California governor and lawmakers reach deal on budget surplus

SAN FRANCISCO (Reuters) - California Governor Jerry Brown and top Democrats in the legislature have agreed to a state budget deal that gives them some increased spending in exchange for accepting his more cautious revenue outlook, a lawmaker involved in budget talks said on Monday.

The state Assembly and Senate must still approve the budget deal, but the agreement means the legislature will likely meet its June 15 deadline for approving a new spending plan.

Few details were available but Brown last month proposed general fund spending of $96.4 billion, up from this year's $95.7 billion.

Ranked as the world's ninth-largest economy, California is projected to have a budget surplus for the first time in many years, in part due to recent voter-approved tax hikes.

Legislative leaders have been pushing for a deal with the Democratic governor despite different expectations about the state's revenue.

The legislature's budget conference committee is scheduled to meet Monday evening to review the agreement for the fiscal year starting July 1, said Assemblywoman Nancy Skinner, a Democrat on the committee.

"I'm very confident we'll be adopting an on-time budget," Skinner said.

She said the budget agreement is "very much reflective of the governor's framework, yet there was very good progress made on the priorities of the Assembly and Senate."

Aides to other lawmakers said the deal includes about $200 million more in spending for mental health services urged by lawmakers and about $80 million to restore dental services for the poor.

Additionally, lawmakers and Brown agreed to send more money to all school districts instead of only to the state's poorest districts as he had initially proposed.

Brown last month said he was being cautious with his outlook for the state's revenue in his revised budget plan due to uncertainty over whether a recent surge in revenue would persist.

Saying his revenue outlook was too conservative, Democrats in the Senate and Assembly countered with budget plans seeking about $2 billion more in spending than the governor proposed.

But the three plans were similar in that they would put the state budget in the black, build reserves and pay back loans from state funds.

Monday's agreement includes a $1.1 billion reserve for contingencies, an aide to a top lawmaker said.

Presenting his initial budget plan in January, Brown projected California's budget could swing to a surplus as the economy improves and due to revenue from voter-approved increases in November to the state's sales tax and income tax rates on wealthy Californians.

But he also urged lawmakers to restrain spending, an approach top lawmakers accepted to notch the budget agreement, an aide to one said.

(Reporting by Jim Christie; Editing by Lisa Shumaker)