Transcript: Press conference Q&A with CA Gov. Jerry Brown on the May revision of the 2013-2014 budget

Partial transcript of the press conference Q&A with Gov. Jerry Brown on the May revision of the FY 2013-14 California state budget. The briefing was held on May 14, 2013:

Question:
[On immigration reform]…I know that just sent a letter to Sen. Feinstein…

Gov. Jerry Brown:
Well, first of all, we hope the Congress does it. It’s very hopeful that some key Republicans as well as Democrats are pushing immigration reform. That is really vital to California.

And in this budget, where we direct funding to those school districts based on how many children are not English speakers at the beginning – their family speaks another language – that’s very important for immigration and to make use of it in a beneficial way. And finally, our Medi-Cal expansion does the same thing.

Question:
…The chart that you have here about your local funding. It seems to make the point that the concentration grants are just 4 cents of every dollar. In which case, someone would say, well, so why not just push it back into the other part of it. Because that’s what you’re hearing upstairs – that concentration grants are a problem.

Gov. Jerry Brown:
…If you concentrate it on those districts that are very impacted by non-English speaking, by foster care kids, and by poverty, you get more bang for your buck. And that’s the point of the concentration grant. If you spread it over the whole 16 million kids, they’ll hardly notice it. If you concentrate it as my formula does, you can make some dramatic improvements in areas that really were neglected.

Look, there’ve been governors before that drew lines in the sand on issue…to the legislature, I don’t do that. We are leaving this formula. I think it’s just. It’s crucial for the well-being of our future. I’m going to do everything I can to get it – my legislative colleagues and we’ll have a vigorous discussion.

I’m pretty confident that we’ve got a powerful principle. So there’s the political power of all those who are affected, and there’s the moral power of attributing unequals in away that takes account of inequality.

Question:
…This surge of revenues that we’ve got really nets out to around $3 billion and that you would allocate virtually all of it – not quite all – but on a one-time basis to schools. Is that an accurate summary of what you…?

Gov. Jerry Brown:
No…Over a three-year period, the actual net over revenues is about $800 million. If you figure out general fund in three years, it’s $300 billion. $800 million is about…0.28. Not a lot of money here folks.

We have climbed out of a hole with a Proposition 30 tax. That’s good. But this is not the time to break out the champagne.

And by the way, there is – but you’re the one who says it – there’s a trillion debt out there. Now, assuming, you’re 80% to 90% wrong, that’s still $100 to $200 million out there that we got to take account of. So it’s a call for prudence not exuberance.

Question:
…The advocates of health and welfare programs that have been cut in the last few years are saying it’s time to restore that. What’s your reaction to that?

Gov. Jerry Brown:
No.

Question:
No?

Gov. Jerry Brown:
No. The money’s not there. We have obligations under Prop 98 and we have incredible responsibilities under the Affordable Care Act and the known unknowns are considerable. So anybody who thinks there’s spare change around has not read the budget and Ana [Matosantos] can explain that in her own inimitable way.

Question:
…The $72 billion more for county probation departments. Is that an acknowledgement that the realignment needs some fixing?

Gov. Jerry Brown:
No. What…is under the blueprint for our prisons. It turned out the cost of housing prisoners was lower than the formula that was the basis of our county support. And so we increase the amount of money because we think that’s a fair representation of the cost of housing inmates that are now being handled locally.

If you’re asking me if realignment, you know, like a big surgery, no. Like everything else around here and in life, we learn from experience and we adjust accordingly and we do have an adjustment in here for those who are being sent to prison – rather, jails for longer terms, and we have a fix for that.

Question:
…Anymore money for the judicial branch. They’ve been complaining for sometime that they’ve had to close down courtrooms, limit access to justice. Could you comment on that?

Gov. Jerry Brown:
Yeah. The judiciary is getting the same amount of money they had the year before. The speaker’s spoken about giving more money and I’m sure there’ll be a lot of give and take as we go through the process.

Question:
You’re opening the possibility that…?

Gov. Jerry Brown:
Oh no. What we’re saying is they are getting level funding so obviously their costs are going up and they’ve got to figure out ways to control it. It’s not that easy.

All these institutions – courts, universities, hospitals – [have] huge costs and they all – everybody has to get used to managing it. Because we’ve been used to this over-commitment at the federal level, at the state level, and we’re trying to now have honest budgeting and careful budgeting. And so that’s why we’ve held them level and, in fact, under Proposition 98 this year we have to make 103% of the funding that’s available this year for schools. Then next year, there’ll be a little more funding. But this is a three-year exercise and we’ve got to be careful.

