By Michael B. Marois – Mar 10, 2011 9:01 PM PT

Governor Jerry Brown’s proposed $12.5 billion in budget cuts won’t prevent California’s spending from increasing 31 percent during the next five years, according to figures from his budget office.

Expenditures would rise to $111 billion by 2015 from $84.6 billion in the fiscal year that begins July 1, under Brown’s plan. A third of the increase is required by the constitution to bolster education. Much of the rest is for projected growth in health care and welfare, and to make up for lost stimulus funds, Brown’s office said.

Republican opposition threatens to derail Brown’s plan to repair the financial strains that have left California with the biggest deficit among the U.S. states and the lowest credit rating. He wants to offset even deeper cuts to schools and the poor by retaining $9.3 billion a year in higher taxes and fees that are otherwise due to expire.

“While we must bridge this year’s budget gap, we must also rein-in future spending to fix the state’s chronic budget crisis,” said Senate Republican Leader Bob Dutton.

Some in the Republican minority are seeking a ‘‘hard cap,” or ceiling, on spending as part of the price for the votes Brown needs to push the plan through the Legislature.

The state’s Legislative Analyst Office says Brown’s budget erases a looming $25.4 billion deficit and eliminates expected shortfalls for at least three more years.
‘Long-Term Fix’

“There are ongoing reductions and long-term solutions that not only close the budget gap in the coming year, but projected gaps in the years to come,” said H.D. Palmer, a spokesman for the Finance Department, in a telephone interview. “This budget is a long-term fix.”

Even with an austerity budget that Brown called “painful,” spending will increase $26 billion by 2015, according to state projections. At the same time, he’s asking voters to pay more than $46 billion of higher taxes and fees.

Brown’s office says most of the higher spending during the next five years is due to rising welfare rolls, costs mandated under the new federal health-care law, constitutionally required spending on schools and the loss of federal stimulus funds.

Almost $10 billion more is earmarked for schools over the five years, according to figures from Brown’s Finance Department. Under a constitutional amendment approved by voters in 1988, California must provide guaranteed funding that grows each year with the economy and the number of students. While lawmakers can suspend that requirement, as they did in the current fiscal year, they must make up the difference later.
Debt Service

Principal and interest payments on state-issued municipal bonds are expected to rise 40 percent to a record $8 billion in 2015, from $5.7 billion in the coming fiscal year. Brown and state Treasurer Bill Lockyer imposed a moratorium on new bonds in the first half of this calendar year to cut debt costs.

California also must pay an additional $2.4 billion during the next five years to implement President Barack Obama’s federal health-care overhaul to expand coverage to people previously not insured. At the same time, the state will stop receiving $6 billion of federal health and human services subsidies that were part of the economic stimulus.

State payments to its two biggest public-employee pension funds are projected to rise by $944 million in the same period to a combined $4.25 billion.

Brown wants voters to retain a 0.25 percentage-point increase in personal income-tax rates; a 1 percentage-point boost in the retail-sales tax rate, to 8.25 percent; an increase in the rate for auto-registration fees of 0.5 percentage point, to 1.15 percent of a vehicle’s value; and a reduction of the state’s child tax credit to $99 from $309.
Schwarzenegger Taxes

To read entire story, click here.