California Governor Jerry Brown said Monday the state's economy was on the mend but that California still had a nearly $10-billion budget hole to close and insisted tax hikes were needed.
The Democrat said tax revenue this year and next would be $6.6-billion better than expected. But he stuck to the bulk of his proposals made earlier this year for hikes in sales and income taxes and more.
The most populous U.S. state and biggest municipal bond issuer cut several billion dollars in spending earlier this year. But politicians are at odds over whether extensions of tax hikes are required.
"The economy in California is looking pretty good ... not as good as it's been, but definitely on the mend. But we still have a $10-billion structural budget deficit and a wall of debt to come," Mr. Brown said as he introduced the revised plan.
Mr. Brown proposed to use the unexpected bump in income taxes to scale back his tax hikes proposal and increase school funding by $3-billion. He offered more support to enterprise zones favoured by local governments than in his earlier plan.
Mr. Brown said he still wants state voters to be given the opportunity to approve or reject his plan.
He gave nods to Republican calls for broader changes, saying the state needs a spending limit and that he would go forward with pension reform. But he declined to offer a Plan B budget plan composed only of spending cuts.
"I'm not going to give Republicans a road map to ruin," he told reporters.
Mr. Brown said he is confident he can reach a budget agreement with lawmakers by mid-June, when a spending plan is technically due.