There’s a reason why this budget was always in deficit: Because there’s a lot of needs out there and there’s very articulate advocates. And I’m trying to find the right balance between spending and holding the line.

Question:
…Counties are already struggling with the prison realignment.

Gov. Jerry Brown:
Right.

Question:
Now you’re proposing like $1.5 billion in the health field. Can you elaborate a little bit on why that’s a good idea?

Gov. Jerry Brown:
Where’s the $1.5?

Question:
Well, there’s a $1.5 billion number in the budget over time.

Gov. Jerry Brown:
…You’ve got to look at these things, you know, with a careful lens. Ana will explain that. All we’re saying in health care is if counties are taking care of indigent and they become eligible for Medi-Cal expansion, we don’t want to pay twice because we are going to pay under the Medi-Cal system. So that’s our point.

By the way, Medi-Cal has two components – the expansion does. One, only 6% of the eligible are signed up. Under certain rules of the Affordable Care Act, that’ll probably go up to 80%. That 80% will be paid half by the state. When we go above the current level of income eligibility, then we get 100% for the next couple of years. So there are going to be costs imposed on the state budget. Those costs represent burdens taken away from the counties. But it’s not exactly clear how much and that’s why we have a formula and we’re going to work through it over the next couple of years.

Question:
…Are the counties on board with this idea that you would take the money slowly over time…?

Gov. Jerry Brown:
Well, I don’t think the counties would argue that they’re entitled to double payment. So let’s suppose family X is being supported by the county hospital. All of a sudden, they’re now eligible for Medi-Cal. Why should they get a state payment for what they’re not doing?

Now, the question is how much, and that’s something that we don’t know today, but we’ll know over time. But we do know that we’re adding 2 to 3 million new people, we’re going to take some county responsibility and when we do, we feel it’s only fair that the counties not be paid for what they’re not doing.

Question:
…Are you making any changes to more quickly pay off the wall of debt? Or is it the same schedule as in January?

Gov. Jerry Brown:
I think it’s the same schedule, but check with Ana on this.

Question:
…It looks like you’re changing up the sales tax… on enterprise zones? It looks like you’re changing the sales tax to a statewide credit but it’s unclear whether you’re preserving the overall enterprise zone?

Gov. Jerry Brown:
We have a proposal to make it more efficient. The enterprise zone works in funny ways. I know because we used it in Oakland and then we got all the exceptions. So I know it’s too loose. Also, sometimes people get rewarded after they’ve made the hiring – maybe a year or two later – so that’s not an incentive.

Secondly, as a company that went from Brisbane to somewhere in the Central Valley why should you get a tax payment for leaving – a tax credit – for leaving one part of California to go to another. So this is an effort to use this money that will really create job incentives.

Question:
…Common Core incentives will help alleviate some of the concerns over your school funding proposal?

Gov. Jerry Brown:
Well, if it does, that’s good. But Common Core is a challenging intellectual exercise that our 330,000 teachers are going to have to go through. It’s going to take training. It’s going to take time. And that money is wise to have around…

By the way, I think that’s good. If I were a school district and now I found out that I’ve got extra money put to Common Core implementation, which I know is going to cost money, that’ll be good. But I think this program – 80 cents based grant, 16 cents supplemental grants, 4 cents for the few people in the concentrated districts – I think it’s fair. It’s just, and I think it has great moral force.

Question:
[Inaudible]

Gov. Jerry Brown:
I think the idea in a Democratic legislature of helping the less advantaged is very persuasive.

Maybe if we were talking about another group of people, maybe the Tea Party or maybe some other ideological folk, they might look more skeptically.

But I think most Democrats in their heart of hearts want to help those who life has not given them the same opportunities that they have to the majority.

Question:
…The Education Department, they tried to do some modeling of a local control fund formula, their analysis of it seems to suggest that about half the districts would actually get less under the LCF…?

Gov. Jerry Brown:
No…That is not true. But ask Ana for those details.

Question:
But can you talk about the concerns that some districts that they’re going to come out [less]?

Gov. Jerry Brown:
There’s some – I would like Ana to talk about it…Some districts have huge amounts of money. There are very few – $34,000 per child. Very unusual. So they’re already doing pretty well. This is giving more. Everybody’s going to do better. But some are going to do, you know, considerably better.

