Seeking Budget Deal, Davis May Agree to Tax Cut

Gov. Gray Davis has agreed to a $500-million tax cut sure to attract Republican support for a new state budget, and the Legislature could vote on the spending plan next week, leading lawmakers said Friday.

Legislators appear intent on approving the $80-billion budget before the July 1 start of the new fiscal year--a deadline met only once in the 1990s, and one violated more often than not for the better part of the last two decades.

In an all-night session ending at 5 a.m. Friday, a joint Senate-Assembly budget conference committee approved the tax cut in the form of a 10% reduction in the vehicle license fee that motorists must pay each year. The cut continues a legacy of Davis’ Republican predecessor, Pete Wilson.

Davis’ aides would not confirm Friday that the governor has agreed to the tax cut; they said only that it is one of the issues he will discuss with lawmakers this weekend. “The governor is confident that we are going to have . . . a good budget on time,” said press secretary Michael Bustamante.

Legislators who met earlier in the week with the governor said he indicated he would agree to the cut.

“I’m sure of it,” said state Sen. Jim Brulte (R-Rancho Cucamonga), the Senate’s Republican representative on the budget conference committee.

“The governor, in my belief, is supportive of it,” said Assemblywoman Carole Migden (D-San Francisco).

Migden cast the one dissenting vote on the car tax reduction, believing, like many Assembly Democrats, that more money should go to health care for poor Californians. Still, she said she will vote for the budget.

“Certainly there are areas of differences,” Migden said. “But in the main, we endeavored to craft it with an eye to ensuring passage.”

As the committee wrapped up business early Friday, about 200 lobbyists and legislative staffers remained in the committee room.

“Everybody was driven to the point of exhaustion,” said Bill Chavez, a lobbyist for the Los Angeles Unified School District, who remained until the end.

Besides the tax cut, the budget conferees agreed to a rich local government aid package, a salary increase for beginning teachers and $50 million in bonuses for teachers in low-performing schools who help students improve.

“If you take as many actions as we took, there may be some things that stick in somebody’s craw. But this is the framework for a budget,” said Senate Budget Committee Chairman Steve Peace (D-El Cajon).

Part of the framework is the state’s emergency reserve fund, which stands at $1.1 billion. Some of that will be used for upcoming pay hikes for state workers. Davis could increase the reserve by using his blue pencil to reduce or eliminate spending in some areas.

Some of those cuts could come from more than $100 million in special projects requested by lawmakers for their districts. The projects range from new hiking trails and playgrounds to municipal equipment purchases and help for community programs.

The committee also approved the overall budget, but on a party line 4-1 vote, with Assembly Republican leader Scott Baugh of Huntington Beach voting against it and Brulte abstaining.

Brulte said the committee’s work amounted to a “good framework” for the final budget deal. Baugh was less laudatory.

“We are still growing government at an enormous pace,” Baugh said, adding that Republicans in the lower house want a tax cut of roughly $1 billion.

Pressure for the tax cut has grown as the state’s budget surplus ballooned. It’s estimated at $4.3 billion, possibly as high as $4.6 billion.

Initially, Davis included no personal tax cuts in his budget proposal. But he appears to have bent, striving to strike a budget deal by July 1.

To meet that constitutional deadline, two-thirds of the lawmakers in both houses must vote for the budget, and that cannot happen without some Republican support. Republicans repeatedly have said they would not approve the budget without a tax cut.

Holdover From Wilson Administration

The tax cut has it roots in Wilson’s final budget last year, when the former governor engineered an agreement to phase in a 67% reduction in the car tax.

The first reduction came this year, as vehicle owners saw their fees drop 25%. The next cut was to take place in January 2001, worth $500 million a year to California vehicle owners, with deeper cuts coming in the future. Lawmakers simply agreed to advance to January 2000 the tax cut that would have occurred in January 2001.

In a series of meetings this week, legislators also agreed to the outlines of a budget package that includes $50 million to boost the starting pay of teachers, bringing their salary to about $33,000, from the current average of $31,000. Another $50 million would go to bonuses to teachers in low-performing schools who manage to improve students’ performance.

The budget committee also gave the nod to Medi-Cal health benefits for low-income working families with two parents in the home, at a cost of $125 million.

And the committee approved aid worth almost $1 billion for local government, more spending flexibility for local schools and some health care initiatives pushed by Democrats in the Assembly.

Left out of the mix, at least for now, is Davis’ request for $335 million to construct a new maximum security prison in Delano.

“Why do we need a prison?” Davis said in a radio interview on Wednesday. “Because we are at about 195% capacity. In three years, we’ll be at 200%, and we run a very substantial risk that a federal court will force us to release prisoners that have not served their full term. That is not happening on my watch.”

Senate and Assembly Democrats are at best cool to the idea of a new prison. Asked whether there would be money for a new prison in the new budget, Senate President Pro Tem John Burton (D-San Francisco) asked dryly: “What prison?”

The lack of money for the prison does not mean it is dead. Democrats have said they might approve the prison if Davis agrees to a series of changes in the criminal justice system including more drug treatment, literacy programs and lesser sentences for nonviolent offenders and parole violators.

The local government package developed by Sens. Peace and Brulte includes a freeze at $3.6 billion a year of the amount of property tax money that is diverted from counties and other local governments to schools. The freeze would give local governments $234 million next year, and the sum would grow as land value and property tax revenues rise.

Additionally, local government would receive $130 million for law enforcement, $150 million to cover counties’ cost of collecting property taxes, $150 million for public works projects including roads, $50 million to reimburse cities for the cost charged by counties to house inmates in county jails and $20 million more for local libraries.

Lawmakers would write a constitutional amendment to be put before voters in November 2000 that would rewrite local government’s financing power. If the measure were approved, the counties would stand to get permanent financial aid.

With the conference committee action Friday, the Legislature can take up the budget next week. But lawmakers will probably fail again to approve its version of the budget by the deadline set forth in the state Constitution--June 15, Tuesday. Legislators do not take that deadline seriously and have not met it since 1986.