Tuesday, December 16, 2008



Senate Minority Leader Dave Cogdill, R-Modesto, right, di... (AP)

Senate Minority Leader Dave Cogdill, R-Modesto, right, discusses a Republican state budget proposal at a Capitol news conference in Sacramento on Monday. (AP)

Matthew Yi, San Francisco Chronicle Sacramento Bureau

Tuesday, 16 Dec 2008 - Sacramento- Republican state lawmakers unveiled their answer Monday to the state's budget crisis - a $22 billion plan that would avoid raising taxes, cut deeply into education spending and dip into voter-approved funds intended to pay for mental health services and children's health care.

The plan is the Republicans' first comprehensive proposal since Gov. Arnold Schwarzenegger called a special legislative session last month to try to solve the state's fiscal crisis. That special session ended without any action by lawmakers, prompting Schwarzenegger to declare a fiscal emergency Dec. 1, the first day on the job for newly elected legislators, and to call another special session to fix the budget.

Senate Republican leader Dave Cogdill of Modesto insisted Monday that raising taxes was not the answer to California's problems. Republicans have refused to consider tax increases as California's money problems piled up, and they can block any budget that includes increases because both the Assembly and Senate must muster two-thirds votes to approve a spending plan.

"We have said time and time again that because California taxpayers, quite frankly, are more burdened than the average taxpayer in this country, and the fact that we are ground zero as it relates to the economic realities that this country and the world face right now, we've got to find a better way," Cogdill said.

The GOP budget plan would raise $6.5 billion of new revenue for the general fund and reduce spending by $15.6 billion over the next 18 months, about two-thirds of it from K-12 schools. The proposed cut in education is far deeper than Schwarzenegger and legislative Democrats have called for in separate plans for reducing the deficit.

As part of their proposal, Republicans also suggested measures they said could stimulate the economy, such as granting tax credits to businesses, and relaxing environmental and labor regulations. Those would include extending deadlines to retrofit diesel engines in trucks and changing the rules on overtime pay and meal breaks.

Schwarzenegger had expressed frustration with Republicans for bringing little to budget negotiating sessions other than a refusal to raise taxes. In a sign of how frayed relations between GOP lawmakers and the Republican governor have become, Schwarzenegger's office was as critical of the Monday's proposal as legislative Democrats were.

"It's simply a rehash of the tax cuts that have been on the table for months with some borrowing on top of that," said Aaron McLear, Schwarzenegger's spokesman. "It's not a negotiated compromise. Until Republicans and Democrats negotiate with one another, our problem continues to get worse."

Assemblywoman Noreen Evans, D-Santa Rosa, chairwoman of the Assembly Budget Committee, said the GOP plan balances the budget "on the backs of poor children and the mentally ill."

Evans plans to convene a committee hearing today to consider the Republican plan. If and when a vote is held, the Democrat-controlled panel is certain to reject it.

Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), said she would hold a floor session this afternoon to vote on a separate budget proposal, even though there wasn't a deal in sight Monday.

Bass did not spell out what exactly was in the proposal, but she said it would include elements of plans put forward by Schwarzenegger and Democrats.

The governor has suggested nearly $10 billion in cuts and temporarily increasing the sales tax to help close the deficit, along with other revenue increases that would total around $12 billion. Democrats have proposed a $17 billion mix of spending cuts and tax increases, including increasing the vehicle license fee.

Under the Republican lawmakers' plan, the bulk of the new revenue - $6 billion - would be siphoned into the state's general fund by asking voters to alter Proposition 63, a 2004 measure that funded mental health services for homeless adults, and Proposition 10, a tobacco tax approved in 1998 that pays for health care and education programs for young children. A special election would be called to consider the changes.

The rest of the revenue would be generated by delaying certain loan payments and transferring money from other special funds.

The largest chunk of spending cuts, nearly $10 billion over the next 18 months, would come out of K-12 education. This year, the state is spending $58 billion on public schools.

Republicans also want to cut monthly payments for supplemental security income recipients - to $830 from $870 for singles, and to $1,407 from $1,524 from couples.

The Republican proposal also would reduce the Legislature's operating budget across the board by 5 percent, including lawmakers' salaries, and eliminate $6 million for Schwarzenegger's plan to build an infrastructure to support hydrogen-powered cars.

The budget crunch is so bad that, unpleasant as they are, none of the proposals set forth by Schwarzenegger, Democrats and Republicans would eliminate a deficit now expected to hit $40 billion by June 2010.

State Treasurer Bill Lockyer warned last week that budget problems were making it hard to sell voter-approved bonds that pay for public works projects. Lockyer, state Controller John Chiang and Schwarzenegger's finance director, Mike Genest, will decide Wednesday whether to halt spending on all such projects until lawmakers reach a budget solution.

With the state rapidly running out of cash, the need to find budget solutions quickly was one area that all sides seemed to agree on.

"If you keep doing business the way we're doing business in California today, we're heading for the cliff," said state Sen. Bob Dutton, R-Rancho Cucamonga (San Bernardino County), vice chairman of the Senate Budget committee. "We've got to change."

Competing plans

California's fiscal crisis is expected to create a nearly $40 billion budget deficit by June 30, 2010. Here's how Gov. Arnold Schwarzenegger, and legislative Democrats and Republicans would reduce that total:

-- Schwarzenegger has suggested a $22.4 billion plan that includes $9.8 billion in cuts and $12.5 billion in revenue increases. He would raise the sales tax by 1 1/2 cents on the dollar, broaden the sales tax to include certain services, add an oil severance tax, add an excise tax on alcoholic drinks and increase the vehicle registration fee.

-- Democrats have come up with a $17 billion plan divided almost equally between cuts and new taxes that include restoring the vehicle license fee that Schwarzenegger cut when he took office and increasing the income tax by eliminating this year's inflation adjustment.

-- Republicans want a $22 billion plan that includes $15.6 billion in spending cuts and $6.5 billion in new revenue for the general fund, most of which would be taken from money that now pays for mental health care for homeless adults and children's health care.

Sources: state Department of Finance, Chronicle research

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