By the way, if you ask somebody in Beverly Hills or Palo Alto or Piedmont, “Would you like to move to Compton? Would you like to move to Watts?” And if they say, “Yeah, let’s do it because I want to get the extra money”…I don’t think so.

And anybody who walks through this state as I have for the last many years, there are differences. And this formula recognizes the differences in a way that’s not only just but is crucial to our future well-being. Because remember we have 3 million kids in homes that are low-income and we have 2 million kids where they speak a language other than English. And we have all these older well-speaking folk getting old. You know, we’ve got a lot of these old white guys. All right? Now, they’re being replaced with a whole new group of people and these people – we have 10 million immigrants in the state? 12 million? We’ve got to invest there. That is key to our continued well-being.

If you look over there in Europe, one of the reasons they’re stagnating is just pure demographics, and we’re benefitted by the fact that people chose to come here to California. Now, we’ve got to get them legalized and we’ve got to make sure our school system skills them. When the Russian emigrates went to Israel, they had a whole program to get them to learn Hebrew and get them assimilated. That’s a good thing. Well, we’ve got to do the same thing.

Question:
But what about the school districts that don’t have quite the 50% of the disadvantaged students who might have 40%, 45% who are going to miss out on these extra funds? San Jose has one of the…

Gov. Jerry Brown:
That’s the concentration. Well, this is a very small part of it.

Question:
But what about those districts? Are they going to be able to, you know, educate these disadvantaged kids at the same level as the other districts?

Gov. Jerry Brown:
I think they’re going to get supplemental grants. But this is one of those formulas that I know a certain amount – I’d rather turn to my expert here who can respond to it. I know that the Mercury said that there’s something about the property tax. Let her explain because I asked her the same questions myself.

Question:
…There’s a fairly healthy debate about hydraulic fracturing – franking – of oil. And some people say it could be a big boon to the economy, it could be boon to the tax dollars to the state. There’s an intense debate about what to do. Where do you stand?

Gov. Jerry Brown:
I stand on intelligent analysis of the issues. We have a very good division of oil and gas. They’re reviewing this. The legislature has several bills. This is not about just saying ideologically yay or nay. It’s about looking at what could be a fabulous opportunity but we want to make sure about the aquifers, some people were talking about earthquakes – a lot of different things – what are the chemicals, what do we know.

In addition, climate change is real. Now, the reason why I have some sympathy for oil drilling in California is because 98% of the people use the oil because it’s important. And until we get them electric cars or walking or riding their bikes, we need oil. But we’ve got to get off it. Climate change is very real. We just passed 400 parts per million…It’s serious stuff.

I have to balance my strong commitment to deal with climate change, renewal energy with what could be a fabulous economic opportunity.

And remember about oil drilling. Oil drilling in Long Beach…[back when] my father was governor poured I don’t know how many billions into higher education. So this could be good but there are issues and I want to look at them. I don’t deal with these things “Oh, the sky’s falling in” or, you know, “Utopia’s arrived.” We’ve got to look at it. These are hard questions…

Question:
Sounds like you disagree with the moratorium then?

Gov. Jerry Brown:
…Let’s see the evidence. First of all, I don’t think they’re ready to go yet. There’s a lot of technical engineering issues so I think we have time to do it right.

Question:
[Inaudible]

Gov. Jerry Brown:
Look, we’ve just got a nice tax. 55% of the people voted for it, and I think we ought to take a deep breath and show them how we’re spending it in a wise way before we start looking around to fill up more money.

But when those people are talking about an oil tax, good luck. The last time they had one, the oil companies spent almost $50 million fighting it. Ideas in the abstract may seem appealing. But when you put them on the ground, you find out they don’t work quite so well.

Question:
…[Prison reforms] Implementing the federal order and if not would that impact the budget in any significant way?

Gov. Jerry Brown:
Well, the federal order wants more people out so we’ll have to just see. This has been going on a long time, and we have to make our budget on what we know. Now, what I know is that since the Supreme Court made their ruling – by the way, they made their ruling on a record that rejected evidence that we tried to put in when I was Attorney General that showed improvement in our prisons.

Since that time, there’s been even more improvement. I mean, real big money and not money just thrown down a rat hole but money for state-of-the-art health facilities at San Quentin, at Stockton; hirings of psychiatrists, psychologists; system of record-keeping. The prisons have really invested a lot of money here.

The federal test of cruel and unusual punishment is whether or not the state is deliberately indifferent. We are not deliberately indifferent. So I think it’s only responsible to appeal this thing until the court tells me no. And if they tell me no, then fine, we’re going to follow it.

