Davis budget seeks tax hikes

wildbirdhunter

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Governor reverses stance in face of $23.6 billion gap


By Ed Mendel
STAFF WRITER

May 15, 2002


SACRAMENTO – Gov. Gray Davis, facing a budget gap that has nearly doubled since January to $23.6 billion, made a surprising election-year reversal yesterday and proposed tax increases on vehicles and tobacco to protect schools and other programs.

The governor's revised spending plan contains $7.6 billion in cuts, falling heavily on health programs and counties, and about $11 billion in loans and fund transfers.

At the beginning of the year, when the budget gap was $12.5 billon, Davis said he would not advocate a tax increase. But he said a tax hike became necessary when the budget gap ballooned past $21 billion.

"I'm not going to sacrifice the future of our children, particularly in public education," Davis said, "and without some revenue increase, I would have to do that."

Davis said his revised, $98.9 billion spending plan for the new fiscal year beginning July 1 contains an increase for schools and protects public safety, health insurance for children and vital programs for seniors.

The proposal to meet the Proposition 98 minimum guarantee for schools and provide a 2 percent cost-of-living adjustment, higher than the statutory requirement of 1.66 percent, was welcomed by a number of school groups.

Among them was the California Teachers Association, which is pushing widely publicized legislation opposed by Davis that would expand teacher labor-contract negotiations to include curriculum and textbooks.

"(The) CTA is pleased that the governor is recommending full cost-of-living and growth increases for all education programs," said CTA President Wayne Johnson, who recently criticized Davis for seeking a $1 million campaign contribution during a meeting with CTA officials at the Capitol.

The new plan proposed by Davis, who repeatedly has said education is his top priority, also was praised by community college officials and contains no fee increase for students at the University of California and California State University systems. However, CSU trustees today will consider raising tuition for out-of-state students.

The governor's Republican opponent in the November election, Los Angeles businessman Bill Simon, said he is "extremely disappointed" in the new plan because it raises taxes, does not adequately protect education and fails to address a long-term budget imbalance.

"For three years, Governor Davis spent our tax dollars like there was no tomorrow," Simon said in Los Angeles. "Now tomorrow has arrived, and all Californians are going to suffer because the governor was too busy fund-raising to provide the leadership and make the tough decisions that would have prevented this crisis from growing out of control."

The governor challenged his critics to produce an alternative "comprehensive budget that balances and adds up." Simon issued a plan before the March primary to close a $12.5 billion gap, largely through spending cuts that critics said were not identified.

Davis said the $23.6 billion gap in the $76.5 billion general fund, which pays for most state programs, is the result of a dramatic drop in income-tax revenue, mainly from capital gains and stock options as the high-tech boom collapsed.

Davis said the state's dependence on high-end income-tax revenue, instead of more stable sources such as property and sales taxes, "may well bear examination to see what we can do to level out the ups and downs."

Senate Minority Leader Jim Brulte, R-Rancho Cucamonga, said the budget gap is the result of a failure to restrain spending, rather than a lack of revenue. He said money from the boom should have been used for "one-time" expenditures not requiring cuts when funding fell in the future.

"We warned that it was one-time money," said Brulte, who said Davis pushed through budgets despite opposition from Republican leaders. "But he spent it on programmatic expansion."

Davis rejected the criticism, saying no previous governor has produced budgets that contained as much spending on transportation and other one-time funding projects.

The governor needs only a handful of Republicans, one in the Senate and four in the Assembly, to get the two-thirds vote required to pass a budget. His decision to include a tax increase makes his plan more acceptable to Democratic leaders, who have been pushing for a tax increase.

"I applaud the governor's courage and leadership in proposing a budget with a combination of cuts and revenue enhancements," said Assembly Speaker Herb Wesson, D-Culver City.

Democratic budget writers said there is a need to move quickly on the governor's proposal because the state is seeking a $7.5 billion loan next month to avoid running out of cash before the current fiscal year ends.

"Lenders will want to know we have a plan in place," said the Assembly budget chairwoman, Jenny Oropeza, D-Long Beach, agreeing with comments made earlier this week by the Senate budget chairman, Steve Peace, D-El Cajon.

The state is short of cash because the general fund has not been repaid for more than $6 billion worth of power bought for utility customers last year during the electricity crisis.

The governor's top budget aide, Finance Director Tim Gage, said he hopes the general fund will be compensated this fall by a long-delayed, $11.1 billion bond that will be paid off by electricity customers over 15 years.

Davis is proposing that the vehicle license fee, which has been reduced over several years, be restored to the level in place when he took office three years ago.

The reduction in the fee that had reached 67.5 percent from its original level would be returned to a 25 percent reduction. Gage said the average annual vehicle license fee would be increased from $64 to $148, yielding $1.3 billion for the state.

