Gov. Jerry Brown can rightly claim that California is on its most stable financial footing in more than a decade.

As he enters the third year of his current tenure, he deserves a lot of credit for more closely matching spending and revenue than either of his two predecessors who both proved too fiscally challenged for the job.

To get there, Brown has had to reduce the state prison population, eliminate redevelopment agencies, substantially trim the state workforce, squeeze programs that serve the needy, and win voter approval for a temporary hike on sales tax for all and income taxes for the wealthy. It's been a tough slog.

But the governor and state are nowhere near out of the woods. Not even close.

Gov. Jerry Brown points to a chart showing an increase in education funding during a news conference where he unveiled his proposed 2013-14 state budget at
Gov. Jerry Brown points to a chart showing an increase in education funding during a news conference where he unveiled his proposed 2013-14 state budget at the Capitol in Sacramento, Calif., Thursday, Jan. 10, 2013. Brown is proposing to spend $2.7 billion more on K-12 education for the next fiscal year. (AP Photo/Rich Pedroncelli)

As the legislative analyst points out in this week's critique of Brown's proposed budget for fiscal year 2013-14, it hinges in part on factors outside his control, including the outcome of the upcoming fights in Washington over the federal debt ceiling and spending, the pace of the economic recovery, the court reaction to the governor's attempt to take back control of state prisons, and the state cost of federal health care reform.

Nevertheless, the governor maintains that the budget "is projected to remain balanced for the foreseeable future." That depends on what one means by balanced.

The future forecast shows only tiny reserves. Forget about the rainy day account voters were promised back in 2004 in exchange for approving $15 billion in one-time borrowing. The requirement can be suspended by an executive order of the governor. Not surprisingly, there's no money in the account, and no one in Sacramento even talks about it anymore.

Then there's the enormous debt that remains unaddressed. It's the state's giant credit card balance on which not even minimum payments are being made. Specifically, the governor estimates unfunded state liabilities for employee retirement programs now total $181 billion. (In fact, if one uses realistic assumptions about future investment returns, the debt is more than that.)

To put the number in perspective, it's equal to nearly two years of total state general fund expenditures. Yet, the governor's spending plan through 2016-17 doesn't address it, thereby pushing the obligation onto future generations.

As the legislative analyst concluded, "the state faces daunting budget choices even in a much-improved fiscal environment."

Brown recognizes the problem. As he said in his budget proposal, "Despite the dramatic budgetary changes of the past two years, there remain a number of major risks and pressures that threaten the state's newfound fiscal stability, including the overhang of billions of dollars of debt accumulated in prior years."

The take-away is simple: When you can't pay down your debts, don't start buying new things. That is an important lesson that simply must be learned. The situation is stabilized, so now is time for the tough business of addressing past transgressions. No one in Sacramento should go on a spending spree.