Question:
So just to clarify, this document does not assume the implementation of the court order? It assumes that your appeal is successful?

Gov. Jerry Brown:
Well, that’s a good question. If the court order – we have a plan and, you know, if the legislature votes for it then we’ll have to find the money. It costs money. But relative to the total budget, I’m sure we can find funds if that’s where the legislature wants to go.

Question:
But why abandon credit hour caps?

Gov. Jerry Brown:
Credit hour caps? Is that because the universities are going for it? We have to take more time. The idea is – look, here’s the idea. We want to get more people through than we currently do. We want kids not to take 7 years and 6 years but 4 years. If they get through 4 years instead of 7, there’s more space and we can add more students – increase capacity – and the kids don’t borrow as much money and they get into the workforce sooner. That’s the point.

Now, when you start putting little caps here and there or then people get all nervous. Like everything else, we take it in steps – two steps forward, one step backward.

Question:
[Inaudible] …unions on their contracts right?

Gov. Jerry Brown:
We haven’t even started yet, I think.

Question:
…Does this budget account for any kind of raise?

Gov. Jerry Brown:
Well, you know, that’s one of the easy things about bargaining. If you put a number in the budget, then they know where they’re going. [Laughter]

Question:
So what’d you do?

Gov. Jerry Brown:
Well, it’s always been a dilemma. Always a dilemma but I don’t have a good answer to it. But suffice it to say, we’re aiming low. [Laughter]

Question:
If at all, right?

Gov. Jerry Brown:
Yeah.

Question:
…You repeatedly talked about fiscal discipline. How concerned are you that your colleagues – your Democratic colleagues in the legislature – aren’t going to hear that message?

Gov. Jerry Brown:
Well, I think they do. They’ve been talking about – John Perez talked about the need for a reserve. Darrell Steinberg has been [muffled audio].

Question:
But that’s just the leaders though. There’s also talk of other members wanting to see more spending.

Gov. Jerry Brown:
Everybody wants to see more spending. That’s what this place is. It’s a big spending machine. You need something? Come here and see if you can get it. [Laughter]

Well, I’m the backstop at the end and I’m going to keep this budget balanced as long as I’m around here – if I can. Now, there’s too damn many uncertainties out there in the world, that’s why I don’t want to keep more money in reserve than those who have immediate needs.

Question:
But with a simple majority, though, there’s a lot more easier –

Gov. Jerry Brown:
You mean a super majority.

Question:
But with a super majority vote though, I mean, it’s much easier for certain elements to push for spending increase.

Gov. Jerry Brown:
They can push but I can push back. At the end of the day, they need the governor’s signature…Before, I said, “Can you make the cuts?” “Can you vote a tax?” Today, they’re saying, “Can you sign the bill?” Big difference. It’s a big difference today than we were two years ago.

Question:
…On California’s economy, we are seeing this bump in personal income taxes and the numbers seem to be going well. Housing’s up. I’m wondering – do you see us in a bubble or is this a short limited – just in terms of California’s economy? How healthy are we?

Gov. Jerry Brown:
I’ll answer that by referring to an article in the New York Times about two weeks ago of a conference of macroeconomists – the guys who think about the big picture. And the conclusion was that they’re not sure what fiscal stability is and they’re not sure what the proper remedy is and they’re not quite sure where we are…For the moment, austerians are a little more in the driver’s seat…

But remember, whatever extra money’s out there is probably capital gains. So you’re betting on the stock market and in years’ past we’ve had governors that did that and they bet that more was coming in than actually did.

So we’ve got a pretty good record here of boom and bust and my inclination is to be more prudent than we have been in the past.

Question:
…A lot of people have heard about the surge in revenues, can you explain what changes have happened in the federal level that have dampened that?

Gov. Jerry Brown:
Two things. One, the sequester. And more importantly, the 2% bump in the payroll tax that hits workers right in their pockets. And that definitely seems to be the major force.

Then of course we have Europe that’s still floundering. And we have China slowing down. And all those global players affect the economy in California.

That’s why consensus forecast is down from where it was in January, and we have to take that seriously. Cash is what you have now. It’s quite possible people in December pre-paid because they expect the federal taxes to go up even more. So whatever they were doing, so that’s why we’ve got to be careful.

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3 Comments on “Transcript: Press conference Q&A with CA Gov. Jerry Brown on the May revision of the 2013-2014 budget

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