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California Budget Surges To Record High With Education Increases

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SACRAMENTO, Calif. (AP) – A robust economic recovery and surging revenue propelled by voter-approved tax increases have sent California’s general fund spending to a record high, marking a dramatic turn-around from the state’s days as the nation’s poster child of fiscal dysfunction.

Yet Gov. Jerry Brown, in releasing his budget proposal Thursday, pledged to take a somber approach in spending the windfall. He said California must begin paying down what he has called its massive “wall of debt,” a stew of unfunded liabilities, bond debt and borrowing that is estimated at $355 billion.

His somewhat cautious approach will run afoul of some of his fellow Democrats in the Legislature, many of whom already are clamoring for higher spending on pet programs.

“When you’re at this level of long-term liability, it isn’t time to just embark on a raft of new initiatives,” Brown said in announcing details of his budget during a Capitol news conference.

The news conference was moved up a day after copies of his budget proposal were leaked to media outlets late Wednesday. He was scheduled to promote his budget plan later Thursday in San Diego and Los Angeles.

The governor’s budget proposal for the 2014-15 fiscal year dedicates $11 billion to paying down debts and liabilities, including $6 billion in payments that had been deferred to schools and nearly $4 billion to pay down the so-called economic recovery bonds left over from the administration of Gov. Arnold Schwarzenegger.

It does not address long-term liabilities in the state’s teacher retirement fund, which will require billions of dollars extra a year to make solvent. Instead, Brown said he wants to create a plan for long-term solvency this year. The teachers’ pension fund is estimated to be $80 billion in the red.

The record $106.8 billion general fund exceeds the spending level of just before the recession by more than $3 billion and is a nearly 9 percent increase over spending in the current fiscal year.

The governor also sets aside $1.6 billion for a rainy day fund to protect against future downturns, saying “wisdom and prudence should be the order of the day.”

California’s financial turnaround is due in large part to temporary increases in the state sales tax and income taxes for the wealthy that were approved by voters in 2012. Combined, those tax increases are expected to generate about $6 billion a year.

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