(May 14, 2003) -- Faced with a now-admitted near $40 billion gap between state spending and state revenue, CA Governor Gray Davis today released a revised proposed spending plan for the 2003-04 fiscal year that (if approved by the state legislature) would significantly increase CA's annual vehicle registration fee (some estimates say roughly triple), impose a "temporary" one-half cent sales tax hike and increase income tax "targeted to realigned local government programs."

In a written release, the Governor's office said his spending plan "protects education, public safety, health care and environmental programs while building consensus with the Legislature on a multi-year financing plan to bridge a $38.2 billion revenue shortfall."

The "shortfall" results from state spending (authorized by the CA Assembly and CA Senate) that exceeds expected state revenue.

"Difficult times force us to examine our priorities and make difficult choices," Gov. Davis said in the release, adding "Our choices reflect our values."

The Governor's revised proposal balances the budget this year, but defers a significant portion of what it calls a "structural problem" to the next budget year. The Governor continues to urge legislators to enact a structural reform package as part of a budget solution.

"The legislature must address the structural reforms necessary to make sure these fiscal problems do not come back to haunt the state in future years," Gov. Davis said.

The Governor proposes, but ultimately the CA Assembly and CA Senate get the last word on the budget. State legislators, not the Governor, ultimately decide state spending (subject to the Governor's possible veto). Democrats are in the majority in both houses of the state legislature. In late April, CA Republican Assemblymembers unveiled their own spending plan that, they say, could balance the budget without raising taxes (Assembly link below).

The Governor's office proposes to handle half of the budget gap with cuts and savings (49.4 percent). The revenue "shortfall" is closed with a total of $18.7 billion in cuts and savings, $7.1 billion in fund shifts, transfers and loans, $1.7 billion in program realignments to local government and $10.7 billion in deficit financing.

The Governor's revised spending plan effectively assumes car registration fees will roughly triple, phrased in government-speak in the release as "the presumed operation of existing law with respect to local government's vehicle license fees ($4.2 billion)."

[Our translation: The Governor's office assumes CA Dept. of Finance will cite existing law as its justification for ending the current practice, began when CA still had budget surpluses, of lowering part of the vehicle registration fee.]

"The Governor's proposed budget revision requires passage of $1.8 billion in cigarette and income taxes targeted to realigned local government programs. A temporary one-half cent sales tax ($2.3 billion) will pay for the deficit financing plan," the release says.

The release stressed that the Governor's plan protects "the progress that has been made in our schools. The Proposition 98 Guarantee is fully funded. Critical classroom priorities, including class size reduction, accountability and special education are fully funded. Schools will have $700 million more in state and local funds than the January budget."

And firing a partisan shot at Republican lawmakers, the Governor's release said, "Community colleges will receive $304 million in funding above the January proposal, and the size of the previously proposed fee increase is reduced to $18 per unit. The Governor rejected the Republican proposal of raising the fee to $26 per unit. Higher education is protected from further cuts."

Regarding public safety, the Governor's office said, "[T]he threat of terrorism makes this no time to compromise on public safety. Local police, sheriff and fire departments are protected by the operation of the existing law governing vehicle license fees. The budget also preserves funding for critical, targeted law enforcement programs."

On health care, the Governor's proposal "restores the proposed cut in SSI/SSP, while continuing to ask that the state-only cost of living increases be suspended. This will result in a small increase in payments for seniors and the disabled."

Assembly Republicans say their plan, floated late last month, "does not rely on tax increases to solve the problem" and is a "compromise proposal [containing] ideas that Republicans have opposed in the past." They said, "Four years of overspending and phony budgets by Governor Davis and liberal Democrats have taken California to the brink of insolvency, and so far their only solution has been to scare Californians into believing huge tax increases are needed," said Assembly Republican Leader Dave Cox (R-Fair Oaks.) "We respectfully disagree -- your taxes do not need to be raised. Our caucus believes there is a better way, and we are ready to lead California back to prominence."

Assembly Republicans posted their plan at CA Assembly Republican budget plan.