SACRAMENTO (CBS/AP) – Gov. Jerry Brown outlined his plan Wednesday to raise taxes to pull the state out of its financial malaise, casting his proposals as an investment in the future of California like those of the visionaries and achievers whose big dreams made the state the envy of the nation during economic boom times.
The State of the State speech served as a launching pad for his campaign for the November ballot initiative to raise taxes. He has said that if voters don’t support his plan there would be drastic cuts to public education.
“Putting our fiscal house in order is good stewardship and helps us regain the trust of the people. It also builds confidence in California as a place to invest and to realize one’s dreams,” Brown said. “Contrary to those critics who fantasize that California is a failed state, I see unspent potential and incredible opportunity.”
Brown’s proposal aims to raise income taxes on individuals who make $250,000 a year or more and boost the state sales tax by half a cent. The governor also said the state needs massive investments in mega-projects such as renewable energy, education, high-speed rail and water—all of which are exceedingly expensive.
But the underlying theme of the speech was his tax plan, a budget approach that differs widely from that of many other governors who continue to scale back spending and downsize government amid falling revenues.
Within hours of his address, Brown’s proposal was cleared to begin gathering signatures, and the governor hit the road for two days of appearances to sell the plan to teachers, business executives and civic leaders in Southern California. He reprised his speech several hours later in front of an invited audience thick with Democratic supporters at City Hall in Los Angeles.
KCBS’ Doug Sovern Reports:
Republicans who last year blocked a similar effort by Brown in which he asked the Legislature to put taxes before voters, said they remain deeply critical of his approach, which calls for $5.4 billion in cuts, mostly to schools, if voters reject the taxes. They said California’s economy is already improving, and with tax receipts rebounding, the state can avoid such tax increases.
“If we don’t get in the way of it, the state will turn around,” said Senate Minority Leader Bob Huff, a Republican from Diamond Bar.
Brown said his temporary increases on income taxes for the wealthy and the state sales tax are the best options to end California’s cycle of budget deficits and cutbacks to teachers, social service programs and health care services for the poor. He noted that his budget for the coming fiscal year closes a $9.2 billion deficit with a roughly equal proportion of spending cuts and tax increases.
Only a handful have embraced taxes to help stave off deeper cuts, including New York, where lawmakers last month approved a millionaire’s tax that will also allow Gov. Andrew Cuomo, a Democrat, to pay for a middle-class tax break.
In Maryland, Democratic Gov. Martin O’Malley on Wednesday floated a sales tax increase as one option for raising hundreds of millions of dollars, in addition to a potential gas tax increase and a hike in the state’s “flush” tax on sewers. He told reporters “no one in our state lost a house, lost a job or lost a business because of the additional penny on the sales tax, and that these bridges don’t build themselves.”
Washington Gov. Chris Gregoire and other Democrats there want voters to approve a temporary half-cent increase in the state sales tax, which they hope the Legislature will put on the ballot in time for a spring vote, and in Idaho, Democrats are considering hiking the cigarette tax by $1.25 a pack, to $1.82, although they face stiff opposition from Republicans who dominate the state Legislature.
New Jersey Gov. Chris Christie on Tuesday used his State of the State address to cast his home as the anti-tax state, taking a swipe at California and others where taxes are on the table.
“In this environment, the best way to compete is to show a different direction,” Christie said. “Let others choose tax increases. We choose responsible tax cuts to give our overburdened citizens real relief.”
Brown has said his tax hike would generate $7 billion a year through 2017, but the state legislative analyst’s office differs on the amount of revenue likely to come from the wealthy and predicts Brown’s plan would generate only about $4.8 billion a year.
The governor also faces competition from other Democratically aligned allies: At least two other groups are proposing their own tax initiatives for the ballot which could confuse voters and lead them to reject all the proposals.
Brown said Wednesday that he is prepared to make even more spending cuts in the year ahead because “the situation demands them,” but also said imposing higher taxes, especially on the wealthy, was needed for a balanced approach.
And he made clear that he supports big infrastructure investments, such as a proposed $98 billion high-speed rail line linking northern and southern California that has come under harsh criticism from many fronts as the price tag more than doubled.
“Those who believe that California is in decline will naturally shrink back from such a strenuous undertaking,” he said. “I understand that feeling but I don’t share it, because I know this state and the spirit of the people who choose to live here.”
He said he will have the elements of an “enormous” water project to ensure water for 25 million Californians and millions of acres of farmland by this summer.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, said the governor combined a positive vision for California with a concrete path to getting there. He noted that deep cuts to social programs have left many Californians hurting.
“Today was about how we get beyond having to make those kinds of choices and to build something better in California,” said Steinberg, who supports Brown’s tax plan.
Brown, who first served in the governor’s office from 1975 to 1983, also gave a full endorsement of the state’s future prospects. His father, who was governor from the late 1950s to the mid-1960s, is credited with overseeing the construction of the state’s extensive water system and the expansion of its higher education system.
Brown said California’s elected officials should have similar ambitions today, even amid the worst economy since the Great Depression. In addition to the maligned high-speed rail project and water, he promised to protect the environment, promote alternative energy and engage in a robust debate about how best to fix California’s faltering schools.
Wednesday was the second State of the State address of Brown’s third term in the governor’s office, coming after a year in which he failed to persuade Republicans to go along with another tax plan.
His pitch largely paralleled the priorities he outlined earlier this month in releasing his budget for the 2012-13 fiscal year, a spending plan that calls for continued cuts to welfare and social service programs such as in-home support. Brown has warned that if Californians reject his tax plan in November, he will call for $5.4 billion in immediate spending cuts that will hit public schools the hardest.
Those cuts could reduce the school year by three weeks, after it already dropped from 180 days to 175.
The governor has argued that the temporary tax increases are necessary to stabilize California’s finances as it emerges from a recession that has seen the unemployment rate soar and government tax revenue plunge. State tax revenue has dropped by $17 billion since the recession began in late 2007.
Brown also seeks to improve government efficiency, pay down debt and scale back public employee pensions.
The Howard Jarvis Taxpayers Association, the California Taxpayers Association and Small Business Action Committee are teaming up on their own ballot initiative seeking to impose a tougher state spending cap using a formula driven generally by population and inflation growth.
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