Senate President Pro Tem Don Perata indicated last week that he will put a budget plan up for a vote Tuesday, but the Associated Press noted that "he did not say the proposal would have the support of Republicans, whose votes are needed to reach the two-thirds majority required."
The budget legislation that will be up for a vote in the Senate has not been heard in committee, nor has all of the language been printed in bill form. As of press time, the billions of dollars in new taxes proposed by Democrats had not been amended into bills, so the public, media and interested parties have had no opportunity to scrutinize the language or weigh in on the details of the proposals. (Cal-Tax: Tax increases have a direct impact on the life and fiscal health of every Californian, and taxpayers deserve to see the language of proposed tax hikes in advance. Rushing economy-busting tax hikes through the legislative process is no way to create sound long-term policy.)
Meanwhile, The Sacramento Bee reported that Governor Arnold Schwarzenegger plans to put additional pressure on lawmakers by issuing an executive order that will defer the salaries of more than 200,000 state workers until after a budget is signed. The newspaper reported that a draft copy of the order said state workers would be paid at the federal minimum wage level of $6.55 per hour, beginning with the August pay period, and would receive full back salaries once a budget is in place.
However, State Controller John Chiang said that he will ignore the executive order and will continue paying state employees their full salary.
Governor Arnold Schwarzenegger expressed his frustration with the state of the budget. He said he has met his deadlines in submitting the budget, and added, "I can only get the horse to water, but I can't make it drink."
In interviews, the governor reiterated his position that the budget package must include budget reform. "If we don't have budget reform, we're basically saying to the people of California … that even though we have the worst budget system, we're not willing to fix it," the governor said.
On July 22, the governor added: "I will not sign a budget that doesn't have budget reform in it, because otherwise I could not keep the promise to the people of California. I told them in 2003 that we are going to become more fiscally responsible and that we are going to go and to start living within our means. Now here we are in an economic slowdown, and again we don't have that rainy day fund set aside."
At a well-attended Sacramento Press Club luncheon on July 15, Senate Republican Leader Dave Cogdill reiterated the opposition of Senate Republicans to a tax increase. He said a tax increase will not solve the budget problem, and will hurt the struggling economy. He said there are other revenue solutions that don't involve raising taxes. He also said a "revenue-neutral" tax bill would be OK. Senator Cogdill also said education reform, an economic stimulus package and budget reform are essential ingredients of a final package.
Meanwhile, Democrats reiterated their demand for an $8.2 billion tax increase.
(Sources: The Sacramento Bee, July 15, 22, 23 and 24; San Francisco Chronicle, July 15; Cal-Tax coverage of Sacramento Press Club event.)
In other budget developments:
Proposed Surcharge on Fire Insurance Policies Doubled. Democrats did not list the surcharge on fire insurance policies as one of their proposed tax increases when they released the components of their $8.2 billion tax increase plan. However, the budget conference committee doubled the governor's proposed surcharge on property insurance policies. Their plan would raise $250 million by imposing a surcharge of 2.8 percent on policies in high-risk areas and 1.5 percent on policies in low-risk areas. Assemblyman John Laird said the Legislature needs to cover firefighting costs, and this is a good way to do it.
Assemblyman Rick Keene said the surcharge is a double tax, as people already pay taxes for basic government services, one of which is fire protection. He also questioned setting up a separate firefighting unit in the Office of Emergency Services. He called this "silly," and said the duties should be within the purview of the Department of Forestry and Fire Protection.
This brings the total revenue increase proposed by the Democrats to almost $10 billion: $8.2 billion in taxes, $1.5 billion scored from amnesty, and $250 million from the fire surcharge. The total could be higher once the details of the budget adopted by the conference committee are made known to the public. It has been more than two weeks since the committee's vote, and still none of the tax increases have been placed in a bill and no analysis of the proposal has been made public. (Source: Capitol Weekly, July 17.)
Will the Legislature Try to Shift Property Tax Again? Rumors are rampant in the Capitol that legislators are considering another shift of property tax to help balance the budget. Governor Schwarzenegger has expressed opposition to the idea. Although Proposition 1A of 2006 was designed to prevent such shifts, it left a loophole allowing the Legislature to shift the tax twice in 10 years, provided that the funds are paid back with interest.
Legislators also are looking at taking $200 million from Proposition 10 cigarette tax revenue that has not been spent for early childhood education programs, and are considering shifting funds from the sales tax on gasoline that voters have said they want spent on transportation.
Budget Battle Goes Online. In an attempt to generate public support for their respective positions, legislative leaders have gone online with their budget arguments. Here are the sites:
· The Assembly Republican Caucus We Are Not a Tax Loophole site and budget information site.
· The Senate Republican Caucus budget crisis site.
· The Assembly Democratic Caucus "Your Budget, Your Values" site.
· The Senate Democratic Caucus budget site.
Cal-TaxReports July 28, 2008
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