Gov. Jerry Brown

Gov. Jerry Brown holds a poster showing the history of California budget deficits while announcing his revised 2014-15 spending proposal on Tuesday. (Gina Ferazzi / Los Angeles Times / May 13, 2014)

California's tax revenues will rebound more strongly than Gov. Jerry Brown's spending plan predicts, according to the Legislature's top budget advisor, a finding Democratic lawmakers are expected to seize on to challenge the governor's continuing call for fiscal restraint.

The increased revenue, spurred in part by a healthier stock market, will be about $2.5 billion more through the next budget year than the governor's fianance advisors projected, nonpartisan Legislative Analyst Mac Taylor said in a report Friday.

Brown projected a $2.4-billion increase in revenue through the next budget year.

In his report, Taylor cautioned that most of the extra money from increased revenue would be directed to schools under the state's education funding law. That would leave "no more than several hundred million dollars" to pay for other programs, pay down debt or to be set aside in an emergency fund.

The dueling fiscal outlooks will be grist for budget negotiations between the governor and Democratic lawmakers over the next month. The Legislature is required to pass a budget by June 15.

Democratic legislators already were critical of Brown's revised spending plan, released Tuesday, saying it ignored the pent-up need to restore more of the spending on social welfare programs that was cut during the recession.

Senate leader Darrell Steinberg (D-Sacramento) also questioned Brown's priorities, criticizing the governor's devotion to building a high-speed rail network over programs such as universal preschool.

On Tuesday, Brown said the revenue forecast from his budget advisors was the most reliable, and curtly said, "That's the one I'm living with."

Last year, the Legislative Analyst said California would receive $3.2 billion more in revenue than Brown expected. Democratic lawmakers used the report to push for more restored spending on social services and healthcare.

In the end, Brown persuaded the Legislature to use his administration’s lower estimates. Since then, however, revenue has outpaced the governor’s original numbers by billions of dollars.

Assembly Budget Committee Chairwoman Nancy Skinner (D-Berkeley) said in a recent interview that lawmakers would be more resistant to Brown’s revenue
calculations this year.

"He tried that once," she said. "It will be harder to justify."

There’s also a reluctance to accept Brown’s estimates on healthcare costs. The governor said Medi-Cal would cost the state hundreds of millions of dollars more over the next year because so many new patients had enrolled.

Steinberg said legislative staff would review the numbers to see if more of the tab should be paid by the federal government, freeing up state funds for other services.

“We’re going to kick the tires, hard,” he said.

The higher revenue projects are expected to generate additional spending proposals from Democrats, including Assembly Speaker Toni G. Atkins (D-San Diego).

“The LAO forecast is one more piece of the puzzle as we work to craft a budget that strengthens fiscal stability and expands opportunity by making smart investments,” Atkins said in a statement. “The Assembly budget subcommittees will hold their final hearings next week and the LAO forecast will certainly be considered in those hearings.”

But Republicans were calling for restraint in new spending.

"The report is another reminder that while the economy is starting a road to recovery, there is much uncertainty, and the Legislature should show caution in our revenue estimates and spending priorities,” said Amanda Fulkerson, a spokeswoman for the Assembly Republican Caucus.