Statement of Sen. Tom McClintock (R., Thousand Oaks)

Three years ago, when the 2000 budget passed the legislature with overwhelming majorities, I warned that "If lawmakers don’t take a strong stand now to control spending, they are setting California up for very harsh choices and hard times just around the corner."

Two years ago, when the 2001 budget was taken up in the Senate, I warned the continued absence of structural reforms in the budget would ratify policies that were bankrupting our finances.

Last year, when the 2002 budget was taken up in the Senate, I warned that the budget set in motion events that would require the next legislature to "address a continuing hemorrhage of red ink whit fewer options and a weakened economy."

And today I tell you this: the budget now before us is a rotting porch just waiting to collapse.

It rests on two decayed pillars that cannot stand: the illegal tripling of the car tax and the illegal borrowing of billions of dollars for ongoing expenses without a vote of the people.

According to the office of the legislative counsel, the governor does not have the authority to raise this tax.

This action is now being challenged in court. And mark my words: the state will be ordered to refund this money -- plus interest. If you pass a budget that spends this money -- you have just blown a multi-billion dollar hole in future budgets.

The second rotting pillar of this porch is the borrowing of $13 billion for ongoing state obligations, in direct violation of Article 16 of the state constitution. It doesn’t matter what general fund revenue streams you dedicate to its repayment -- it is a general obligation of this state and general obligation debt cannot be used for ongoing expenses and it must be submitted to the people.

And we have already been placed on notice that this action will be challenged in court. And it too will collapse.

I set only two requirements for my vote on this budget: it must be balanced and it must not require tax increases.

As to the first: I count some $13 billion of deficit spending -- including the Davis deficit bond, the pension bond and the $1 billion raid on our highway funds. It is not balanced.

And as to the second: however you care to explain it or justify it, this budget is based on over $5 billion of new taxes -- $4 billion in car taxes, a half billion in manufacturer’s taxes, and a half billion in other taxes masquerading as fees. That’s an average of $575 of new taxes on every family in this state. It DOES require tax increases.

I believe Senator Brulte when he says that this is the best budget that he feels he could negotiate given the current membership of the legislature and the current structure of our service delivery systems.

But here’s the problem. The current structure of our service delivery systems is completely shot. You have to change those systems.

We can bridge that gap -- but we have to be willing -- right now -- to close obsolete offices, eliminate agencies that have overlapping jurisdictions, decentralize service systems and restore local control over those systems. We have to allow state government to do what every household and business does everyday -- shop around for the best service at the lowest price. We can no longer delay prevailing wage reform, welfare reform, medi-cal reform, workers compensation reform.

And every time that I -- and others -- have made these proposals we’ve been told -- year in and year out -- that there’s no time and we’ll talk about them next year.

I realize that we are taking some steps forward by finally moving ahead with BRAC and are at least talking about some structural reforms. But I’ve heard promises of bureaucratic reform before and they all go away once the budget is passed.

This might be the best the legislature can do. But it is nowhere close to the best that can be done and that needs to be done.

Mark my words: this budget solves nothing. It sets in motion still bigger deficits to come. The day that it is signed will be the first day of the budget crisis of 2004.

Assemblymember/Budget Committee Chair Jenny Oropeza (D., LB-Carson)

No member of this Legislature is entirely happy with this budget. There is something in this Budget Act for everyone to dislike. I myself am not thrilled with certain aspects."

But our work is not complete because we must immediately begin work on structural reform closing the nearly $8 billion deficit projected for 2004-05.

The 2004-05 budget gap is the result of two things: The Republicans were unwilling to budge on increasing taxes on the rich, and Democrats were unwilling to cut further into critical services already cut to the bone.

This budget cuts K-12 education to the minimum Proposition 98 guarantee. It also cuts services and grants for the elderly, the blind and the disabled and makes extremely difficult cuts to health care and health access.

But this budget avoids the unconscionable cuts proposed in the Assembly Republican plan, such as cutting an additional $1.7 billion out of our schools.

Republican Assembly Caucus

The California Assembly passed a state budget today that avoids the massive proposed taxes supported by Democrats and Governor Davis, and makes reductions in state spending. It also maintains education funding required under Proposition 98, repeals fees on California’s farmers and agriculture, and provides for school equalization funding. It also provides resources for law enforcement to strengthen public safety, including reinstatement of booking fees for cities, rural public safety grants, and a grant to continue the fight against methamphetamine. The measure received the required 54 votes necessary, and proceeds to the Governor’s Office for enactment into law. However, the budget does not make enough changes to alter California’s long term structural debt, and Assembly Republicans vowed to continue their fight on behalf of California taxpayers for fiscal responsibility.

"This spending plan has something for everyone to dislike, but is a vast improvement of what we started out with," said Assembly Republican Leader Dave Cox (R-Fair Oaks.) "We were able to prevent billions of dollars in tax increases proposed by the governor and supported by Assembly Democrats. We’re proud to have stood up for the people of California who feared government would shift the budget burden to them. They deserve a better budget solution, but this budget does put California on a fiscally responsible path. This isn’t as good a budget as Republicans would have passed if we were in a majority, but it is much better than anything we’ve seen all summer long.

"Of course, Californians deserved more than the failed leadership they’ve received under Governor Davis, whose inability to govern devastated our state’s economy, and left us with an unprecedented $38 billion hole. There were no easy solutions, and though we proposed a budget that did not raise tax increases, Democrats were not willing to make the difficult but necessary spending reductions to enact that plan. Today’s budget reflects bipartisan compromise.

"I am troubled that this budget relies on revenues generated by Governor Davis’ blatantly surreptitious triggering of a $4 billion dollar increase in car taxes. I believe Governor Davis violated the Constitution, and I am supporting a lawsuit challenging the governor’s car tax hike. The bottom line, however, is that until the judicial system makes a final ruling as to the legality of this tax, there is no way to stop its enactment."

"This plan makes children a top priority," Cox added. "By funding the Proposition 98 education guarantee, schools will be largely spared from the budget axe. Educating our children is the most important function of state government. This budget keeps schools open, teachers employed, and children learning by preserving education funding at the Proposition 98 guarantee, and this achievement should not be overlooked -- especially given the enormous deficits facing California. Education remains the largest expense item for state government, and yet we have found a way to protect students and teachers amid a devastating budget crisis. I’m also pleased that we were able to bring fairness and equal funding for California’s classrooms. Assembly Republicans once again fulfilled their commitment to school equalization funding in 2004-05. This is a basic issue of fairness for California’s low-wealth schools and their students."