SACRAMENTO  (AP) — Gov. Jerry Brown is preparing a spending plan as California faces its most optimistic financial outlook in years, yet the Democratic governor's intention to stick with a frugal fiscal agenda could put him on a collision course with Democratic lawmakers who seek to restore state services lost during the recession.

After years of deep spending cuts to education, health and social programs, Brown and California lawmakers will be debating this year how to spend the state's money rather than battling over what to cut.

Brown will release his budget proposal Thursday for the 2013-14 fiscal year, which begins July 1. He is expected to boost education funding by at least $2 billion, as he promised during his campaign for Proposition 30. The November initiative's sales and income tax increases are expected to generate $6 billion a year.

But he also said this week that "2013 is the year of fiscal discipline and living within our means, and I'm going to make sure that happens."

The state's nonpartisan legislative analyst has pegged the 2013-14 budget deficit at $1.9 billion, a vast turnaround from the double-digit deficits of the last several years. The Legislature is required by law to approve a balanced budget by June 15, which will still force lawmakers to cut some areas of spending to close the deficit.

Brown is likely to face some of his biggest challenges this year from fellow Democrats, who now hold two-thirds majorities in the Assembly and Senate and are eager to restore spending to a host of programs after years of cuts. Brown is more fiscally conservative than many Democratic lawmakers, favoring restoring school funding and building a robust rainy day fund over expanding services.

"People want to have more child care, they want to have more people locked up, they want to have more rehab, more, more, more. More judges, more courtrooms. We have to live within reasonable limits," Brown said in a Capitol news conference this week.

The legislative analyst's office has projected that the state will spend nearly $56 billion of a $94 billion general fund budget on education in the 2013-14 fiscal year, about $2 billion more than last year. That money comes partly through a voter-approved education funding guarantee that requires the state to spend more on schools when tax revenue rises.

"You can take this to the bank: We're not going to spend money that we can't afford to spend," Brown said. "We have to do more with less; that's just the way life is."

Like Brown, the analyst's office has also cautioned that the state's rosy forecast is dependent upon maintaining the strict spending limits of the past few years.

Still, the added revenue from the voter-approved tax increases allow the governor and lawmakers to begin to tinker with school funding formulas, which Brown is expected to address in his budget.

His administration advocates scrapping a series of dedicated funds aimed at addressing specific issues. Instead, he favors freeing school districts to spend that money in areas they deem most important.

Brown's proposed school formula also is intended to target spending to the neediest students, which is likely to draw opposition from parents and teachers in more prosperous areas.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, said he is open to Brown's school funding proposal. He said the goal is laudable, but there will be a lot of details to work out.

"How do you make sure, without micromanaging, that the kids that need help the most get the help that they need?" Steinberg said. "How do you make sure that the proven approaches to improving student achievement and helping kids graduate are funded?"

The legislative analyst projected last fall that the state's overall general fund spending would be about $94 billion, nearly 8 percent more than in 2012. California's general fund spending hit a high of $103 billion during the 2007-08 budget, the year the recession began, falling to a low of $87 billion in the 2011-12 fiscal year.

Still, some expenses will grow in the short term, although the analyst said they are likely to be outpaced by higher revenue in the long term. For example, more Californians are expected to sign up for Medi-Cal, the state's health insurance program for the poor, as states prepare to implement the federal health care reform law.

Copyright 2013 The A