The excise tax on cigarettes and other tobacco products would be increased by 50 cents, producing $475 million in new annual revenue for the state.

The governor also is proposing that the ability of businesses to write off losses over several years be suspended for two years, producing $1.2 billion for the state.

Davis said he does not regard the suspension of the "net operating loss" multiyear provision as a tax increase, because businesses will be allowed later to claim losses for two additional years.

"The business community, particularly those in the high-tech and biotech industries, is greatly concerned about the NOL suspension," said Chris Micheli, a business lobbyist. "In these bad economic times, companies are experiencing large net operating losses, and there is a need to get cash back into the economy."

Davis also proposes to obtain $938 million in new state revenue through several tax changes: conforming banks to federal bad-debt reserves, waiving penalties and interest on delinquent accounts, and improving tax protest and settlement programs.

The biggest single source of revenue is $4.5 billion from a bond that would be paid off by money from the tobacco industry settlement over the next 22 years. In January, Davis proposed a smaller, $2.5 billion tobacco bond.

The governor's plan would increase funding for students in kindergarten through high school to $7,186 per pupil, up from $6,618 in the current fiscal year, when the level fell from $6,685 the previous year.

The drop in funding this year would be the result in part of a proposal by Davis for a complicated shift that would produce $1.1 billion to help close the budget gap.

Money owed to the schools at the end of this fiscal year would be delayed until the beginning of the new fiscal year. School groups agree with the governor that schools would not lose money under the shift.

Davis' plan would give schools $31.5 billion from the state general fund. With revenue from local and federal resources, total school funding from all sources would increase from $52.8 billion to $56.5 billion next fiscal year, up 7 percent.

While Davis protected funding for child health care, health groups complained about proposed cuts for safety-net hospitals and Medi-Cal providers and recipients, including dental, psychiatric, chiropractic, therapy, medical supplies and other services.




Copyright 2002 Union-Tribune Publishing Co.



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This guy has got to go or he will run this state into the ground.
WBH
 

shaginator

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I hope this is political suicide for the incompetent Governor Davis.
 

Dakota

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Hmmm, this is surpisingly similar to "read my lips" isn't it.  Except the media won't run with this one, Davis will get a pass.

Man I hope Simon pulls this one off.
 

huntducks

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All you union gun owners just keep voting DemocRAT and the defecit will be 30 billion next year.can you say WELFARE STATE.

Just something how this group of RATS keep clutching for straws and looking for the prize at the bottom of the box, i'll bet they were counting on there gun law suit money hehehe.

WHO THE HELL OWNES A CAR THAT IS PAYING $68 NOW FOR THER TAGS, my 65 Chevelle is $39 so a $68 tag must be for a 80 YUGO.

I GOT TO GET THE HELL OUT OF THIS STATE.

Who do they think pays for these bonds it's just another way of saying TAX.



DAVIS & DEMOCrats:shootin:
 

karstic

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<font face=arial size=1><blockquote><hr noshade size=1>
The excise tax on cigarettes and other tobacco products would be increased by 50 cents, producing $475 million in new annual revenue for the state.
<hr noshade size=1></blockquote></font>

What happens when the state sponsord anti-tobacco ads kick in and become effective, there goes his source of revenue.
...or maybe the state should quit spending millions (billions?) on the anti-tobacco ads. I'm not a smoker but extra taxes of any kind piss me off.
 

wildbirdhunter

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I really love the part about the state being short because of buying power and not getting paid back for.
Does any one really think the state will ever get it’s money back let be real we got and are still being f----ed by this power problem. If Simon plays on this and how the state is buying power for two and three time the market value and selling (giving to the power companies) at below market prices and how that state had a cash surplus when Davis stated in office and in now in the hole plus no new taxes he BSed about when he ran for office he just may pull it off
WBH
 

kilbuc

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Gray Dufuss is a piece of work.  I could see this coming a couple years ago and got out.   Several years ago CA had a $$12 billion surplus and the liberals fell all over themselves finding ways to spend it.  
All I got to say is hold onto your pocketbooks.

from the "Heartland of Wyoming"
 

Modocer

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We need to cut Grayout some slack. We all know that it was the evil Republican, GW Bush and Enron's fault that the budget is messed up. Only in Calif. would they propose a major tax hike during an election year.
 

paulc

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the scary part is that the morons in ca will most likely reelect this career politician... this guy really reminds me of clinton.. buying votes... what makes me sick is the company i work for  (citigroup) gave him a couple hundred grand.  i just am not convinced that simon can take him out and most political people in the know think gray will win also.. it is almos absurd that people can vote for him...
help!!!!
 

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