CSUN University News Clippings

Details of plans to tackle Calif’s budget deficit

(December 2, 2008)

Published: 12/01/2008

Here are snapshots of various proposals to close California’s $11.2 billion budget deficit. The details are from proposals released by Gov. Arnold Schwarzenegger and Democrats in the state Legislature, and general ideas recommended by Republicans, who have not released a detailed plan.

GOVERNOR’S PLAN

Schwarzenegger proposed closing the deficit through the fiscal year that ends June 30 through a combination of tax increases and spending cuts:

Tax increases:

— Total: $4.7 billion.

— Raise the state sales tax by 1.5 percentage points—or a penny and a half on the dollar—for three years to generate about $3.5 billion in the current fiscal year. The state currently collects 7.25 percent in sales tax, with 1 percent of that automatically sent back to local governments.

— Broaden the sales tax beginning Jan. 1 to include more services, including vehicle repairs, appliance and furniture repairs, veterinarian services and greens fees for playing golf.

— Increase the Department of Motor Vehicles’ annual fee for registering vehicles in California from $30 to $42.

— Impose a 9.9 percent tax on each barrel of oil extracted from California, a tax other oil-producing states already levy. The move is estimated to generate $528 million this fiscal year.

— Raise an excise tax collected on all beer, wine and liquor by 5 cents per drink on distributors and wholesalers to raise $293 million
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this fiscal year.

Spending cuts:

— Total: $4.4 billion.

— Reduce K-12 education funding by $2.5 billion and funding for the University of California and California State University systems by $132 million.

— Cut the state’s welfare-to-work program, known as CalWORKS, by 10 percent beginning in the spring and reduce a supplemental grant for low-income seniors and the disabled by $348.9 million. Cease optional low-income health benefits for adults under the state’s Medi-Cal program.

— Require state employees to take a one-day-a-month unpaid furlough and forego two of 13 paid holidays, Columbus Day and Lincoln’s Birthday.

— Rescue the state’s unemployment insurance fund by asking employers to pay more and tightening eligibility requirements, which would reduce payments to laid-off workers. The fund is projected to be $2.4 billion in the red by the end of 2009.

Economic stimulus:

— Require lenders to modify loans for troubled homeowners, cutting monthly payments by up to 30 percent. The governor’s plan also calls for a 90-day moratorium for homeowners facing foreclosure.

— Accelerate spending on public works projects, including $204 million from water bonds, more than $1.5 billion for transportation and $106 million for hospital construction. Suspend environmental review requirements for those projects.

DEMOCRATS

They have proposed a package based on cutting $1 in spending for every $1 in tax increases. They say it would balance the current year’s budget and trim about $18 billion from the projected 2009-10 deficit. Assembly Speaker Karen Bass, D-Los Angeles, said she is considering other ideas after the package was rejected in the state Legislature.

Tax increases:

— Total: $8.1 billion.

— Increase personal income tax payments by maintaining the current tax brackets for 2008, rather than allowing them to adjust beyond inflation levels. That would cost taxpayers anywhere from $79 to $200 more depending on their income and generate $1.4 billion for the state in 2008-09 and $1 billion for 2009-10.

— Restore the vehicle license fee that Schwarzenegger cut after taking office to the same rate of 2 percent of a car’s value, up from the current .65 percent. That would generate $1.4 billion in 2008-09 and $4.3 billion in 2009-10.

Spending cuts:

— Total: $8.1 billion.

— Cut K-12 education funding by $2.5 billion as Schwarzenegger proposed, but target specific programs to try to reduce the effect on classroom instruction.

— Cut $132 million from the University of California and California State University budgets, also as Schwarzenegger proposed.

— Maintain current Social Security grant levels and suspend cost-of-living increases for Social Security and welfare-to-work programs, saving a combined $600 million this fiscal year.

— Ask state workers who are currently negotiating labor contracts to make unspecified concessions worth $658 million through June 2010.

REPUBLICANS

They have yet to offer a detailed proposal to close the $11.2 billion gap in the current fiscal year. GOP lawmakers oppose implementing new taxes or raising existing ones to help close the shortfall. Instead, they support:

— Selling state assets, collecting outstanding debt, cutting wasteful spending, enacting a strict spending limit and approving an economic recovery plan.

— Adding a fee on oil extraction in California like the ones many other states collect.

— More flexible work schedules for businesses to save on overtime and postponing some of California’s mandatory regulations aimed at reducing greenhouse gas emissions.

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Sources:

California Department of Finance, office of Assembly Speaker Karen Bass and office of Assemblyman Mike Villines, R-Clovis.

Publication: Associated Press