Cuts, Tax Hikes Proposed By Governor

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(Sacramento, CA)
Thursday, November 6, 2008

It was just six weeks ago that Governor Schwarzenegger signed the record-late spending plan into law. 
“We are living in a different world now.”

The Governor says since then the stock market tanked and the state’s budget went with it.  Finance Director Mike Genest says the shortfall is now more than eleven billion dollars.

“That is a monumental change in just a few weeks.  It was only a couple of weeks ago when we were saying the drop would be about three billion. And then in the month of October, everything just went nuts”

Genest says the state will run out of cash in February or March unless lawmakers act.  Schwarzenegger’s plan to soak up the red ink is about fifty-fifty, cuts and tax increases.  The centerpiece is a one-and-a-half percent sales tax hike.  That would expire in three years.  He’d also permanently expand the sales tax to services like auto and appliance repairs, sporting events, amusement parks and greens fees for golf.  The Governor wants to tax alcohol another nickel a drink and put a nearly ten percent tax on oil pumped in the state.  And he’s pushing to increase the vehicle registration fee by twelve bucks a car.  It’s a long list of tax hikes for an anti-tax Governor.  But he says there’s no other choice:

 “I’m not a believer in taxes – I’m not a believer in raising fees, it’s just under these circumstances it’s necessary to do.”

In fact, for the first time, the Governor changed course on a fundamental argument he’s made over and over:

“We say many times that we have a spending problem, not a revenue problem.  It just has happened this year, that it actually has switched – that because of this tremendous drop in revenues, it is now a revenue problem.”
The Governor wants to make four-and-a-half billion dollars in cuts – most of those to education and social services.  He’s also proposing government-belt-tightening like forcing state workers to take one unpaid day off each month – and eliminating two state holidays.  He expects lawmakers to decide on a solution by the end of the month.   That’s optimistic for a group of legislators who fought over the state budget all summer long.  But Schwarzenegger says he thinks they’ll be more likely to compromise, now that the election is over and some lawmakers are termed out of office.  

Within an hour, lawmakers gaveled in for the special session. 

Welcome Back!”

It was déjà vu for lawmakers like Republican Assemblyman Roger Niello.  He quickly showed the same old divisions remain over spending and tax increases.

 “We do have a spending problem, and we have a huge economic problem and we’re not going to solve either one of those by increasing tax rates by putting an additional burden on the economy…”

Democrats are similarly unenthused with the Governor’s proposed cuts to social service programs.  Assembly Speaker Karen Bass:

  “Number one, we’ve seen them before, number two, they’re absolutely devastating.”

Bass questions further cuts to programs that serve the poor at a time when more people are relying on them.  She says the need for new revenue is clear—but hopes the Governor has done a little advance work.

I am assuming that since the Governor has called for this special session that he has been in dialogue with members of the Republican caucus and he has some votes he’s bringing to the table.”

He didn’t have much luck getting G-O-P votes during budget negotiations this summer. And lawmakers have a much tighter time frame to get something done now-- the session ends November 30th.