Drama grows over Calif.s overdue budget

The drama is intensifying around California’s budget for the fiscal year starting July 1. Last week the Legislature’s Budget Conference Committee announced a counterproposal to roll back many of the draconian cuts to health, education and social services proposed by Republican Gov. Arnold Schwarzenegger.

The battle revolves around how to cope with a $15 billion-plus deficit in the state’s $101 billion general fund.

The conference committee called for reinstating higher tax brackets for the wealthiest state residents, closing a tax loophole for large corporations, rolling back a loophole and suspending a tax adjustment for the wealthy, restoring the franchise tax and stepping up tax enforcement. It rejected the governor’s plan to plug part of the gap by selling bonds to be repaid from future state lottery proceeds.

“In every poll we’ve seen and every conversation I’ve had, Californians are telling us don’t decimate education, don’t shred the safety net, don’t close parks and … don’t close clinics,” Assembly Speaker Karen Bass (D-Los Angeles) said in a statement. “And the straight truth is we can help solve this budget deficit by closing tax loopholes and rolling back overly generous tax breaks that were given to big corporations and the wealthiest Californians — rolling them back to levels they were under other Republican governors.”

Reflecting the majority Democrats hold in both houses of the Legislature, the conference committee consisted of two Democrats and one Republican from each house. Foreshadowing the bumpy road ahead, many committee votes split along party lines.

The conference report now awaits final votes in the Assembly and Senate. Republican Assemblyman Roger Niello predicted the committee budget “will be a troubled and very challenged proposal on the Assembly floor.”

The legislative Democrats’ budget is “a very nice job of getting the right taxes and framing them properly,” Lenny Goldberg, executive director of the California Tax Reform Association, said in a telephone interview. However, Goldberg noted that the proposal “didn’t touch the vehicle license fee,” which was reduced by then-Gov. Gray Davis, a Democrat, in 2002. It is estimated that restoring the fee to its level under earlier Republican governors could bring the state a yearly $6 billion in revenue.

California is the only state to require a two-thirds legislative vote both to pass a budget and to approve any tax increase. Since the Democrats’ current majority doesn’t reach this level in either house, some Republican legislators would have to support the conference budget. But the Republicans remain unanimously opposed to raising taxes, even (or especially) on the wealthy.

“If this were a normal government,” Goldberg observed, “there would be negotiations between the majority party in the Legislature and the governor, and you’d have a budget.”

Even with the additional revenues in the committee’s proposal, the Health Access California coalition points out that real cuts remain, especially for children, through new paperwork requirements the coalition says could cause a quarter million children to lose coverage in the next few years. Also cited were higher Healthy Families program premiums and suspension of efforts to bring eligible but unenrolled children into the program.

Expressing similar concerns, Ellen Wu, executive director of the California Pan-Ethnic Health Network, added, “I think the Republicans need to step up. It’s time that we turned around the way we look at government” to recognize that it provides vital services and needs appropriate resources.

Bass, a former Los Angeles community organizer, was sworn in last May as the first woman Democrat to serve as Assembly speaker, and the country’s first African American woman to serve in this powerful legislative role. At that time she called for a bipartisan independent “blue ribbon” commission to examine the state’s tax structure.

mbechtel @pww.org