Calif. budget disliked by Democrats, Republicans

[June 29, 2011]  SACRAMENTO, Calif. (AP) -- Democrats and Republicans both found something to dislike in California's newest spending plan, which passed with only Democratic votes after months of budget negotiations proved fruitless.

Democratic lawmakers said they were forced to use their newfound majority-vote authority to fill in California's remaining $9.6 billion budget deficit without the tax renewals they had sought all year. Republicans, meanwhile, criticized the budget package for lacking any of the changes they sought to restrain state spending and improve California's business climate.

"This budget fails to include any of the reforms that Republicans have been seeking since January -- reforms that address our massive unfunded pension liabilities and reforms that reduce our regulatory (burden) so we can put people back to work and make sure that California businesses thrive in this state," said Sen. Mimi Walters, a Republican from Lake Forest. "The budget before us is more of the same, kicking the can down the road."

In a late vote Tuesday, Democrats in the state Legislature approved an $86 billion spending package using more spending cuts, greater-than-expected tax revenues and some new fees that are sure to be challenged in court.

They passed a series of related bills that will raise fees, shift more responsibility for the prison system to local governments and prepare for deeper cuts to schools, higher education and social services if the revenue assumptions don't pan out. The changes come on top of billions of dollars of cuts from welfare, in-home support services and Medi-Cal programs passed in March.

California began the year with a projected deficit of $26.6 billion.

"We have stepped up. We have made decisions that we hate because there's less money and we have to do the best we can with what we have," said Senate President Pro Tem Darrell Steinberg, D-Sacramento. "The minority party has sat on its hands, has sat on its pledges and has refused to participate in governance."

Gov. Jerry Brown was certain to sign the package after striking a compromise with his fellow Democrats days earlier. He said he gave up on his plan to get Republican support for tax increases after coming to the conclusion that GOP members had "an almost religious reluctance" on revenues for the state budget.

He praised his fellow Democrats for producing an on-time budget.

"Putting our state on a sound and sustainable fiscal footing still requires much work, but we have now taken a huge step forward," Brown said in a statement after the budget package passed.

The package included bills that will raise fees, fund a prison realignment and restructure the state's 400 redevelopment agencies so more tax money will flow to schools.

If the projected higher tax revenue fails to materialize, the budget plan calls for immediate cuts to schools, higher education and social services.

Democrats were angry about having to make deep cuts to higher education, welfare, social service programs, state parks and other core state services.

If the revenue projections fall short, it will trigger up to $2.5 billion in additional spending cuts to schools and other programs in the middle of the fiscal year. That would include authorizing school districts to shorten the school year by seven days, increasing community college fees, cutting $100 million more from in-home support services and slashing $250 million from school bus transportation.

It also would mean additional cuts to the University of California and California State University systems. Once a model for the nation, the state's four-year systems of higher education already face $1.3 billion in cuts for the coming fiscal year.

"We know that higher education and universities and colleges get further and further out of reach because tuition keeps going up," said Sen. Mark Leno, D-San Francisco, chairman of the Senate budget committee. "We are disinvesting in our higher education system, the very education system that made this the eighth-largest economy in the world."

Brown had hoped to extend temporary increases to the state sales, personal income and vehicle taxes to help close the state's budget deficit. He wanted the Legislature to call a special election so voters could decide the question, but he could not persuade the four Republicans needed to support it.

The increases to the sales and vehicle taxes will expire Thursday, while the increase to the personal income tax rate expired in January. In all, the state Department of Finance estimated the end of the temporary increases will save the average Californian about $260 a year.

Democrats can pass a budget with a simple majority vote, but a two-thirds vote still is needed for tax increases and to place measures on the ballot.

Republicans had wanted reforms to the public pension system, a state spending cap and an overhaul of state business regulations in exchange for authorizing a special election.

Several Republicans said the assumptions of greater-than-expected revenue undermined the Democrats' pleas for a continuation of the higher taxes. In addition to the $4 billion projected in the latest budget plan, Brown assumed $6.6 billion in higher revenue.

"If we now have the revenues that we needed at the beginning of the year, why is it we keep going back to the voters asking for more?" said Sen. Bob Huff, R-Diamond Bar, vice chairman of the Senate Budget Committee.

Republicans also criticized the budget's lack of long-term reforms, saying it does nothing to address California's chronic imbalance between tax revenue and annual spending obligations.

"This is a hope-without-change budget," said Senate Minority Leader Bob Dutton, R-Rancho Cucamonga.

The Legislature acted with unusual haste to pass a budget before the start of the fiscal year on July 1. An initiative passed by voters last fall halts lawmakers' pay if they miss their June 15 deadline to pass a balanced budget.

The budget provides additional revenue, but Republicans and anti-tax advocates questioned the Legislature's ability to impose fees without meeting the two-thirds legislative vote threshold for tax increases.

The new revenue would come from a $12 increase in the annual vehicle registration fee to pay for Department of Motor Vehicles services and a $150 annual fee on property owners in rural areas that depend on the California Department of Forestry and Fire Protection for wildfire protection. The wildfire fee is expected to raise $50 million in the new fiscal year.

[Associated Press; By JUDY LIN]

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