SACRAMENTO -- Gov. Jerry Brown on Thursday proposed a $106.8 billion general-fund budget that seeks to pay off a big chunk of the state's long-term debt while making modest investments in public schools, health care and the troubled bullet train.
While the state's finances have improved significantly since the days of embarrassing, multibillion-dollar deficits, Brown said at a morning news conference that he believes the newfound fiscal stability could be short-lived and that restrained spending of scarce state resources is crucial.
The governor calls for spending $11 billion -- or more than 10 percent of the total budget -- to pay down $24.9 billion in remaining debts the state racked up during the previous decade. More than half of that money would be used to repay public schools, whose state aid payments were slashed by as much as 20 percent in recent years to balance the budget.
He also wants to put $1.6 billion in a "rainy day fund" that will help the state get through future recessions.
Brown noted at the news conference that when you include unfunded term pension obligations in the massive "wall of debt," the total comes to about $355 billion.
"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 at a Capitol news conference.
"Lots of programs may seem attractive, but when you have this level of long-term liability, it isn't time to just embark on a whole raft of new initiatives," he said, "This is a strong budget, a balanced budget , but it's not free from liability."
Indeed, the budget 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.
Wednesday's early-evening leaks of the budget to the media forced the Brown administration to move up a news conference scheduled for Friday morning.
Brown was scheduled to promote his budget plan later Thursday in San Diego and Los Angeles to get maximum media exposure in an election year.
The governor also wants to commit $670 million in new money to the expansion of Medi-Cal benefits for mental health, substance abuse, adult dental and specialized nutrition coverage.
The state's $68 billion high-speed rail project, which has been snarled by recent court rulings that block the state's use of bond proceeds to fund the project, will also get a boost next fiscal year that could prove to be a lifeline, according to the governor's spending blueprint.
Brown wants the bullet train to get $250 million generated by the state's landmark cap-and-trade law -- and the controversial funding would continue for years. Another $600 million in fees this fiscal year would fund projects that reduce transportation emissions, increase energy efficiency and restore some state forests.
The independent Legislative Analyst's Office is projecting a $3.2 billion surplus for the next fiscal year and continued budget surpluses for the next several years.
A daunting $27 billion deficit greeted Brown when he returned to the governor's office in January 2011 -- nearly three decades after he left the office. So he laid out an austere path riddled with billions of dollars in education and social service cuts that hit his Democratic constituencies hard.
The governor's cautionary approach is caused in part by the source of the state's revenue. His budget assumes about $4 billion in capital gains tax revenue, driven by the soaring stock market. But it also acknowledges that such income is highly volatile and will probably be short-lived.
Brown's tax increases under Proposition 30 -- the tax measure voters approved in November 2012 -- will begin expiring later this decade: The state sales tax hike will last four years and the higher income taxes on those making more than $250,000 a year will last seven years.
Despite Brown's call for budgetary prudence, the 8.5 percent increase in general fund spending over the current fiscal year includes additional money for nearly every area of state government. K-12 school spending will increase by 11.4 percent after years of devastating cuts.
The University of California, California State University and community college systems will receive a total of $1.1 billion. About half the money would go to community colleges, which are expected to grow rapidly in the next few years.
Since the legislative session opened on Monday, it's been obvious that there's been little appetite among legislative leaders for substantially increasing spending -- especially since it's an election year in which the Democrats hope to hold on to their two-thirds majorities in the Senate and Assembly.
The budget also proposes $815 million for critical deferred maintenance in state parks, highways, schools, courts and other state facilities, and $619 million to expand water storage capacity, improve drinking water supplies and increase flood protection.
Although he has not formally announced his re-election bid, Brown himself has been aggressively raising money and is widely expected to seek a final four-year term.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker John Perez, D-Los Angeles, both said in recent days that California's "fiscal stability" is their top priority this year.
"Right now, it's important not to overreach," Steinberg said. "We know there was real damage done to people, especially vulnerable people, these last few years, but it's important to exercise some restraint."
Steinberg said he agrees with Brown's emphasis on paying down old debts and bolstering a "rainy-day fund" that will help California survive future recessions.
Still, he said he believes that other funds should be spent on statewide early kindergarten programs (not currently in Brown's budget), rehabilitation for prisoners and services for people with developmental disabilities. Perez has called for some surplus funds to be spent on job training and college scholarships for the middle class.
Steinberg cautioned, however, that this week is just the start of budget negotiations that will stretch on for months, so it's too soon to know what programs will see their funding boosted.
Senate Republican Leader Bob Huff said the Democrats' calls for fiscal restraint are something he can get behind.
"This notion of restraint is a truly Republican message," Huff said. "Still, I think there is pent-up desire among some Democrats to spend, and those efforts could easily become a runaway train."
But even many ultraliberals in the Legislature such as Sen. Mark Leno, D-San Francisco, concede that there likely will not be enough surplus money to substantially increase funding of health and social programs.
Still, he said, "with such great need out there, some will argue that restoring the social safety net is more important than paying down the wall of debt as quickly as the governor says we should."
One of the Republicans who will challenge Brown this year if he decides to seek re-election said Brown's budget still proposes too much spending, saves too little in reserves and does not do enough to create tax incentives that will keep businesses in California.
"We're seeing people literally get a U-Haul and leave California, and he's spending money like it's 1999," said Assemblyman Tim Donnelly, who lives in the San Bernardino Mountain community of Twin Peaks.
The Associated Press contributed to this report. Contact Jessica Calefati at 916-441-2101. Follow her at Twitter.com/calefati.