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No general tax hike in budget agreement
Legislators are closer to spending plan deal
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At a glance
Here's a look at some of what legislative leaders are proposing to plug a $15.2 billion budget shortfall:
- Cut $7.1 billion in state spending, including reductions in public transit and human services programs; includes lower-than-projected education funding, although schools will be fully funded under Proposition 98's minimum funding guarantee.
- Collect $2.3 billion through "accelerations" in revenue by requiring corporations and upper-income taxpayers to pay 30 percent of their estimated taxes in each of the first two quarters of the fiscal year instead of 25 percent.
- Collect $1.6 billion through a 10 percent increase in state income tax withholdings.
- Close the "yacht tax" loophole that allows people to avoid paying state sales tax on boats, RVs, airplanes and other luxury goods if they take possession out of state and keep the items there for more than 90 days.
- Borrow against future lottery revenue to secure $10 billion over the next two fiscal years, starting in July 2009. The money would be deposited into a new fund dedicated to retiring debt. Prize payouts would be increased, but no new games or technologies are envisioned.
- Increase the state's "rainy day" fund from 5 percent to 10 percent of the general fund budget.
- Grant the governor authority to cut up to 7 percent from state operations when revenues fall below expectations. The governor would not have the ability to cut from the largest areas of the budget — education and health and human services.
Source: Assembly Budget Committee
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SACRAMENTO — Patching together billions of dollars worth of accounting maneuvers, accelerated tax collections and other changes to tax laws, California lawmakers Monday night appeared on the verge of ending the longest state budget impasse in history without resorting to a general tax increase or heavily borrowing from special state funds.
Leaders of both parties negotiated the deal on Sunday, then spent Monday briefing their members on the details and preparing for what was expected to be a very long night. In addition to the budget itself, the deal was dependent on passage of 25 separate pieces of legislation.
Before they could begin deliberations, however, Gov. Arnold Schwarzenegger presented the four leaders with a list of three demands, threatening to veto the deal if they were not accommodated.
Schwarzenegger's demands concerned the details of how much money would be directed into a strengthened "rainy day" fund and under what conditions money could be withdrawn from it in the future.
Legislative leaders were privately discussing how to respond to those demands late Monday. The Senate voted 29-10 to approve the main budget bill, two more than the two-thirds majority needed for passage, but that vote was awaiting a final recording as of 11:45.
The proposed budget deal would close the state's $15 billion budget shortfall through about $7 billion in spending reductions and $9 billion in added revenues. The revenues would be generated by such steps as increasing the amount of income tax withholding from the paychecks of all California workers and requiring those who make quarterly estimated tax payments to frontload their payments next year.
In each case, taxpayers would have the same total tax liability, but the state would receive more money in 2009 and less in 2010.
The deal would result in a $1.5 billion shortfall heading into next year's budget — a relatively small amount that would be made possible by selling increased future lottery revenues to investors next year. That sale would generate an estimated $5 billion in each of the next two years.
Changes in the lottery and in the "rainy day" fund requirements would have to go before voters, most likely in a special election next year.
Some criticized the budget deal for its reliance on financial gimmicks and failure to address long-term fiscal problems, but both sides achieved their principal objectives for the near term: Minority Republicans successfully blocked a tax increase, and majority Democrats prevented spending on education, healthcare and social service programs from dipping below the minimum levels they had decided upon in June.
"For everybody, their biggest fears weren't realized," said Assembly Budget Committee Chairman John Laird, D-Santa Cruz.
Still, lawmakers acknowledged that the budget deal fell far short of what they wanted.
Sen. Sheila Kuehl, D-Santa Monica, said the action represented a necessary cave-in by Democrats after more than two months of attempting to persuade at least a handful of Republican lawmakers to vote for a tax increase.
"It's a cave-in because we really thought it irresponsible to have another budget without revenue enhancements," she said. "It's another year of smoke and mirrors, another year of pushing the problem into next year."
Under the agreement, schools would get $58.1 billion, which is $300 million more than Schwarzenegger proposed in his August compromise proposal but $800 million less than Democrats had agreed to in the plan adopted by the budget conference committee over the summer.
Compared with the spending levels schools would have needed to keep pace with their 2007-08 budget, it is a $3 billion reduction in education funding.
The agreement also avoids some of the deep cuts to Medi-Cal that had been contemplated by Schwarzenegger. Among other things, it restores a 10 percent cutback in provider rates, beginning in March.
The deal also includes some of the "budget reforms" that Schwarzenegger has been insisting upon all year. It increases the amount of money that will annually be placed into a reserve fund called the Budget Stabilization Account, allows that account to accumulate a higher balance and requires a specific act of the Legislature to withdraw money from the fund.
