California leaders to deliver on-time state budget

SAN FRANCISCO, June 3,(Reuters) - In another sign of improved fiscal health, California will not only approve its first budget surplus in years but also is expected to have it passed on time for the third year in a row.

Democrats who control California's legislature are seeking more spending in the state budget plans than Governor Jerry Brown wants, but differences are small and they are ready to strike a budget deal well before the July 1 start of the new fiscal year.

The legislature's deadline for approving a budget is June 15 and Brown is keen to sign one into law before the new fiscal year beings. If he does it will mark the third consecutive year California - the ninth-largest economy in the world - puts a budget in place on schedule following a decade filled with long and often bitter impasses in its statehouse over how to balance its deficit-prone books.

Those fights helped wreck California's credit rating and spurred voters in 2010 to approve a measure lowering the threshold for lawmakers to pass budgets to a simple-majority from a two-thirds majority, effectively giving Democrats the power to advance budgets on their own.

But they have had fights with Brown, a Democrat, over the past two years on closing deficits. He has forced them to swallow deep spending cuts and vetoed one of their budgets in 2011, but their differences should be ironed out quickly.

"They don't have a lot of super-big problems compared to past years," said Barry Broad, a lobbyist for the Teamsters and other unions in Sacramento, the state capital.

"My sense from talking to lawmakers is they may have their disagreements with the governor but they seem to want to reach an accommodation," Broad said.

Some friction is expected over Brown's plan to shift more funds to the state's poorest school districts. The plan raises questions about how all other school districts would fare but it should not hold up a budget deal, said Senate President pro Tempore Darrell Steinberg.

"I think we're close," Steinberg said. "I'm confident we'll be able to find common ground with the governor."

RESTORING SOME SPENDING

Brown in January projected California's budget could swing to a surplus, a forecast he maintained in the revised budget plan he presented last month.

His new plan proposes general fund spending in the next fiscal year of $96.4 billion, up from this year's $95.7 billion but less than the $97.7 billion he urged in January, reflecting uncertainty over whether a recent surge in revenue will persist.

The legislature's top Democrats share Brown's goals of putting the budget in the black, building reserves and paying back loans from state funds. But they think the state can afford to spend more than Brown wants to restore some of its spending slashed in recent years, Steinberg said.

Brown's revenue outlook is "a little too conservative," Steinberg said after the Legislative Analyst's Office, the state's budget watchdog, recently said the governor's revenue expectations are too pessimistic. The office is traditionally very conservative on estimates.

Using that assessment, Senate and Assembly Democrats have produced budget plans about $2 billion larger than Brown's plan.

The Senate plan would raise spending for health care programs by about $500 million more than Brown's and would spend more to help poor students, though in a different way than the governor proposes.

The Assembly would increase funds for child care programs by $250 million and aid to poor families by $200 million. It also proposes $200 million for scholarships at state universities and more than $600 million for adult education.

Both plans would increase court funding by $100 million.

But the differences between the plans are far from large, said Senator Mark Leno, chairman of the legislature's joint budget committee. "Compared to previous years this is a dream," he said.

Brown wants a $1.1 billion reserve. The Assembly proposes a $1.3 billion reserve. The Senate urges a $1.5 billion reserve.

Assembly man Bob Blumenfield, co-chair of the joint committee, said he expects his house and the Senate can agree on a spending plan quickly to meet the legislature's June 15 deadline.

"I see no reason why we can't hit that comfortably," he said. "The scale is so different from what we're so used to and the priorities the Senate has, they're not objectionable."