Calif. budget deal leaves taxes, reforms to voters

SACRAMENTO, Calif. (AP) — Gov. Jerry Brown and the Democrats who dominate the California Legislature on Wednesday celebrated the rare enactment of a state budget before the fiscal year begins, after using their new power to pass the spending plan with a simple majority vote.

But the $86 billion budget approved Tuesday night is only the starting point for a larger political fight to come. In true California style, it will be up to voters to decide the biggest issue the governor promised but failed to deliver this year — an increase in taxes to help end the state’s ongoing budget mess.

Voters almost certainly will be asked to weigh in on one or more tax proposals in 2012, as well as whether to institute a strict cap on state spending. Public employee unions and anti-tax groups already are gearing up for an intense year of proposed reforms, although it’s unclear whether one of the Republicans’ top priorities — changes to the public pension system — will be among the moves.

Brown promised voters during his campaign for governor last year that he would not impose tax increases without a vote of the people. He had hoped to ask Californians to extend for up to five years a series of temporary increases in the sales, vehicle and income taxes approved by the state Legislature in 2009.

But he needed two GOP votes in each house of the state Legislature to put that measure on the ballot, and after six months of talks he announced this week that he had lost that battle.

The last of those tax increases will expire Thursday.

With this year’s budget debate behind them, Brown’s fellow Democrats are deciding what type of tax increases might prove more palatable to an electorate that is generally reluctant to tax itself.

Among the ideas are an additional tax on the wealthiest Californians and a tax on companies that pump oil within the state. Proponents are gearing their ballot campaigns toward the November 2012 presidential election, when turnout is expected to be higher and more Democratic-leaning than it would have been this year or during the June primary next year.

“We enacted a plan that preserves our opportunity for economic recovery, and look forward to giving Californians the chance to vote on making that recovery even stronger,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento.

Brown’s office had not released details about when he will sign the budget package.

The budget for the fiscal year that begins Friday relies on further spending cuts to close a remaining $9.6 billion deficit, an amount that had been reduced from a $26.6 billion deficit at the beginning of the year.

It also imposes new fees on vehicle registration and rural property owners for fire protection, levies that are almost certain to be challenged in court because they did not get the two-thirds vote required for tax increases. Democrats also assume the state will take in some $10 billion more in tax revenue than originally projected, largely because the rich are doing so well.

The budget package also shifts responsibility for low-level offenders from the state to counties, and includes deeper spending cuts to schools, higher education and social services if the revenue assumptions fail to materialize. School districts, for example, would be allowed to reduce their school years by seven days.

The changes come on top of billions of dollars in cuts to welfare, in-home support services and Medi-Cal programs passed in March.

Brown has indicated that he will pursue another ballot measure for November 2012 but so far has given no details on what taxes he would include.

Some of the state’s most influential unions had grudgingly backed Brown’s proposal to extend the tax increases but were concerned the move would not address the state’s long-term financial problems even if voters approved. Unions also were reluctant to support a special election that would have included pension reforms and a spending cap — the demands Republicans were making.

Now that Brown’s plan for a special election this year has failed, the unions are free to pursue other options.

The California Federation of Teachers has launched a campaign to add a 1 percent income tax surcharge on Californians who make more than $500,000 a year — about the wealthiest 1 percent. That would bring the state taxable income rate to 10.3 percent for the richest Californians and net about $2.5 billion a year for the state, based on current returns.

“Our polling shows us clearly that this is a winner, that very high numbers of the public and likely voters agree that the wealthiest Californians should contribute more,” said Fred Glass, the federation’s communications director. “I think there’s a growing recognition that it’s not that California’s broke. We have plenty of money in this state; it’s just in other pockets.”

An Orange County community college professor is circulating a proposal to impose a 15 percent per-barrel tax on oil extracted in California and send the money to schools. Most other states where oil is pumped impose just such a fee.

Nearly half the estimated $3.6 billion in annual revenue would go to community colleges, about a third to public schools and the rest to the University of California and California State University systems.

That proposal hits the high notes for a California electorate that shows much greater propensity to support taxes on the wealthy and on corporations. Proponents have until September to collect an estimated 500,000 signatures to qualify it for the ballot.

Voters also are far more likely to back tax increases that go toward specific programs they support, such as schools and local law enforcement, said Mark Baldassare, president of the Public Policy Institute of California.

“K-12 always polls the best, and local rather than state services, so the more that it appears that new taxes are aimed at schools and at local communities, the more likely that voters would support those types of taxes,” he said. “In general, Californians are not eager to see additional tax monies go to the state government without any specific purpose.”

Union opponents are also gearing up for a fight, including a proposal known as paycheck protection that would restrict the funds public employee unions could collect, said Jon Coupal, president of the Howard Jarvis Taxpayers Association.

“On our side of the ledger, you’re going to see some labor reforms like paycheck protection, a hard spending cap and pension reform,” he said. “I think there’ll be a number of interests lined up on both sides ... People are saying it’s going to be a pretty aggressive initiative battle in 2012.”

One of the state’s most influential and wealthy unions, the California Teachers Association, isn’t yet willing to back any of the specific tax ideas being floated. The CTA instead is hoping to pursue major structural reforms to the state’s tax system.

“We would much rather look at the tax structure in a global way, as a fairness issue. ... Who should be paying what and why?” said CTA President Dean Vogel. “The ideal is that public education is funded a level that is adequate to do the things we’re being asked to do.”

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