larger reserves. Democratic legislators moved to restore spending on health and welfare programs.
The budget counts on voters in November to amend the constitution by requiring that 1.5 percent of general-fund revenue be set aside each year in a rainy-day fund, as well as those capital-gains taxes that exceed 8 percent of the general fund, which pays for most core operations.
Credit-rating companies have criticized California for its failure to set aside money when the economy is booming and for relying too much on volatile capital gains.
California’s general-obligation bonds are rated A1 by Moody’s Investors Service, the fifth-highest investment grade. Standard & Poor’s has the state one step lower, at A, with a positive outlook -- a potential precursor to an upgrade. California hasn’t had an S&P rating above A since 2009. Only Illinois has a lower rating from both Moody’s and S&P.
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