CSUN University News Clippings

Assembly leader says new revenue sources are on the table

(June 11, 2009)

By Jim Sanders

Californians can brace for a new war over raising revenue to close the state’s multibillion-dollar budget shortfall – the first shots are on their way.

Assembly Speaker Karen Bass said Wednesday that her caucus is deciding among numerous revenue-raising options because the $24.3 billion shortfall is too large to bridge without an infusion.

Bass and other Democratic lawmakers fear that mending the hole without new revenue would devastate the state’s safety net.

“You can’t solve a deficit this big through cuts alone, considering all the cuts that have been made over the last few years,” Bass said.

The Los Angeles Democrat said that ideally she would like to see a balanced approach utilizing about equal amounts of program cuts and revenue generation, but she conceded that cuts will dominate.

“We would like for it to be as balanced as possible – I’d love for it to be 50-50, but it’s not going to be 50-50,” she said.

Bass declined to discuss options under consideration or how much they could raise. She said some could be implemented by a simple majority vote of the Legislature, meaning that they rely on fees or mechanisms other than taxes.

Numerous Assembly Democrats said privately Wednesday that their caucus has spent many hours in behind-closed-doors meetings the past two weeks discussing the need for new revenue and numerous possibilities.

Capitol interest groups have pushed ideas that include imposing an oil production tax, increasing corporate income tax rates, restoring state fees on motor vehicle licenses to their 2003 levels, or raising the state’s top personal income tax rate.

Assemblyman Jim Beall, D-San Jose, said he would like to see higher fees on cigarettes, alcohol, pornography or card rooms.

“To me, you have to put a little revenue in there,” he said. “It’s going to cause a little pain, but an all-cuts budget is bad for the economy.”

Bass’ comments came only one day after Senate President Pro Tem Darrell Steinberg took a different tack that called for preserving key health, welfare and college aid programs by raiding state reserves projected at $4.5 billion next year.

Gov. Arnold Schwarzenegger blasted Steinberg’s approach as “wishful thinking” or “hallucinatory.” He contends that raiding the reserves would leave another gaping hole in the state’s budget next year.

Schwarzenegger also has opposed the notion of raising taxes to bridge the budget gap at a time when the state’s economy is foundering and revenues continue to plummet.

“The governor believes we need to cut spending and make government more efficient,” said Aaron McLear, Schwarzenegger’s spokesman.

Republican legislators consistently have opposed targeting Californians’ pocketbooks to solve the state’s budget woes, saying such a move could worsen the economy.

Bass was careful not to use the word “taxes” in describing potential revenue generation, but the powerful Service Employees International Union publicly beat the drum for a tax hike in a $1 million advertising campaign launched Wednesday.

“Tell Sacramento to balance spending cuts and taxes. It’s just common sense,” says the union’s ad, which will air in the Sacramento, Los Angeles, San Francisco and San Diego media markets.

“I think that just going on cuts alone is going to have a devastating impact,” said Eliseo Medina, SEIU executive vice president.

SEIU represents 700,000 members in California, including in-home health care workers and others who stand to lose under proposed state budget cuts.

Medina conceded that lawmakers must act quickly, but if there is political will, there is ample time to consider tax hikes.

“It ain’t over till it’s over,” he said. “I think it’s not too late to walk away from the precipice.”

State Controller John Chiang said Wednesday that the state’s fiscal condition is worsening and that the state will run out of cash in July.

“Without immediate solutions from the governor and Legislature, we are less than 50 days away from a meltdown of state government,” Chiang said in a statement.

Schwarzenegger told reporters he won’t “under any circumstances” agree to short-term borrowing to keep state services operating if lawmakers don’t act in time.

Treasurer Bill Lockyer said the state needs a balanced budget by July 1 or it will not be able to meet essential cash-flow needs.

“If they’re able to avoid some of the cuts by eliminating tax loopholes or finding another revenue source, I think that’s fine – but I’m not sure they can,” Lockyer said.

Bass vowed to act quickly. “Whatever we do, it’s going to be done by June 30,” she said.

Bass noted that even Schwarzenegger’s budget-balancing proposal, while not raising taxes, would generate several billion dollars.

The governor’s plan, for example, would accelerate tax payments by requiring corporate and individual filers to pay 40 percent of their liability in June.

Schwarzenegger’s plan also would allow some oil drilling off the Santa Barbara coast, generating state royalties, and would sell a portion of the State Compensation Insurance Fund.

Democratic lawmakers have insisted that Schwarzenegger’s proposal relies too much on program cuts, however, and would devastate key services for the state’s most vulnerable residents.

Specifically, Democrats have pointed to the proposed elimination of California’s primary welfare program, a health care program for uninsured children and financial aid for college-bound students.

Publication: Sacramento Bee