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Brown Strikes Budget Deal With Dems, Drops Tax Vote Plan

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Jerry Brown

California Gov. Jerry Brown (Justin Sullivan/Getty Images)

Phil Matier
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SACRAMENTO (CBS/AP) – Gov. Jerry Brown on Monday abandoned his plan to hold a special election this year to renew expiring tax hikes and instead said he will balance California’s budget with a combination of spending cuts and a projected increase in normal tax revenue.

Brown announced the latest approach at a news conference while accompanied by the leaders of the state Assembly and Senate, both fellow Democrats. They agreed to pursue a budget for the coming fiscal year without support from Republicans, who had refused to accept the centerpiece of the Democratic approach: an extension of temporary tax increases that expire this week.

Brown had hoped to extend the tax increases, but he needed two Republican votes in each house to bring the proposal before voters. A vote on the Democratic plan was expected as early as Tuesday afternoon.

After six months of talks with a handful of GOP lawmakers, Brown said he finally gave up on the idea Sunday night after receiving a text message from one of the lawmakers. The new version does not include any pension or regulatory reforms Republicans had sought.

“We had some very serious discussions. I thought we were getting close, but as I look back on it, there is an almost religious reluctance (among Republican lawmakers) to ever deal with the state budget in a way that requires new revenues,” Brown told reporters during a brief news conference.

Instead, the Democratic leaders said they would pursue a ballot initiative to bring tax increases before voters in November 2012. They did not say whether they would continue to press for broad taxes such as the income, sales and vehicle taxes.

KCBS’ Melissa Culross Reports:

The new budget relies on a stronger economic recovery and higher income tax collections. While the governor proposed $88.8 billion in spending in his May revision, it wasn’t immediately clear what the spending level will be for fiscal year 2011-12. California has reduced spending by more than 17 percent since it reached a general fund high of $103 billion back in 2007.

Assembly Speaker John Perez and Senate President Pro Tem Darrell Steinberg accompanied Brown to the news conference, but none of them released many details of the emerging proposal.

Under the plan, up to an additional $2.5 billion in further cuts to schools and other programs would be triggered if the hoped-for revenues do not materialize, Steinberg said.

KCBS’ Margie Shafer Reports:

Brown already has signed bills that addressed $11.4 billion of California’s original $26.6 billion deficit. That reduction was accomplished primarily through spending cuts to social service and health program programs, as well as shifting money between government accounts.

Brown has said he will not sign a budget that contains accounting gimmicks, and he listed that as one reason why he vetoed a Democratic budget that passed with majority support two weeks ago. That left more spending cuts as the leading option to deal with the remaining deficit.

“This budget is the most austere fiscal blueprint California has seen in more than a generation,” Steinberg said. “Spending levels are at historic lows, and every sector of society will feel the difficult choices we’ve made to bring the budget into balance.”

Senate Minority Leader Bob Dutton, R-Rancho Cucamonga, called the Democratic plan “hope without change.”

“This latest budget is based on the hope that $4 billion in new revenues will miraculously materialize but does absolutely nothing to change government as usual,” he said in a statement.

The plan includes the governor’s effort to shift responsibility for jailing and supervising thousands of California criminals from the state to local governments. Brown already signed the realignment bill, but the new budget would provide money for counties to make the adjustment by directing more sales tax revenue from the state.

Democrats also assume savings from eliminating redevelopment agencies and assume the governor will sign a bill requiring online retailers to collect the state sales tax. Unlike the previous Democratic plan he vetoed, Brown said the state will not sell state-owned office buildings.

Democrats are also planning to impose fees without meeting a two-thirds threshold for tax increases, which will likely face legal challenges. They include a $12 annual fee on car registrations to pay for Department of Motor Vehicle services and a $150 annual fee on homes in rural areas that depend on the California Department of Forestry and Fire Protection for wildfire protection.

Republicans were seeking changes to state employee pension plans, regulatory reforms and a spending cap in exchange for their support in putting the taxes before California voters. Each party blamed the other for failing to compromise.

On Monday, Assembly Republican Leader Connie Conway, R-Tulare, declared victory in the fight against Brown’s tax extensions.

“While Democrats may still use legally questionable maneuvers to raise taxes, the simple truth is because of Republicans’ resolve, temporary tax increases will expire this Friday and the average California family will save nearly $1,000 per year,” Conway said in a statement.

Brown acknowledged that he still has more work ahead and vowed to revisit revenues later.

“It’s a good budget, but it’s not the budget that I started with in January and the Democratic leadership wanted, and that was a budget that had revenue,” Brown said. “We still have our wall of debt hanging out there.”

California’s new fiscal year begins Friday, and lawmakers are under added pressure this year to pass a budget as quickly as possible. Under a new requirement passed by California voters last fall, members of the Legislature lose pay for each day after June 15 that they are late in passing a balanced budget.

Last week, state Controller John Chiang, a Democrat, began withholding pay and living expenses after he determined the first Democratic plan did not comply with Proposition 25.

This is the second time Democrats are trying to pass a budget without GOP support after negotiations between the parties broke down.

Democrats had hoped to extend temporary increases to the vehicle and sales taxes, as well as an increase to the personal income tax rate that expired in January. Lawmakers approved all three temporary increases in 2009.

KCBS and Chronicle Insider Phil Matier Comments:

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services may have contributed to this report.)

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