Revised California budget: State revenue up; Brown still pushes tax hikes
May 16, 2011
SACRAMENTO, Calif. and#8212; Gov. Jerry Brown is betting that California continues its gradual climb from the depths of the recession but said Monday that even a multibillion dollar bounce in tax revenue will not close the state’s budget deficit and he wants to keep pushing a series of tax increases.
The Democratic governor released his revised budget proposal for the fiscal year that starts July 1, a spending plan that mixes hope for better days ahead with a warning about the future if the Legislature fails to enact his plan for higher taxes.
Public schools will receive nearly $3 billion more under his plan but would be hit particularly hard if his call for higher taxes is rebuffed in the Legislature or by voters.
The governor proposed spending of $88.8 billion, a nearly 5 percent increase over the budget he introduced in January. The boost was fueled by rising sales, personal income and corporate tax receipts and#8212; the three main sources of the state’s general fund.
The governor expects an overall increase of $6.6 billion in tax receipts through the rest of this fiscal year and into the coming one.
The rising revenue and spending cuts already enacted by Brown and Democratic lawmakers have reduced the projected deficit to $9.6 billion. It had been estimated as high as $26.6 billion at the start of the year.
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Noting the increased tax revenue, Brown proposed to slightly modify his call for a renewal of expiring tax increases. But he defended his decision to push ahead with the tax plan, saying the state faces deficits into the future.
“California’s finances were plunged into turmoil by the Great Recession and a decade of short-term fixes and fiscal gimmicks,” he said during a Capitol news conference. “This is not the time to delay or evade. This is the time to put our finances in order.”
Brown and Democratic lawmakers want to renew increases to the personal income, sales and vehicles taxes that were approved two years ago but are scheduled to expire June 30. Brown had wanted the increases extended for five years.
He said Monday he still wants to renew the increases to the sales and vehicle taxes this year but not the increase to the personal income tax. Instead, that increase would be reinstated for the 2012 through 2015 tax years.
The additional revenue would mainly go to education and to pay for the realignment of public safety programs to local agencies. He argued that the relative tax burden would remain below historic levels.
The governor said his proposal for spending cuts and tax increases represented a reasonable, balanced approach that would put the state’s finances on sound footing over the next few years. Without the renewal of the higher taxes, Brown said California faces a budget deficit of about $20 billion in two years.
He would not say whether he had an alternate plan if Republican lawmakers continue to block his call for tax renewals.
“I’m not going to give the Republicans a roadmap to ruin, I’m giving them a roadmap to success,” he said.
Even though Democrats have majorities in the Assembly and Senate, two Republican votes are needed in each house to reach the two-thirds threshold to approve tax increases or place a measure on the ballot.
Brown does not want lawmakers to authorize the tax extensions directly. Instead, he wants them to place the question before voters in a special election, perhaps this fall.
The governor’s May revise, as it’s called in the Capitol, marks the unofficial starting point for lawmakers to get serious about their most important job and#8212; creating a state spending plan for the coming fiscal year.
It’s not clear whether the parties will be able to agree on Brown’s plan by their June 15 constitutional deadline to pass a budget.
Assembly Republicans questioned whether the state needs to extend the temporary tax increases. They also criticized Brown’s plan and#8212; already signed into law and#8212; transferring responsibility for some low-level offenders from the state to local law enforcement agencies. The governor has said the shift will not take place unless the tax renewals are approved.
“Those are two fundamental places we do not have any interest in going,” said Assemblyman Jim Nielsen, R-Gerber, speaking for the GOP caucus. “In terms of compromise on tax increases, I don’t see any place to go there.”
GOP lawmakers have steadfastly refused to go along with Brown’s plan to extend the temporary tax increases and say a combination of an improving economy and targeted spending cuts can solve the remaining deficit for the fiscal year that starts July 1.
They want deeper cuts to services to the poor, elderly and disabled; 10 percent salary cuts for state workers; and a raid on one-time funds intended for early childhood development and mental health.
Republicans also want long-term reforms to public employee pensions, a strict spending cap and regulatory reforms for businesses. Brown has proposed a package of pension reforms and on Monday agreed that the state needs a spending limit.
Brown broke off talks in late March with five Republican senators who seemed willing to deal on his call for higher taxes if he and the Democratic majority conceded on their reforms. But the governor complained that they kept changing their demands, making negotiations impossible.
Since then, Brown has given occasional speeches warning of dire consequences if the temporary tax increases are not renewed. At the same time, education officials and the state’s two main teachers unions have said schools will face thousands of teacher layoffs, increased class sizes and a shortened school year if the budget deficit is closed through cuts alone.
Brown has been largely out of public view since late April, when he had a basal cell carcinoma removed from the right side of his nose and underwent reconstructive surgery. Doctors said they removed all the cancerous cells.
The surgery sidelined Brown at a time when governors typically are working hard to sell their revised budget plan to lawmakers and interest groups.
The governor and Democratic lawmakers already have reduced the original $26.6 billion deficit through spending cuts and transfers between government funds. On Friday, the administration announced that nearly a quarter of all state parks would close by July 2012.
Even with the anticipated rise in tax revenue, California’s income is far below its pre-recession level. Brown’s $88.8 billion spending plan represents a 13.7 percent decline from the 2007-08 fiscal year, when the state spent $103 billion from its general fund, the state’s main checkbook.
Funding for K-12 schools alone has dropped over the past two years from $46.2 billion to $36.8 billion in the current year.
Associated Press writers Lien Hoang and Adam Weintraub contributed to this report.