Highlights of plan to close California budget deficit
The California Legislature adopted a package of bills Thursday to fill California’s $42 billion budget deficit through June 2010. It calls for a midyear fix to immediately reduce state spending and raise taxes.
The revenue provisions of the final plan raise taxes by $1.6 billion less than in the plan originally debated by the Legislature because a 12 cent-per-gallon gas tax was deleted. That amount will be made up through line-item vetoes agreed to by the governor and money California will receive from the federal stimulus bill.
The plan would raise up to $12.8 billion through June 2010 by imposing a variety of temporary taxes. The higher taxes would be in effect for two years. The taxes would remain longer ” through the 2013-14 fiscal year ” if voters approve a state spending cap during a special election in May.
Here are the specific taxes:
” Increases the state sales tax by 1 cent on the dollar, generating $5.8 billion through the next fiscal year.
” Raises the fee for licensing vehicles to 1.15 percent of market value, up from the current .65 percent. The move is projected to generate $1.5 billion. A portion of the fee will be dedicated to local law enforcement.
” Raises the state personal income tax rate by 0.25 percent, generating $3.7 billion in the next fiscal year. If the state receives more than expected from the federal government, the increase in the rate would be reduced to 0.125 percent.
” Reduces the amount taxpayers can claim on a dependent care credit to the federal level of $100 instead of $300, adding $1.4 billion.
Reduces state general fund spending by $15.1 billion through the end of June 2010 by forcing education and social service programs to absorb much of the pain. Among other cuts, the budget proposal:
” Reduces education spending by $8.6 billion over two years, likely forcing schools to lay off teachers, slash salaries and postpone spending on construction and textbook purchases. The proposal also would give districts greater flexibility in spending money that is normally dedicated to specific programs.
” Imposes a 10 percent across-the-board cut to the University of California and California State University systems, saving $264.4 million.
” Continues furloughs for 238,000 state workers, trims overtime pay and eliminates Lincoln’s Birthday and Columbus Day as paid state holidays, saving $1.4 billion. The furloughs would be reduced from two days a month to one and workers would receive two personal days off in exchange for giving up the paid holidays under a tentative contract agreement reached recently between the governor and the state’s largest employee union.
” Eliminates annual cost-of-living increases for recipients of the state’s welfare-to-work program, known as CalWORKS, to save $79 million.
” Eliminates the state and federal cost-of-living increase for seniors and the disabled who are receiving Supplemental Security Income/State Supplementary Payment, saving $594.1 million.
” Depending on whether the federal government provides additional aid, the budget compromise would make further reductions to Medi-Cal, the state’s health insurance program for the poor; CalWORKS; in-home support for seniors; and other social service programs by $948 million.
” Eliminates $1 million that was allocated for the state controller’s office to buy furniture as one of the conditions for securing the last GOP vote.
” Approves a $5 billion plan to borrow against the value of the lottery’s future revenue. Voters must approve changes to the lottery to make it more marketable in the hope that it will bring in more money, and then the state would have to entice investors to buy the bonds.
” Authorizes the state to take out $6 billion in bonds to cover bills that will not get paid in the current fiscal year. Lawmakers expect to avoid this loan by using federal aid.
” $400 million transferred from various special funds.
These questions will appear before votes May 19.
” Spending cap: Asks voters to impose a limit on the amount the state can spend each year based on revenue growth over the previous 10-year period. Money above that amount would be saved in a rainy day fund. That fund would be capped at 12.5 percent of revenue, and any amount above that could be used to pay debt or for one-time purposes. If voters approve the cap, then temporary taxes that are part of the budget would be extended for an additional two years.
” Education: Asks voters to modify Proposition 98, the voter-approved minimum school funding guarantee, to protect education funding when state revenue rebounds after lean budget years.
” Mental health: Asks voters to shift $227 million in voter-approved funding from Proposition 63, the state mental health fund, for two years to pay for a low-income child development program known as the Early Periodic Screening, Diagnosis and Treatment Program.
” Child development: Asks voters to redirect $608 million in First 5 money for early child development to other children’s programs for five years. Voters approved Proposition 10 in 1998, adding a 50-cent tax to each pack of cigarettes.
” Lottery: Asks voters for permission to hand out larger lottery jackpots as a way to sell more tickets. Also grants the state permission to stop using lottery proceeds for education programs. Instead, school funding would be paid through the general fund.
” Legislative pay: Asks voters to amend the Constitution to freeze the pay of lawmakers and state elected officers, meaning they would not be eligible for raises, during years the state is running a deficit.
This question will appear before voters in June 2010.
” Ask voters to amend the state Constitution to allow open primaries for legislative, congressional and statewide elections, including the governor’s race. The top two vote-getters would advance to the general election.
” Grants up to $400 million in tax credits for companies with 20 or fewer employees that hire new workers over the next two years. Allows businesses to claim a credit of up to $3,000 per full-time job created.
” Provides up to $100 million a year for five years in tax incentives for movie studios to film in California, known as the runaway production credit.
” Reformulates taxes for corporations that operate in multiple states. Republicans say the tax break would encourage investment in California while critics called it a giveaway that could cost the state $690 million a year.
” Allows unlimited public-private partnerships on state transportation projects through 2017 and up to 4,500 beds in community-based prisons for inmates nearing parole.
” Speeds up construction on 10 state public works projects, 5 local transportation projects and 10 redevelopment agency projects and 5 state office buildings by allowing one company to do both the design and construction.
” Removes environmental hurdles and accelerates permit approval for 8 state road projects through 2010.
” A 2007 off-highway diesel regulation requires bulldozers, airport baggage trucks and ski resort snowcats to begin reducing emissions from their fleets in 2010. The rule phases in the regulation through 2020 for fleets of large vehicles. The budget proposal would delay the initial phase-in requirements, requiring fewer vehicles to comply in the early years.
” Exempts environmental reviews for selling surplus state property.
” A state grant program offers funding to companies that take steps to reduce harmful emissions from their vehicles before state air pollution requirements go into effect. The budget proposal would allow farmers to access that money even if the requirement has already taken effect.
” Exempts some rural communities from paying prevailing wage on public work projects.
Source: California state Assembly, Senate.
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