Thursday, January 1, 2009

SCHWARZENEGGER PROPOSES BUDGET

By JENNIFER STEINHAUER

The New York Times

 

January 1, 2009 — LOS ANGELES — Gov. Arnold Schwarzenegger, at war with the California Legislature over how to close tens of billions of dollars in projected budget shortfalls, proposed a budget Wednesday that contains a hefty sales tax increase and would cut away at state services.

Mr. Schwarzenegger, a Republican who has repeatedly derided lawmakers — particularly those in his own party — for failing to come to an agreement over how to close the budget gap, released his latest plan through his staff while on a ski vacation in Utah.

The plan is unusual in that it covers 18 months instead of 12, the six remaining months of this fiscal year and the new fiscal year that begins on July 1.

It calls for increased taxes and fees amounting to roughly $9.3 billion, and spending cuts and other solutions — mainly accounting changes and hopeful projections about lottery and other revenues — of more than $18 billion. Fees for higher education would increase, but class offerings would be cut. Health care would be trimmed, and the state work force would be reduced through layoffs.

The plan calls for a 1.5-cent increase to the state sales tax, which is now 7.25 percent — a rise Republicans have repeatedly rejected — and would cut the dependent credit permitted on the 2009 state income tax return by about two-thirds.

California’s fiscal situation is among the direst in the nation, in large part because of the confluence of large tax cuts made early in Mr. Schwarzenegger’s administration and declining tax revenues resulting from high rates of home foreclosures.

The state has already reduced school and health care programs, laid off workers and halted infrastructure projects because of the difficulty it is having selling municipal bonds.

The Legislature passed its own version of a similar budget earlier in December, but Mr. Schwarzenegger, arguing that it lacked sufficient spending cuts, has refused to sign it.

“I appreciate the governor acknowledging today the necessity of the cuts and revenues the Legislature approved,” Speaker Karen Bass, Democrat of Los Angeles, said in a prepared statement. “And I hope the governor’s first act of the new year will be to sign the responsible package we are putting before him.”

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