In addition, the deal would give the governor limited authority to make midyear budget cuts. He or she could reduce general government spending by up to 7 percent and suspend any approved cost-of-living increases for four months, without approval from lawmakers.
Even without a tax increase, the effects of the budget deal could be felt by taxpayers beginning Jan. 1. At that time a new law would kick in increasing the amount of payroll tax withholding by 10 percent. In other words, a worker who now has $100 per pay period withheld from his or her paycheck would have $110 withheld instead.
For taxpayers who typically owe the Franchise Tax Board on April 15, it will mean they will owe less at tax time. For those who typically receive a refund, it will mean a larger refund check. In each case, their take-home pay will be reduced from paycheck to paycheck.
Taxpayers who wish to do so can adjust the number of deductions on their payroll withholding form to prevent a reduction in take-home pay.
Other revenue adjustments would require those who file quarterly estimated tax payments to pay 30 percent of their expected 2009 tax liability in each of the first two quarters of next year and 20 percent in each of the last two quarters, rather than paying a flat 25 percent each quarter.
Those two changes alone will result in $2.9 billion in additional revenue in the 2008-09 fiscal year.
Posted by Dyscrasy on September 16, 2008 at 1:05 a.m. (Suggest removal)
How about eliminating funding for the millions of illegals? They alone are leeching our economy dry. What, it's "politically incorrect" to mention the fact that our state is supporting a whole lot of people who aren't citizens or even legal residents? No wonder we're broke. Be careful, just step around THAT GIANT ELEPHANT in the middle of the room....
Posted by tom on September 16, 2008 at 6:07 a.m. (Suggest removal)
There is still a lot more that can be cut from the budget and I hope that Arnold holds firm and vetoes any bill without cuts for the future. And when it is time to vote, remember all those Democrat legislators that wanted to raise your taxes even higher!
Posted by keepin_it_real on September 16, 2008 at 6:34 a.m. (Suggest removal)
Amen to all comments above !!!!!
Posted by VoiceofReason on September 16, 2008 at 6:52 a.m. (Suggest removal)
So the bottom line for all of us taxpayers is that the State of California is MANDATING that we provide the state with an interest FREE loan. Lets face it, if you receive a tax refund at the end of the year you are loaning the State money at no interest rate. Ideally one should have their deductions cover your taxes exactly but with this system EVERYONE potentially gets to make a loan to the State. Then next year where will the money come from to refund all the excess taxes collected this year???? Get smart California, increase you deductions by one or two and keep your money in your own pocket, don't give it to the politicians in Sacramento.
Anybody see SMOKE and Mirrors here ?????????
Posted by keepin_it_real on September 16, 2008 at 6:56 a.m. (Suggest removal)
VoiceofReason,
Yes, I am sick and tired of having to bail out the idiots who run our state when they are misusing the money they already get.
Posted by VCNative on September 16, 2008 at 7:43 a.m. (Suggest removal)
What great responses. What is scary is that CA is already heavily taxed and yet the democrats wanted to raise the sales tax again! What the state should do is set aside a fund (something it can afford) for illegals. Once the money is gone its gone, no more, nada. Right now there is no cap on what is spent.
Posted by loquinus on September 16, 2008 at 8:07 a.m. (Suggest removal)
I would rather see the 1% sales tax. At least that way all those that get paid under the table would have to pay also.
Posted by hotwildflower on September 16, 2008 at 8:27 a.m. (Suggest removal)
I would have loved to have seen cutting of healthcare for inmates on death row and serving life sentences while we only extend our finanical responsibility for caring for these people.
I know I bring this up all the time, but I can't get past the fact that the state of CA spent MILLIONS of dollars on health care of one of the Manson clan for cancer treatment only for her to request an early release to die "with dignity" or some crap like that. That was millions that could have been spent on schools...and that was only ONE inmate. Imaging the amount of money spent on these people when at the most all we need to provide is inexpensive pain medication to eliminate cruel and unsual punishment.
Again, cut all the excess that the inmates receive, coffee, sugar, salt, pepper, etc. If many of us had to grow up on powedered milk when times were tough, they can have it too
Posted by hotwildflower on September 16, 2008 at 8:45 a.m. (Suggest removal)
Call me an idiot, but didn't a teacher somewhere along the way make a difference in your life? Mine wasn't a teacher, but a high school counslor...but still, she was funded by the state.
Education matters, it gives children a purpose and leads to less crime.
BTW, Thanks Mrs. Beuttner! :)
Posted by hotwildflower on September 16, 2008 at 9:08 a.m. (Suggest removal)
You're right, let's not put that money towards education and just keep funding the inmates so they never have a reason to rehabilitate since life in prison is so cush!
