Just a week after taking office, Gov. Jerry Brown has released his proposed budget document – “a tough budget for tough times” – which may impact local governments as it slashes billions, and received both praise and criticism on its first day.

On Monday Brown presented a budget with $127.4 billion in spending for the 2011-12 fiscal year, with $84.6 billion coming from the state's general fund.

Brown's balanced budget proposal would cut $12.5 billion, make $12 billion in revenue extensions and modifications, and $1.9 billion in other solutions to close the gap and provide for a $1 billion reserve, his office said.

Measures to balance the budget include reducing state employees' take-home pay by 8 to 10 percent, carrying out a “vast and historic” restructuring of government operations, puts $1 billion into a “rainy day” reserve fund and would close the state's budget deficit “now and into the future,” Brown suggested.

“These cuts will be painful, requiring sacrifice from every sector of the state, but we have no choice,” Brown said. “For 10 years, we’ve had budget gimmicks and tricks that pushed us deep into debt. We must now return California to fiscal responsibility and get our state on the road to economic recovery and job growth.”

Republican leaders said they were skeptical of the plan, largely because of its taxation elements.

Senate Republican Leader Bob Dutton (R-Rancho Cucamonga) noted that while the budget proposal contains “difficult but necessary spending reductions,” the plan isn't compete because he said it assumes voters will support major tax increases, but doesn’t provide solutions if they reject them. That, he said, could result in a $10 billion budget hole come June.

Dutton said the way government operates needs to be addressed first. He said there also isn't anything in the budget to stimulate the economy or create jobs.

Lake County's Administrative Officer Kelly Cox said he's concerned about how the proposals would impact the county, and noted that some of Brown's proposals look like some put forward by former Gov. Arnold Schwarzenegger and shot down by the Legislature.

“It's going to take quite awhile to analyze everything that will impact local government, but believe me there is a lot in this budget proposal that, if enacted, will significantly impact county government,” Cox said Monday.

North Coast Assemblyman Wes Chesbro (D-Arcata) said Monday that it's now up to the Legislature to make the budget proposal work.

“Jerry Brown has laid out a plan to put us on a road to a cure for California’s chronic economic

condition,” Chesbro said. “This plan represents a starting point. It is now our job to work with the governor to heal the state’s economic woes.”

State Controller John Chiang said Brown has proposed “some ugly solutions to an even uglier situation,” but added that gimmicks and delay make the state's budget problems multiply.

He called Brown's proposal “a refreshing departure from past schemes that too often sacrificed long-term fiscal stability for band-aid solutions. While more work is required, this plan is an honest first step toward building consensus on how to best shape California’s future.”

With cuts proposed for colleges and universities, the state's higher education leaders – University of California President Mark Yudof, California State University Chancellor Charles B. Reed and the California Community Colleges Chancellor Jack Scott – issued a joint Monday statement in which they said that, given the vast demographic shifts at work in the state, “now is not the time to shrink public higher education, but to grow it.”

Their statement added, “The road to recovery from this recession and prosperity far beyond it runs straight through our many campuses. These universities are the economic engines of California.”

Cuts proposed to social services, higher education; redevelopment may be in danger

Brown said Monday that decisive action is needed to help the state as it slowly emerges from “the Great Recession,” which his budget states California entered with “an existing structural deficit.”

The budget also looks at several economic factors, suggesting that full recovery of jobs lost during the recession won't occur until 2016, when jobs are expected to surpass the 2007 level.

It also suggests that the worst of the housing slump may be over – although new home construction permits are down 80 percent from the mid-2005 peak – and the stability of the housing market itself is still in question.

Exports are up 21 percent compared to 2009's first half, taxable sales are recovering but still down from 2007, unemployment is still trending high – the last state report put it at 12.4 percent – and personal income declined in 2009 on a year-over-year basis for the first time since 1938, although it later began a moderate recovery.

Among his proposals, the governor Brown intends to call for a special June election in which he'll ask voters to give him a five-year extension to several current taxes – personal income, sales tax and vehicle license fee – while California pays off its debt. First, the Legislature will have to implement the necessary statutory changes to allow the measure to go on the ballot.

If the ballot measures are approved, revenue from the sales tax and the vehicle license fee will be transferred directly to local governments to finance the first phase of his realignment plan, Brown said.

But Republican leaders already are saying they'll oppose the tax ballot measures.

Assembly Republican Leader Connie Conway of Tulare issued a Monday statement in which she said there are not the votes in the Assembly Republican Caucus to place the same tax increases “that voters overwhelmingly rejected less than two years ago” on a June ballot.

“Californians have sent a strong message at the polls that they want Sacramento to make government live within its means,” Conway said.

The realignment plan – which Brown said will return more governing decisions and authority to cities, counties and schools – will “allow government at all levels to focus on core functions and become more efficient and less expensive” by reducing duplication of services and administrative costs.

Brown's plan will spare kindergarten through 12th grade education. “Schools have borne the brunt of spending reductions in recent years, so this budget maintains funding at the same level as the current year,” he said.

While kindergarten through 12^th grade education won't see cuts based on Brown's plan, higher education will, with Brown proposing to cut $500 million to the University of California and $500 million to California State University systems.

Other areas where Brown is suggesting major spending reductions are $1.7 billion to Medi-Cal, $1.5 billion to California’s welfare-to-work program (CalWORKs), $750 million to the Department of Developmental Services, $308 million for a 10 percent reduction in take-home pay for state employees not currently covered under collective bargaining agreements and $200 million in government actions that Brown proposes to cut through efficiencies including reorganization and consolidation.

On the health care front, the budget elicited condemnation from the AIDS Healthcare Foundation, whose president, Michael Weinstein, called it “a death warrant for California AIDS patients” because he said it would “drastically” alter care for AIDS care and require steep share of costs from low-cost HIV/AIDS patients.

Brown also is proposing reductions to the state's judiciary and corrections, wants to require all corporations to use a single sales factor when measuring income attributable to California and would create an amnesty program for taxpayers who have avoided or underreported income owed to the state.

An area of particular concern for local officials like Cox is the proposal to phase out the current funding mechanism for redevelopment agencies.

While Brown said that step would return billions in property tax revenues to schools, cities and counties and help pay for public safety, education and other services, it would mean attempts to rejuvenate areas of the county – such as the Northshore and parts of Lakeport and Clearlake – would see a considerable setback.

Still, Cox noted, “I have a hard time believing that proposal will make it through the legislature. It was only two months ago that the voters approved a ballot measure protecting local redevelopment funds from being raided by the state.”

Cox said Brown's proposals concerning realignment and funding of criminal justice programs, welfare and mental health programs sound very similar to proposals made by Schwarzenegger. “Since the legislature soundly rejected many of those ideas when they were previously proposed, I wonder if they will receive any traction now.”

In Cox's view, it's hard to fault Brown for proposing “drastic measures” in light of the need that's been present for years for the state to resolve its budget problems.

“I'm hoping that some of his proposals were designed simply to get everyone's attention and understanding of the seriousness of the state's budget crisis, but that there will be an openness to considering alternatives to some of the current proposals-alternatives that would still generate the needed savings in state expenditures,” Cox said. “There are alternatives which I don't believe they have yet proposed, that should be considered.”

The full budget can be found at www.ebudget.ca.gov.

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