Posted on 08/09/2008 11:30:52 AM PDT by NormsRevenge
SACRAMENTO – Seven years of deficits have left the state budget so far out of balance that a Republican legislative leader is saying that closing a huge budget gap with cuts alone is unworkable.
Senate Republican leader Dave Cogdill of Modesto said he remains staunchly opposed to tax increases and is now proposing that the state borrow – possibly from funds for local government, transportation and other programs – and quickly repay the loans with money from bonds backed by the lottery.
“What we would like to do is see the state get its spending in line with its revenue,” Cogdill said. “But short of that, we need to find a way to get through this without raising taxes and further damaging this economy.”
But borrowing is opposed by Democratic legislative leaders, who are pushing a $9.7 billion tax package. Republican Gov. Arnold Schwarzenegger, who had advocated a lottery bond plan, says he opposes borrowing. He recently dropped his opposition to a tax increase and proposed a temporary 1-cent sales tax increase.
Lawmakers and the governor are in one of the deepest deadlocks in years, leaving the state without a budget since July 1.
Pressure is growing to act: More state payments will be missed and programs curtailed, the deadline to place budget-related measures on the November ballot is approaching fast, and an expensive loan will be needed if there is no budget. The legislative session is scheduled to end Aug. 31.
Here's the basic problem: The state general fund spent $103.5 billion last fiscal year, and total tax revenue this year is expected to be $93 billion, about $1 billion less than last year.
To close that gap only with reductions, lawmakers would have to cut as much money as the state spends on its entire prison system.
But there's more: Inflation adjustments, population growth and other automatic increases required under current law mean that the state is supposed to spend $110 billion under what is often called a “workload” budget.
When Schwarzenegger proposed in January to make a 10 percent cut in the workload budget of $110 billion, he was hammered by criticism, mainly from school groups citing potential teacher layoffs and other cutbacks.
Cogdill and other Republican legislators, who have signed a no-new-taxes pledge, know that a 10 percent cut in the current spending of $103.5 billion would bring an even greater outcry.
“Technically, you could do cuts if you wanted to,” said Assembly GOP leader Mike Villines of Clovis. “We understand this is a negotiated budget, and we are willing to look at being flexible with our colleagues. But they have entrenched on taxes and no cuts.”
When Democratic legislative leaders unveiled a plan last month to spend $106 billion, with a tax increase mainly hitting upper-income individuals and business, they drew a line in the sand: no more cuts.
Senate Budget Committee Chairwoman Denise Ducheny, D-San Diego, pointing to the $110 billion workload budget, said the Democratic plan has $4 billion in spending cuts that affected schools, health care and other programs.
Democrats say Republicans haven't issued a plan to balance the budget, fearing that deep cuts would trigger a backlash. Republicans say Democrats won't put their plan up for a vote because some Democrats are reluctant to vote for a record tax increase.
Both sides say they want to end the years of chronic deficits and put the state on the road to fiscal health and properly balanced budgets. They're making it sound like a showdown.
“We do not want to shove this problem off again to another year,” Senate President Pro Tempore Don Perata, D-Oakland, said Thursday. “We are going to solve it this year, one way or the other.”
Schwarzenegger said in a radio address Aug. 2 that he won't sign a budget without “long-term budget reform.” He's seeking spending controls and a “rainy day” reserve.
“The people elected me to bring sanity and stability to our state's finances,” the governor said. “They wanted Sacramento to end the reckless spending and to finally live within its means.”
If this sounds familiar, that's because similar rhetoric was used when Schwarzenegger persuaded voters to approve a $15 billion deficit bond in March 2004 and Proposition 58, a companion balanced-budget measure that has had a marginal effect. Schwarzenegger wanted a harder spending cap, but Democrats were opposed.
Another tough spending limit proposed by the governor was rejected by voters in 2005. Republicans again are pushing for a hard cap limiting spending to the annual growth in inflation and spending.
Perata said Democrats are willing to put more money into the budget reserve but won't go along with some of the governor's other demands, such as giving him automatic midyear budget-cut authority when revenue falls short.
Democrats have big majorities in the Legislature. But a handful of Republicans – at least two in the Senate and six in the Assembly – are needed for the two-thirds vote required to pass a budget and a tax increase.
“The governor is the key to this,” Perata said. “He has got to be able to find Republican votes because Democrats are OK.”
Schwarzenegger proposes closing the revenue gap in a number of ways.
There are some spending cuts, raids on special funds, accelerated fees and deferred payments. Also, an accounting shift would allow the state this year to count money that won't actually come in until the first quarter of the next fiscal year.
For a while, the governor's gap-closing plan included $5 billion in bonds that would be paid off by improved sales in the state lottery. If voters rejected the lottery plan in November, a 1-cent sales tax increase would have been triggered.
But legislators in both parties rejected the plan, and Schwarzenegger backed off. Last weekend, he proposed a temporary sales tax increase yielding $5 billion a year.
Now Republican legislators who opposed the lottery plan are giving it a second look, though not the tax-increase component. Senate Republican leader Cogdill said lottery bonds not linked to a tax could quickly pay off gap-closing loans.
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and cuts. lots of them.
Republicans should resign their offices and leave this mess to the liberal Democrats who are largely responsible for it.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
They are eating their seed corn.
Neither apparently have the huevos to demand the nullification of 98, a two tier safety payroll and a $100M budget.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
But out of control spending works every time to create budget gaps.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
This is why i moved to Nevada. Sorry Cali, i love you. But i’m not the caption. I’m not going down with that ship
Just reaching out to latino freepers? LOL
Mendel
How come the Democrats cannot understand this?
The theory is... if the taxes are raised... wouldn't the tax revenues be lower as businesses and wealthy individuals leave the state and more people are laid off?
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
They can’t pass a budget but can pass a bill making homosexual day (which includes the teaching and being tolerant of such pervisions as homosexuality, bisexuality, transgenders and if I’m not mistaken pedophilia) mandatory in all public schools.
Just bend me over the table.
California FY 2007/2008 (General Funds) $104 Billion
California FY 2002/2003 (General Funds) $73 Billion
Increase = 42% over 5 years
Increase = 7.5% per year
Has your income increased 42% over 5 years? Has your income increased 7.5% per year for 5 years? Didn’t think so.
This is just one reason why the hellhole called California is going down the tubes.
It is not as though California can’t cut $15 billion from the budget, while it might be painful for some. That would leave General Fund spending at roughly $90 billion.
A $90 billion General Fund budget would still be an increase of $17 billion over the 2002/03 budget, or 23% more than 2002/03.
That is a solid 4% per year increase in General Fund spending since 2002/2003. There is absolutely no reason they can’t cut $15 billion from this budget.
California’s spending increases since 1995 have been staggering.
Remember the days when “Lotto Backed Securities” was a punch line?
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