I am the last person to encourage hand outs on any level or someone not taking personal responsibility, but if we are going to be putting money somewhere, then put it in our youth and the future.
Posted by ReadMyLipsNoNewTaxes on September 16, 2008 at 9:08 a.m. (Suggest removal)
Funny, there are less students in California now than there were 5 years ago, so why should the budget be increased?
Posted by sslocal on September 16, 2008 at 9:40 a.m. (Suggest removal)
Seems to me that tehy forgot the K.I.S.S. Rule. - Keep It Simple Stupid.
When will the realize that gimicks can't fix this problem. Why don't they cut their car allowance? What about their pay raise? Do they get one this year? Someone needs to go through their budget and extract all the benifits they get on our dime.
Posted by keem_s on September 16, 2008 at 9:42 a.m. (Suggest removal)
"the effects of the budget deal could be felt by taxpayers beginning Jan. 1. At that time a new law would kick in increasing the amount of payroll tax withholding by 10 percent. In other words, a worker who now has $100 per pay period withheld from his or her paycheck would have $110 withheld instead."
OK, so California is going to increase our taxes, but give it back to us at the end of the year, so therefore its not really a tax increase. Its an interest free loan to the state. Now where did the state find someone stupid enough to give them a loan at zero percent interest rate? Yep , its YOU, the California tax payer.
Posted by 5thGenerationOxnard on September 16, 2008 at 10:07 a.m. (Suggest removal)
You can get around the higher withholding by increasing the number of dependents you claim.
As for "cuts" to education and healthcare, they are reductions to the increases they proposed. More money will still be allotted to these areas, just not as much additional funding as they originally proposed.
Usually, when politicians speak of reduced spending in a certain area, it is reductions to the proposed increases. (Propose a budget 25% higher than last year, actually increase it 10% and call it a 15% budget cut.)
Posted by lawabider on September 16, 2008 at 10:16 a.m. (Suggest removal)
Hate me for the Republican that I am if you want, but I'm thinking that Sarah Palin's idea AND ACTION to put her state's budget online for ALL taxpayers to view any time they want would be a good thing for California... Then we can actually SEE what they're wasting our money on instead of us just speculating??? Checks and balances are easy for anyone that knows basic math... It comes in from here, and goes out to there... then we'd know which FAT really needs the trimming...
and, Hot Wildflower, I TOTALLY AGREE that we should quit "taking care of" our prisoners... Criminals rights should cease at the entrace to their cell, terms should be shorter and more harsh, jail should be a deterrent to crime not a holiday...
Posted by cat22 on September 16, 2008 at 11:35 a.m. (Suggest removal)
I agree with the first few opinions here, after that it becomes alitlle off the subject. But they say opinions are like a..holes, everyone has one, even idiots. This was not meant to offend anyone but if you are able to read this article you should thank a person called a teacher.
Back to the budget. I hope that all voters in CA remember this debacle when the election rolls around. Find out how the candidates have voted. Was it in YOUR best interest or the lobbyists? Have these people ever had to sell off there possesions to pay their rent or actually use public transportation because they can't afford to buy gas? I have and know others in the same boat & I have a job thank you!!
Posted by rebel123 on September 16, 2008 at 2:41 p.m. (Suggest removal)
What funding are illegals getting? I keep hearing this same rant, but have no understanding of what they are allegedly getting. To the best of my understanding, they are not eligible for any funds.
Posted by Nosmo_King on September 16, 2008 at 6:54 p.m. (Suggest removal)
Cat22, My son reads because his mom taught him to read after public schools failed him.
lawabider, great post!
Posted by keepin_it_real on September 16, 2008 at 7:11 p.m. (Suggest removal)
rebel123,
Illegals get housing, healthcare and schooling for their kids, but can not get welfare. Then they can have children who automatically become citizens. They work and get paid under the table so they pay NO taxes. Tell me that makes any sense. I know that isn't the only reason, but no wonder there is a deficit.
Posted by ironwoman on September 16, 2008 at 7:25 p.m. (Suggest removal)
There are around 19,000 California inmates facing Immigration Holds upon release....cost is $55,000.00 per year per inmate. If they become ill and require medical treatment, cost to keep them in one of the Federal Reciever's prison hospitals will be around $600,000.00 per year per inmate. Now, with the budget the way it is...the Receiver is demanding the 8 Billion dollars next week at a hearing in.
Posted by keepin_it_real on September 16, 2008 at 7:28 p.m. (Suggest removal)
MadAsHell,
Wow, thanks for the info. Then I was wrong according the the link on your post. I did not think illegals got welfare and food stamps and such, just housing and healthcare. (not saying that is a small thing.)
