U.S. News

California to spend big on education, healthcare in $144 billion budget

SACRAMENTO, Calif. (Reuters) - California Governor Gavin Newsom capped a busy first week in office on Thursday by proposing $144.2 billion in general fund spending for the most populous U.S. state, highlighted by increased expenditures in healthcare and education.

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Newsom’s fiscal blueprint assumes continued economic growth of at least 3 percent a year but cautions a recession could transform an existing budget surplus of more than $21 billion left by his predecessor and fellow Democrat, Jerry Brown, into a $40 billion deficit over three years.

“We’re assuming we’re going to continue the economic expansion,” Newsom said during his budget presentation in Sacramento. “I know that send shivers up some people’s spines because we are 10 years into this recovery.”

Increased revenues have allowed California to maintain budget surpluses after the state posted huge deficits following the Great Recession beginning in 2008 forced sharp cuts in education and health care.

With additional bond fund revenue and “special fund” allocations of $64.8 billion, total state spending proposed by Newsom for the upcoming fiscal year that begins in July would come to $209 billion.

The blueprint includes $13.6 billion Newsom has proposed setting aside for what he called “budget resiliency,” with those monies earmarked to pay down unfunded retirement liabilities, to build on California’s rainy-day cash reserve and to retire some of the state’s debt.

Newsom said such measures were intended to ensure that the state remains on sound fiscal footing to “make the California dream available to all.”

The general fund would include a record $80.7 billion in spending for public school education from kindergarten through 12th grade, which Newsom said would rank as the largest such expenditure in state history. That tally amounts to an increase of $5,000 per student compared with spending levels seven years ago, the budget said.

Budget highlights include $750 million to expand full-day kindergarten, $402 million for community colleges, including a second year of tuition-free education to full-time students, and $125 million to help phase in universal preschool for all income-eligible 4-year-old children over the next three years.

The budget also calls for an overall increase in health and human services spending of 8 percent over the current fiscal year, and $1 billion to double the state’s earned income tax credit for low-income families.

Subsidized premiums would be increased under Covered California, the state’s version of Obamacare, while expanding Medi-Cal, the state’s medical plan for the poor. The proposed Medi-Cal expansion would extend coverage to roughly 138,000 young adult immigrants, from age 19 through 25, who are in the country illegally.

Reporting by Sharon Bernstein in Sacramento, California; writing by Steve Gorman; Editing by Bill Tarrant and Lisa Shumaker