http://www.latimes.com/news/la-me-california-budget20-2009feb20,0,4810624.story?page=2&track=ntothtml
From the Los Angeles Times
With budget stalemate over, next move is up to California voters
The spending plan, which wipes out a projected deficit
with tax hikes, program cuts and borrowing, hinges on billions contained in
ballot items that voters must approve in a special election May 19.
By
Jordan Rau, Evan Halper and Patrick McGreevy
February 20,
2009
Reporting from Sacramento — State lawmakers Thursday finally ended
the three-month stalemate that brought California to the brink of financial
collapse -- but now it is up to voters to keep the budget package from
unraveling.
The spending plan, which wipes out a nearly $42-billion
projected deficit with tax hikes, deep program cuts and borrowing, hinges on
$5.8 billion contained in several ballot measures that voters must approve in a
special election May 19. Gov. Arnold Schwarzenegger is expected to sign the
package today.
There are any number of reasons voters may not cooperate.
The four temporary tax hikes in the budget are substantial and the ballot
proposals would prolong them. Polls show that voter disgust with the Legislature
has reached all-time highs. Some well-funded special interest groups are already
plotting campaigns against the measures.
"Given how disaffected voters
are and how really disgusted they are, you might find all the ballot measures
could get swept away," said Democratic strategist Darry Sragow.
Voters
will be asked to wrest money from mental health services, children's programs
and future lottery receipts. They will be offered the opportunity to constrain
future state spending -- but only if the tax hikes just passed stay in place for
four years instead of two. The failure of one or more of these measures could
reopen a deficit.
Lawmakers and the governor are already looking
nervously toward the campaign for the measures, even as they breathed a sigh of
relief Thursday when the Legislature, in lockdown for a third straight day,
finally passed a budget. The plan's approval halts the state's slide toward
insolvency and allows officials to once again begin paying tax refunds, vendors
and public assistance recipients, though those checks could be delayed several
more weeks.
"It is very important we start campaigning now,"
Schwarzenegger said at a Capitol news conference. Earlier in the day, he took
down the clock outside his office that counted how much money the Legislature's
inaction on the budget was costing California.
The governor's office
immediately told road builders and local transit agencies to resume stalled
construction projects. Administration officials said the budget deal may avert
some of the 10,000 layoffs the governor began to implement a few days ago, but
the administration is not rescinding pink slips.
The budget would
temporarily raise the state sales tax, starting April 1, by 1 cent on the dollar
and nearly double the vehicle license fee, to 1.15% of the vehicle's value. The
package would increase personal income tax rates by 0.25 of a percentage point.
A 12-cent-per-gallon increase in gasoline taxes that was initially part of the
package has been eliminated -- replaced with federal economic stimulus money.
The dependent credit taxpayers can claim would be reduced by $210.
An
average family of four with an annual income of $75,000 would pay about $963
more a year in taxes, according to a legislative analysis.
The majority
of GOP lawmakers had tried to block the increases, which would remain in effect
for two to four years.
Howard Jarvis Taxpayers Assn. President Jon
Coupal predicted "the beginning of a new California tax revolt. . . . Our phones
are ringing off the hook. People are upset."
Those Republicans who did
vote for the plan were enticed by roughly $1 billion in tax breaks for
businesses. They include tax credits for film companies that keep their
productions in California and small businesses that hire new employees. And the
GOP lawmakers were wooed with $100 million in tax credits for buyers of new
homes and millions of dollars in subsidies for horse racing tracks.
The
restraints on government growth that voters will consider in May were also key
to winning support from Republicans, who have been pushing such a policy for
years. The ballot measure would force the state to sock away in a rainy-day fund
revenue windfalls created by good economic times.
The six Republicans
who voted for the plan were also satisfied by cuts in government spending that
would be deep and long lasting.
For the approximately 16 months through
June 2010, the plan reduces spending by $14.8 billion.
Schools and
community colleges, which account for nearly half of all state spending, would
take among the biggest hits, along with state colleges and universities, where
tuition has been steadily rising for years. Public assistance and transit
programs would be scaled back considerably.
Those concessions made by
Democrats were still not enough to secure all the GOP votes they needed. So
about midnight Wednesday they made one more big one.
They met the demand
of Sen. Abel Maldonado of Santa Maria to rewrite election rules that he said had
allowed the Capitol to become paralyzed by partisanship, leading the state to
the brink of financial ruin.
Democrats initially said Maldonado's call
for "open" primaries was too substantial to be pushed through in a budget deal.
But Maldonado said the current budget stalemate proved that California could not
return to fiscal sanity without fundamental changes in the way it elects its
representatives.
Modeled on election rules in Washington state, the
change -- if approved by the California electorate next year -- would allow
voters to cross party lines and would have candidates of all parties competing
in the same primary, followed by a runoff of the top two vote-getters. The plan
would not apply to races for governor.
Maldonado's proposal would
undermine the influence of political parties and was unpopular with Democrats,
but their leaders pressed them to accept it as the price of ending the political
logjam.
The rank and file expressed anger nonetheless. They objected to
rewriting California's fundamental rules of democracy in the middle of the
night, all to secure a vote to keep the state from financial ruin. They also
accused Maldonado, who is in his last term in the Senate, of trying to leverage
his budget vote to make a future statewide run easier.
Some Democrats
were so resistant that the Senate had to recess while they were talked into
giving their support. Near tears, Sen. Gloria Romero (D-Los Angeles) called it
"a disgusting process" and "not good government" as she changed her vote on the
open primary to yes.
Art Torres, chairman of the California Democratic
Party, said the organization will work to defeat the open primary measure, which
would be on the ballot in June 2010 and has strong support from the governor.
"Basically Maldonado's name should be 'extortionist,' " Torres said.
"This is not good for democracy."
The spending restraints proposal that
would come before voters in May could prove to be the biggest
challenge.
The curbs in spending are likely to appeal to voters, analysts
say, but they can only be enacted if the tax hikes are extended from two to four
years.
The Jarvis association is among the groups considering a campaign
against the plan.
Another proposal that would be voted on in May
threatens to plunge the state deep back into the red.
It calls for
borrowing some $5 billion against future lottery revenues. Assembly Speaker
Karen Bass (D-Los Angeles) has expressed concern that may not go over well with
voters, who are reluctant to tamper with lottery proceeds now earmarked for
education, even if the proposal ensures schools still get their money.
Mental health and early childhood education advocates, meanwhile, are
gearing up to protect their funds.
Ballot measures planned for May would
take as much as $830 million from those programs in 2010 plus hundreds of
millions annually in the following four years.
If the fund raid is
rejected, it means more red ink for the state.
jordan.rau@latimes.comevan.halper@latimes.compatrick.mcgreevy
@latimes.com
Times staff writer Marc Lifsher contributed to this
report.