SACRAMENTO – The battle over increasing taxes to close a huge state budget gap grew hotter yesterday, continuing a seven-week deadlock that has forced thousands of state employees out of work and left several billion dollars of bills unpaid.
Gov. Arnold Schwarzenegger and top legislative leaders seemed to move further apart on the crucial tax issue as the deadline for placing budget-related measures on the November ballot was moved back until this weekend.
The deadlock could cause Assembly Speaker Karen Bass, D-Los Angeles, to miss the opening of the Democratic National Convention in Denver on Monday, where she is scheduled to be part of an event honoring women in politics.
The Legislature, scheduled to adjourn for the year Aug. 31, may have to stay in Sacramento if there is no budget – pushing the record deadlock six years ago that left the state without a budget until Sept. 5.
Republican legislative leaders said they are determined not to use a tax increase to help close a $15.2 billion gap in a general fund of more than $100 billion for the fiscal year that began July 1.
Assembly Republican Leader Mike Villines of Clovis underscored the point yesterday by making an early exit from a meeting with the governor and other legislative leaders.
“We are not going to do it (raise taxes),” Villines said. “Until people start to realize we have to do something different, we are going to be here for a long time.”
Senate President Pro Tempore Don Perata, D-Oakland, said the Republican alternative to a tax increase is borrowing, which would create another deficit next year.
“I'm prepared to stay here as long as we have to to get a tax increase in order to get us through the next number of years,” Perata said.
The meeting came after the Assembly, on a party-line vote Sunday, rejected a revised Democratic budget proposal calling for a more than $6 billion tax increase, mainly hitting the wealthy.
A Republican proposal for a hard cap on spending, based on the annual increase in population and inflation, was rejected by an Assembly committee Friday on a party-line vote.
Schwarzenegger, dropping his earlier opposition to a tax increase, has suggested a temporary 1-cent increase in the sales tax.
The governor provided some detail yesterday to his main budget demand – what he calls “reform” to prevent future deficits – during a stormy interview with conservative radio talk-show hosts in Los Angeles, John and Ken on KFI-AM.
Schwarzenegger said he wants authority for the governor to make midyear cuts of up to $3 billion when revenue drops and a “rainy day” reserve of 12 percent to 15 percent of the general fund.
The final deadline for placing any proposed “reforms” on the November ballot, along with lottery-backed bonds sought by the governor, is now said to be Sunday or Monday. The previous deadline was last Saturday.
The radio hosts said Schwarzenegger, who replaced former Gov. Gray Davis in a historic recall election in 2003 driven mainly by a huge budget deficit, failed to control spending as revenue increased.
Schwarzenegger said $15 billion in increased spending paid off debt from the previous administration. He said his budgets had average increases of 5.5 percent, near the 10-year average revenue increase.
The Republican governor told reporters after meeting with legislative leaders yesterday that fellow Republicans “want to go out and borrow money,” even though the state is still paying off debt “from the 2003 disaster.”
Schwarzenegger said more borrowing is “not a good idea.” He said “anyone that says they don't want to compromise, I think they are not doing a service to the state of California and to the people of California.”
Perata said the way out of the deadlock is for Schwarzenegger to reach a compromise with Democrats and then get the necessary votes from Republicans.
Some Republican votes, at least two in the Senate and six in the Assembly, are needed for the two-thirds approval required to pass a budget, if all Democrats vote for the plan.
Meanwhile, a federal judge in Los Angeles yesterday blocked a 10 percent cut to Medi-Cal providers that took effect July 1 and was expected to save the state $575 million a year. The Schwarzenegger administration has not decided whether to appeal.
Without a budget, the state did not make $1.2 billion in payments last month and will not be able to make $3 billion in payments this month, state Controller John Chiang says.
Schwarzenegger issued an order laying off about 10,000 temporary and part-time state employees. A court decision is pending on his order to cut the monthly pay of 175,000 state workers to the federal minimum wage, $6.55 an hour.
Perata said the prolonged deadlock is jeopardizing child care and perhaps even school starting this fall. A $1.3 billion payment to schools, due Aug. 27, will not be made if there is no budget.
