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  • Gov. Davis Asks Legislature To Increase Taxes (Incl. 1% Sales Tax Hike), Cut Programs & Enact "Realignment" Shifting Various Services To Local Gov't (funded by state revenue) To Bridge Multi-Billion Dollar Gap Between FY 03-04 Spending and Expected Revenue

  • Democrat Assembly Budget Committee Chair Oropeza Offers Tempered Support; Republican Leader Calls Proposed Tax Increases "Unnecessary And Irresponsible"; We Post Their Statements Verbatim


    (January 10, 2003) -- CA Governor Gray Davis is asking the state legislature to bridge a multi-billion dollar gap between FY 03-04 state spending and expected state revenue by increasing taxes (including a 1% sales tax hike and adding 10% and 11% income tax brackets) along with program cuts (60% of his deficit bridging plan) and a "realignment" shifting various services to local government, funded by state revenue increases.

    LBReport.com is receiving reaction to the Governor's budget proposal as we post. Democrat Assembly Budget Committee Chair Jenny Oropeza (D, Carson-LB) offered tempered support, saying "None of us go into public service with the goal of cutting education and health programs for the needy or raising revenues, but we have a fiscal crisis that requires the tough decisions that Californians demand from their leaders." Assembly Republican leader Dave Cox blasted the proposed tax increases as "unnecessary and irresponsible" and said the "Governorís message to small business owners and working families...is clear: if youíre thinking about leaving California, you should do so as soon as possible."

    We post the state lawmakers' statements verbatim below.

    In a written release accompanying transmittal of his proposed FY 03-04 budget to the legislature (which has the last word), Governor Davis noted that 60% of his budget balancing proposal involves program cuts: $20.7 billion in program reductions. "Nearly every program gets cut in this budget, while protecting education and health care for children as much as possible."

    24% of the Governor's proposed solution is a "realignment" proposal amounting to $8.2 billion that would shift to local government services including mental health and substance abuse, child and youth programs, healthy communities, long term care and court security. Funding for the realignment would come from revenue increases going solely to local government for this purpose.

    In addition to raising the state sales tax by 1% and adding 10% and 11% income tax brackets, the Governor wants the legislature to increase the cigarette tax by $1.10 to generate revenue to fund his realignment proposal. "All the tax increases in this budget proposal will go to local governments so they can maintain these vital services," Governor Davis said. "No tax increases will support state services."

    Roughly 16% of the solution ($5.7 billion) comes from fund shifts, loans and revenue anticipated from Indian gaming.

    The Governor's office says that under Davis' proposal, the state's General Fund will decline from $75.5 billion in the current year to $62.8 billion in FY 03-04, which is the third year the General Fund has declined, something that hasn't happened since World War II. It noted that the FY 03-04 general fund is $4 billion lower than the budget Governor Davis proposed in his first year in office.

    The release added that the Governor will not sign a budget that doesn't include "structural reform to prevent changes in the economy from significantly buffeting California's budget."

    The CA Assembly and CA Senate will have the last word on the budget in the coming months.

    Reaction: Assembly Budget Committee Chair Oropeza (D., Carson-LB) Offers Tempered Support; Republican Leader Blasts Proposed Tax Increases As "Unnecessary and Irresponsible"

    In a written release, Assemblymember Jenny Oropeza (D, Carson-LB), chair of the Assembly Budget Committee, issued the following statement in response to budget details released by Gov. Gray Davis.

    As expected, the Governor has proposed a very painful budget. No one will enjoy the budget process this year. None of us go into public service with the goal of cutting education and health programs for the needy or raising revenues, but we have a fiscal crisis that requires the tough decisions that Californians demand from their leaders.

    I commend the Governor for fully funding the Healthy Families program for children and for preserving some of the most critical health programs. The detail and the impact of this proposal, however, will require significant study to ensure this realignment proposal will meet the needs of Californians.

    I call on my colleagues, Democrats and Republicans alike, to work together to find common ground on these proposals.

    Meanwhile, Assembly Republican Leader Dave Cox (R, Fair Oaks) issued the following written release blasting Davis' budget proposal:

    The Governorís message to small business owners and working families throughout the Golden State is clear: if youíre thinking about leaving California, you should do so as soon as possible. I am greatly troubled by his suggestion to raise $8 billion in taxes on hard working California families. Governor Davisí tax increases are unnecessary and irresponsible, particularly because we donít believe that the deficit is as great as he suggests. It is widely believed that he has intentionally inflated the budget deficit at the request of liberal Democrats in the Legislature in order to convince the people of California that he needs to raise their taxes. However, his administration remains unable to verify their deficit predictions.

    The non-partisan Legislative Analyst has said that the deficit is much lower, and we concur with her analysis. Accordingly, if the spending reductions Governor Davis proposed today are enacted, tax increases would not be needed. Further, his tax hike proposals will cause nearly 500,000 jobs to leave our state. The governor needs to understand that raising taxes - as liberal Democrats are suggesting - will send even more jobs out of California. Republicans agree that creating more jobs is the key to economic recovery. But raising taxes and increasing economic and regulatory burdens on employers wonít create a single new job.

    I applaud Governor Davis for proposing difficult but necessary spending reductions in his budget proposal. He has already asked for $10 billion in spending adjustments, and we share his view that they must be enacted as soon as possible.


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