California lawmakers ready to battle over taxes

Photo of Wyatt Buchanan

Democratic lawmakers proposed raising taxes on tobacco and oil companies and refused to cut state worker pay as a key budget committee finished its plan Tuesday to solve the state's $24.3 billion deficit.

The proposal to raise taxes to add $1.9 billion to the state's coffers is risky, as Republicans are united in opposition to any tax increase and Gov. Arnold Schwarzenegger has pledged to veto any budget that includes new taxes or fees.

The move means lawmakers are headed into a protracted political fight over the budget as the clock ticks on the state government running out of cash by the end of July.

"It's outrageous that the Legislature would ask Californians to pay higher taxes but refuse to cut the pay of state workers by 5 percent. This is exactly why so many Californians have lost faith in Sacramento's ability to solve problems," Schwarzenegger, a Republican, said in a statement. The governor ordered furloughs for state workers that began earlier this year and amount to just under a 10 percent cut in pay.

Assemblyman Jim Nielsen, R-Gerber (Tehama County), called it "the most massive and quickest tax increase ever imposed in the history of California."

Democrats on the committee said they were aware of the risk.

"I'm really concerned when we put up any taxes as Californians are struggling to pay their mortgage, their rent and to put food on the table," said Sen. Alan Lowenthal, D-Long Beach. "The perception of the Legislature is we can't live within our means. We have to realize we will pay a price for doing this."

Democratic leaders plan to announce today a more complete picture of their proposal, which could be voted on by the Assembly and Senate on Monday.

The new taxes would include:

-- A 9.9 percent tax on companies that extract oil from California, something the governor proposed last December, though he has now taken a hard line against any taxes.

-- An increase from 87 cents to $2.37 on a pack of cigarettes. Other tobacco products would also see an increase.

-- Reversing two corporate tax breaks included in the deal last September that ended the stalemate over the 2008-09 budget.

The taxes are in addition to a $15 increase in the vehicle license fee that lawmakers proposed Monday to keep open 219 state parks that would close under the governor's plan, which the committee revised.

As California's financial situation becomes more acute, lawmakers and officials have been pleading with the federal government for help, on the grounds that as the world's eighth-largest economy, the state is too big to fail. So far, the White House has spurned the requests.

"The administration will continue to monitor all aspects of the economic and fiscal challenges in California and elsewhere, but the focus right now should be on California and the tough choices that the elected officials must make to address their fiscal problems," White House spokesman Adam Abrams said on Tuesday.

The administration has not ruled out assistance, but if any comes it may have onerous conditions attached to scare away other states and force California to look elsewhere.

Schwarzenegger has opposed a government bailout for months, and his administration reiterated that Tuesday.

"Gov. Schwarzenegger has stressed time and again that we need to get our own fiscal house in order, and that's exactly what he has proposed to do," Matt David, the governor's spokesman, said. The committee made cuts Tuesday to an array of programs and services, but in most cases they were less than the governor had proposed. The members spared the state's In-Home Support Services from a major cut. That program provides services that allow people with disabilities to stay at home instead of in a hospital, nursing home or another kind of care facility.

Schwarzenegger had proposed to cut the program by about $765 million, which would have eliminated services for about 400,000 people, or 90 percent of those receiving assistance. But the committee, split 6-4 along party lines with Democrats in the majority, voted to cut it by about $117 million, which would drop the rolls by just under 10 percent.

Assemblywoman Noreen Evans, D-Santa Rosa, chairs the budget conference committee and said such large cuts would have been tantamount to cost shifting, as people would receive more expensive services at already-strained hospitals and nursing homes.

"The imagination runs wild on what would actually happen to these people," Evans said.

The committee voted to cut $10 billion from K-12 education this year and next, and about $2 billion from the University of California and California State University systems. The committee mostly spared the Cal Grants program, which offers financial assistance for low-income college students.