What a wake up call. Now that makes me MAD AS HELL.
Posted by kljinusa on September 16, 2008 at 8:15 p.m. (Suggest removal)
The news is that the Governator will veto this budget bill. It is projected that his veto will be overturned by a coalition of Reps & Dems. I admire him for "sticking to his guns" for budget reform, he is sending a message. I do think that we need a working budget in place NOW, even if it means without reforms; too many services are impacted without a budget, including people's salaries. He can't win this one. But we can try, in the next election, to send a message to the people in Sacramento that are supposed to represent us, WE THE PEOPLE: No new taxes, reign in the spending. I am one of the 38% of the people that think the Governator is doing a good job.
Posted by Nosmo_King on September 16, 2008 at 8:39 p.m. (Suggest removal)
One thing is clear in these Posts...we all have an interest in OUR State. Some are su#king off the teat, and others are lactating. I would say there are more su#kers right now....can you believe I had to replace the "c" in the preview comment!
Posted by elephantpower on September 16, 2008 at 8:40 p.m. (Suggest removal)
Here is the link to the entire 2008 California Budget.
http://info.sen.ca.gov/pub/07-08/bill...
Scroll down about 75%, and find Section 97 on Education, Preschool funding. Look at section 4. Nearly $13M for Cal Works. This makes me sick. The state gives the counties this money for FREE OR SUBSIDIZED PRESCHOOL for low income parents. Some parents qualify for $1,000 which goes into an automatic deposit account for these private preschools.
Look at the other sections, and read about the millions and millions for other preschool programs. THIS is a big reason why the education budget is so huge. I hope the Governor vetos this budget. I hope that voters tell their legislators that we CANNOT afford government subsidized preschools. The DEMS keep sneaking this in on us.
My concern is that it is NOT the best use of public monies. We are cutting funding to American seniors in wheelchairs, blind americans, mentally ill and handicapped americans, but we spend millions on services that illegal aliens use in California. And we subsidize preschools for people who are having babies they can't afford. The middle class cannot keep bankrolling these programs.
Stop the preschools, and there will be more money for K-12 education. That's not rocket science. Stop programs for illegals and there will be more money for our citizens. How hard is this? Just too hard for the 25 democrats in the California Senate. Stubborn bastards that are taking our state to Hell with their liberal programs. Oh, but they say it's "for the children." Right... NOT!! Its really for the teachers union and for the Democrat Party that wants to grow new voters for their style of socialism. It's time to move out of California. Republicans can't keep pushing water uphill. This has become a socialist state.
And soon Communists will be able to teach in California, thanks to SB 1322. I'm disgusted by the Senate leader, Democrat Don Perata. He let this bill go through. Has anyone thought to ask Senate District 19 candidate Hannah Beth Jackson if she is for letting Communists teach in public schools? She is a government paid professor. Let's get her answer on record. The governor still can veto this bad bill.
Posted by tom on September 16, 2008 at 9:01 p.m. (Suggest removal)
When the Gov. vetoes this bill, it is up to us to contact our representatives and demand that they not override the veto. Remind them that we vote and we will certainly not vote for them if they continue this folly.
Posted by elephantpower on September 16, 2008 at 9:01 p.m. (Suggest removal)
Here is a link to Sen Tom Harmon's website on the impact of illegal immigration. He has TONS of links to reports of the costs of letting illegals use our country and our services that are supposed to be for our citizens and our legal guests.
http://cssrc.us/web/35/immigration.aspx
I think the key to sending them home is to start at each school district. Every school board in California could implement a new policy requiring proof of legal residency before registering a child. If the parent is not legal, then their signature is not legally binding. They would have to find a legal guardian for their child, willing to be financially responsible for the kid or kids. Good luck on that, unless it is a relative. THEN they would have to show that the guardian is LEGALLY responsible with a court order. Just exactly like divorced american parents have to do. Yes, it is inconvenient and expensive, but SOMEBODY has to be legally responsible, and illegal aliens seem to get a pass from school districts on attendance laws, paying for damages, paying for lunches, field trips, etc. Enforce legal signatures, and presto! Our schools and hospitals and clinics will suddenly become less crowded.
Posted by NowHearThis on September 16, 2008 at 10:14 p.m. (Suggest removal)
These effin' Sacramento politicians now want to take more or your earnings from your paychecks now. So, soon you're take home pay will shrink.
When will you stupid people wake up and revolt.
You're just a bunch of brainwashed minions.
While we're ticked off, DEPORT THE ILLEGAL FREELOADERS NOW!
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