Brown, lawmakers reach $122 billion budget deal

SACRAMENTO — Gov. Jerry Brown and legislative leaders reached a budget deal Thursday that gives Democratic lawmakers a long-sought repeal of a controversial limit on welfare benefits and increases the number of subsidized child care slots, while maintaining the governor’s call for putting $2 billion into the state’s rainy-day fund, administration sources said.

The deal for the 2016-17 fiscal year puts aside $400 million for affordable housing sought by Democrats once lawmakers agree to language Brown wants to ease building requirements. Brown wants to streamline the review process for housing proposals that meet a city’s zoning requirements, but the legislation has been opposed by groups and unions that say it sidesteps the state’s environmental laws.

Administration sources said cementing the language will be a top priority once the budget is “put to bed.”

The state Legislature still has to sign off on the deal by June 15, an easier feat than in years past given that Democrats control both houses. Then the deal must be signed by Brown.

The $122 billion budget deal includes most of what Brown sought in his May revised budget.

Over the next two years, Brown will receive $1.3 billion of the $1.5 billion he included in his budget proposal for building two new state office buildings in downtown Sacramento and remodeling a portion of the state Capitol.

Brown had proposed spending $250 million from the general fund for replacing or renovating county jails. Under the budget deal, the state will use $270 million in lease revenue bonds for jail infrastructure. Using the bond money allowed Brown to address lawmakers’ top priorities without increasing the size of the budget.

Community groups like Fathers and Families of San Joaquin criticized the jail plan, saying the interest on the bonds will impact future budgets and that money would be better served on programs that offer alternatives to incarceration.

Among the top priorities for Democrats is repealing a state law that does not allow for increased welfare payments if a child is born after a family has already been receiving benefits. Called the “maximum family grant,” the change is expected to cost $110 million in the 2016-17 fiscal year and $240 million annually in upcoming years, a budget source said.

Critics of the cap on welfare payments say it endangers the health of infants born into poverty and intentionally delves into the reproductive decisions of poor women.

The budget deal also includes $100 million for 8,877 additional full-day preschool lots to be phased in over the next four years.

Melody Gutierrez is a San Francisco Chronicle staff writer. Email: mgutierrez@sfchronicle.com. Twitter: MelodyGutierrez