California Budget Crisis – Dems Say They Can Raise Taxes On Their Own- 12/17/2008 (VIDEO)

As expected, the state voted this morning to halt all road, construction and other public works projects. [Sac Bee]

But what about the budget crisis?  Well, through some procedural loophole where they classify “taxes” as “fees”  they can raise taxes by a simple majority vote rather than the impossible-to-get 2/3 vote usually required to pass a budget.  Check out Assembly Speaker Karen Bass  break it down:

The LA Times breaks down the details:

The Democratic gambit to raise $9.3 billion, scheduled to be voted on tonight, would increase sales taxes by three-fourths of a cent and gas taxes by 13.5 cents a gallon [this means the gas tax would now be 39 cents a gallon] . The plan would also add a surcharge of 2.5% to everyone’s state income tax bill.

In addition, the Democrats said they would cut $7.3 billion from schools, healthcare and other programs. The complete package would total $18 billion and nearly halve the state’s budget shortfall, projected to reach $41.8 billion within 18 months.

The SF Chronicle has some additional details:

State contractor taxes: The plan seeks to raise $2 billion in one-time funds by requiring businesses that hire independent contractors to withhold 3 percent of their pay rather than allowing the contractors to pay a lump-sum income tax.

Shifting some school taxes: The state would raise $1.6 billion by changing a financing system set up several years ago to repay bonds that were used to bridge an earlier budget deficit. Under that plan, the state’s sales tax was raised by a quarter-cent to repay the bond, while local sales tax was reduced by the same amount.

Revenue loss to local government was restored by shifting property tax funds set aside for schools to local government. Money for schools in turn were restored by the state’s general fund.

Under the new proposal, the local sales tax would be raised by a quarter-cent and the state would halt payments to schools, resulting in the $1.6 billion savings in the general fund.

But not everyone is on board.  First, the Governor needs to sign off on it and he’s not so into it yet, so says the SacBee:

But Gov. Arnold Schwarzenegger balked at details of the plan, prompting lengthy, closed-door negotiations between the governor and Democrats on Wednesday night.

Aaron McLear, Schwarzenegger’s spokesman, said the governor does not support the proposal as unveiled.

“As the governor has said, we need a balanced proposal that includes legitimate cuts, real revenues and economic stimulus,” McLear said, citing as examples the creation of public-private partnerships and changes enabling private companies to bid for both designing and building state projects.

And the GOP, of course, is having none of it:

Even if the governor goes along, GOP leaders said they expect the maneuver to be the subject of a legal battle.

“Obviously, I and my colleagues – and I’m sure a lot of other people in the state – will believe that what they’ve done is illegal,” said Senate Republican leader Dave Cogdill of Modesto.

Oh good, a court fight! That will solve everything!

Stay tuned…