The Schwarzenegger Administration unveiled a new budget plan today, calling for more tax hikes and increased borrowing. One notable omission from the plan was Arnold Schwarzenegger himself.
“We are facing a major crisis, probably the most challenging budget situation the state has ever faced,” said Mike Genest, Schwarzenegger’s finance director. “The governor believes in acting immediately.”
Schwarzenegger is out of state and vacationing at the family residence in Sun Valley, Idaho.
That’s some amusing juxtaposition from the Sacramento Bee.
On to the proposal, which is little more than just a warmed-over recapitulation of earlier proposals the Governor has made, with some new elements from right out of fantasyland.
That plan called for a temporary increase in the state sales tax, expanding the sales tax to cover some services, a nickel-a-drink alcohol tax, a new tax on oil production and a $12 hike on vehicle registration fees. It also called for $15.4 billion in spending cuts, including requiring state employees to take two-days-a-month unpaid furloughs through June 30, 2010 and give up two paid holidays each year.
The new elements include reducing the dependent care exemption on state income tax returns from the current $309 per dependent to $103; carrying over some of the deficit into the 2010-11 fiscal year; borrowing funds from voter-created programs that service the mentally ill and pre-kindergarten children’s health services; changing the operating rules for the state lottery in an effort to make it more profitable, and borrowing $4.7 billion from the private sector.
If there’s one thing the private sector is desperate to do right now, that’s take it’s carefully guarded cash and give it to the state with the worst bond rating in the country. They’re really dying to get that done.
The real patterns we see here are familiar to all of Arnold’s budget – a deep lack of concern for the most marginalized elements of society, and a hearty desire to break unions. Schwarzenegger’s lowest point as a politician as maybe as a person was getting blown out in the 2005 special election. He still believes the ideas he put forward in that election were sound, and blames unions for his defeat. Thus you see Arnold going after union members’ livelihoods, insisting on state employee furloughs and generally trying to roll back labor protections that this state has held for decades.
In addition, there’s a recognition that this budget hole is impossible to fill without a magic angel. The proposal names that angel “private borrowing,” but that’s just not going to happen. The angel is going to have to be federal relief from a stimulus package. California reducing its public spending by $10-15 billion at a time when no other entity can pump money into the economy is counter-productive and deeply dangerous to any recovery. The feds are going to have to make up the gap.
Finally, a new proposal looking at the entire $40 billion dollar deficit suggests that the Governor isn’t interested in going forward with the $18 billion dollar work-around budget which he has been negotiating with Democratic leaders. That would be a mistake, because of the exponential effect of continuing to do nothing in the immediate term. Then again, if he were interested in action, the Last Action Hero wouldn’t be in Idaho right about now.
…if you want to go through it yourself, the budget plan is here.
…statements from legislative leaders on the flip.
If the administration’s point today in putting forward a $41 billion solution is to try to impress upon us the urgency of the situation, it’s not necessary. We feel the urgency of the situation, and that’s why Speaker Bass and I and our staffs have been working diligently throughout the holidays to try to meet the administration halfway or more on their economic stimulus proposals. The fundamental problem, of course, with what the administration laid out today is that they don’t bring a single Republican vote to pass the revenue elements of their proposal.
Bass:
The governor’s proposal released today has one positive message: he may finally be coming around and realizing he needs to approve the responsible package of budget solutions the legislature passed December 18.
That package includes $18 billion in real cuts and new revenues to head off the cash crisis and take a big swipe at the deficit. It includes $3 billion in new funds for transportation projects and $3 billion in expedited projects voters have already approved. That means we’d be creating 367,000 new jobs at a time California needs all the new jobs we can get.
So far, legislative leaders have compromised, but the governor has been holding up these budget solutions and these new jobs. We’ve compromised by easing environmental restrictions for transportation projects. We’ve compromised by expanding public private partnerships. We’ve compromised by putting half a billion dollars in state employee compensation on the table.
The governor’s latest proposal assumes the cuts and revenues from the legislative budget solution package. That’s progress. So let’s get agreement on that package, keep California from going over the financial cliff, and then tackle the next round of hard challenges to find solutions to the rest of the deficit.
There are significant questions about what revenue the lottery can really bring in…there are concerns about whether California can manage the additional borrowing the governor is proposing … and there are problems with cuts that seriously harm the students in our schools.
All those issues can be addressed as we move through the rest of the budget process. Right now the most important step is for the governor to recognize that all his demands aren’t nearly important as the jobs we want created.
I appreciate the governor acknowledging today the necessity of the cuts and revenues the legislature approved and I hope the governor’s first act of the new year will be to sign the responsible package we are putting before him.
Villines:
Republicans believe the Governor took important steps to address California’s growing budget crisis by including budget reform and proposals to streamline government in his latest budget plan. We also join with him in making economic incentives and job creation a top budget priority.
We are also pleased to see the Governor has adopted the Republican’s proposal to let voters choose to redirect billions in existing tax dollars to protect the priorities of working families in these tough budget times. However, Republicans cannot support the Governor’s proposal to impose $14 billion in higher taxes on Californians. We believe this will devastate an economy already in turmoil and will hurt people who are struggling to make ends meet. Before we should even consider raising taxes on people, we need to take action to reduce government overspending starting with the elimination of all automatic increases, and enact an economic recovery plan to grow our economy and create jobs.
We cannot wait until the summer to enact responsible budget solutions for California. When the Legislature comes on Monday, we should vote immediately to pass the over $6 billion in common solutions that were in the special session budget plans put forth by Democrats, Republicans and the Governor. Taking urgent action to pass these reductions can get us through our immediate cash flow crisis. If we also take action now to get Californians back to work and to help stimulate our economy, we will be in a better position to address our state’s budget problem for next year and the years ahead.
(that’s cagey. “We all agree on $6 billion in cuts, just do them now!”)
Cogdill:
I applaud the Governor for including elements of the Republican budget plan into the proposal released today. During these tough economic times, it makes sense to go back to the voters and ask them to redirect money for their intended purposes, such as children’s health and mental health programs, instead of sitting idly in the bank.
While Republicans have serious concerns about raising taxes during a recession, we appreciate that the Governor’s proposal includes difficult, but necessary reductions to bring state spending closer in line with revenues.
Instead of simply asking taxpayers to send more of their hard-earned money to Sacramento we should focus on economic stimulus. Growing and protecting jobs in California has a direct relationship to a robust state treasury. Stimulating our economy should be the Legislature’s top priority and it is unfortunate that the majority party has blocked these common-sense reforms to get more Californians back to work.
In addition, we need to ensure the state never again faces a deficit of this size by enacting long term structural reforms such as a spending cap and rainy day fund.
Republicans continue to stand ready to be a part of a responsible budget solution. The Governor’s early release of his budget underscores the magnitude of the state’s budget problems and the need for urgent action in addressing this crisis.