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…

Latest California Budget Proposal Defeated. Legislature Locked In. Plug Pulled on Public Works Projects

Last night, the California State Assembly voted on yet another budget modification with some combination of spending cuts and raising taxes.  This modification was the one proposed by Governor Schwarzenegger.   Once again, the so-called Republicans in the legislature weren’t on board and there weren’t enough votes to pass the measure.  Here were the broad-strokes of the budget proposal, as reported in the LA Times:

The plan from Assembly Speaker Karen Bass (D-Los Angeles) would have raised $11.3 billion in revenue by raising the state sales tax by 1.5%, adding a tax on oil extraction and increasing taxes on alcoholic drinks — all ideas Schwarzenegger has proposed. The proposal would have reduced spending on schools and social programs by $6.9 billion.

The SacBee reports:

The spending cuts portion of the Democratic-sponsored plan fell six votes short of the two-thirds margin of 54 it needed in an initial tally. The tax hike portion fell eight short in initial voting as none of the 29 Republicans supported it.

The votes come the night before a state board is expected to suspend financing for hundreds of public work projects either underway or about to begin, costing thousands of jobs.

Why did it fail? The LA times says:

The plan’s reliance on tax increases ensured its rejection by the Republican minority, which has the power to block spending plans. Though GOP lawmakers rejected an earlier proposal that was more evenly balanced between cuts and tax hikes…

But if it was ensured to fail, why bother voting on it in the first place?   Assembly Speaker Karen Bass (D-Los Angeles/Culver City) had this to say to the LA Times:

Bass told reporters she was holding the vote because “if we don’t vote on anything, people feel we are doing nothing.”

Speaker Bass, we appreciate the honesty, but unless you’re going Bullworth on us or if this comment is part of some serious inside strategy, you’re really misreading the statewide mood. We already think you’re doing nothing, holding a useless vote only makes things worse.  Admitting to doing it for cosmetic or PR reasons  shows disdain for the people you are supposed to serve.  If it’s a joke, it didn’t translate in print and it’s still insulting.  Boo hiss.

But maybe we shouldn’t second guess Speaker Bass.  According to the SF Chronicle, after it became clear the budget proposal would be defeated, the Speaker pulled this move:

… rather than closing the final vote count on the measures and ending the floor session, Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), announced that lawmakers were locked in, preventing them from leaving the Assembly floor and nearby meeting rooms.

Bass said she ordered the Republicans’ budget proposal to be ready in bill form so that lawmakers could vote on it Tuesday night. But it was unclear how long it would take for the GOP proposal to be ready.

And since there’s no new budget and no one in the legislature has figured out how to stop the state from running out cash by February, it looks like today is the day the plug gets pulled on public works projects.   The LA Times reports:

On Wednesday morning in Sacramento, Lockyer, state Controller John Chiang and Schwarzenegger’s finance director, Mike Genest, will meet to vote as members of the obscure Pooled Money Investment Board on a staff recommendation that new loans for construction projects be stopped and public agencies be barred from spending money they have already been given. The staff estimates that $3.8 billion in project funds would be affected.

“Exceptions may be made for specific projects,” Lockyer spokesman Tom Dresslar said in an e-mail, if the officials determine that “a financing cutoff would expose the state to unacceptable financial penalties, or prevent the state from paying required loan interest or administrative costs.”

If you want to see a big ‘ol list of the projects that are on the chopping block, click here.

Stay tuned…