Democrats See Need for More Tax Increases

The prospect of tax increases even heftier and more prolonged than those proposed by Gov. Gray Davis is taking hold here as lawmakers press forward with a compromise budget that is hundreds of millions of dollars out of balance.

To help close the state’s $23.6-billion budget gap, Davis proposed a nearly $100-billion spending plan for the 2002-03 fiscal year that includes $3.5 billion in tax hikes--primarily increases in the cigarette tax and vehicle license fees--and other new revenue.

But the compromise plan being negotiated by a legislative conference committee has been running $500 million to $1 billion or more out of balance. One reason is that the committee has restored some of the cuts proposed by Davis, including its decision Thursday night to keep open five private prisons at a cost of $2.8 million.

To close the gap, lawmakers will either need to cut spending, borrow money or raise revenue.

Assembly Budget Committee Chairwoman Jenny Oropeza (D-Long Beach) said Friday there is no question in her mind that new revenue will need to exceed the $3.5 billion sought by Davis.

Oropeza and other legislative Democrats believe the governor has underfunded essential services, and she is not comfortable with his proposed level of spending. She cited as options raising sales or personal income taxes or suspending certain tax credits or the vehicle license rebate.

“We need additional revenues,” she said. “This budget cuts too deep into services and programs Californians have come to rely upon.”

At stake, Oropeza said, are recent gains made in health care, education and trauma care. “We can’t just go backward,” she said.

A coalition of 100 groups supporting a proposal by Senate Leader John Burton (D-San Francisco) to reinstate top income-tax brackets has planned a news conference for Monday. Health-care advocates and other lobbyists for the poor have joined a growing number of Democratic lawmakers in backing the Burton plan, which is opposed by Davis.

“The Assembly Democrats have not wanted to cut anything and, in fact, they continue to want to expand programs,” said Sen. Dick Ackerman (R-Irvine), who over the last two weeks has voted to support more than $4 billion worth of cuts.

Assembly Republicans held a news conference last week to blast Davis’ tax plan and featured a 1969 Buick Wildcat as a prop; it’s the only model of car California families will be able to afford if vehicle license fees are allowed to rise, they said.

The dueling approaches contributed to lawmakers missing today’s deadline for approving the budget with a two-thirds vote in both the Assembly and Senate and sending it to Davis to sign by the July 1 start of the new fiscal year.

Negotiations on a compromise spending planmay resume today.

As of Thursday afternoon, the plan was running $685 million above the Davis spending proposal, which includes a $516-million reserve. The state’s independent legislative analyst, Elizabeth Hill, also has warned that lawmakers need to find $600 million more to cover an accounting change.

While it’s unclear how the committee will decide to balance the budget, so far Democrats have balked at the deep spending cuts sought by Republicans.

After weighing nearly $6 billion in cost-saving options floated by Hill’s office and another $1 billion or more proposed by Ackerman, the committee signed off on about $600 million in savings. Half of the amount stems from the Davis administration agreeing to an Ackerman proposal to eliminate 6,000 vacant positions in state government.

The debate illuminated philosophical differences between Democrats and Republicans.

Assemblyman Darrell Steinberg (D-Sacramento) took issue with Ackerman’s proposal to suspend state funding on cancer research to save $13 million, for example. Steinberg warned the committee against considering the proposal in a vacuum, noting that Davis had already proposed reducing about half the funds.

Ackerman agreed with Steinberg that a broader set of factors should be taken into consideration. He then pointed out that the federal government spends hundreds of millions of dollars funding cancer research.

“Cancer research is very important, but it’s going to go on whether we take the cut or not,” Ackerman said.

The committee rejected the cut.

Ackerman also proposed eliminating $600,000 for the University of California’s Institute for Global Conflict and Cooperation. An eagle-eyed GOP fiscal consultant noted in an analysis that “this program has been ineffective at maintaining peace and cooperation in the world.”

“Maybe if we upped the investment we’d have a better result,” Steinberg said.

“Which one of your programs do you want me to take that money out of?” Ackerman replied.

At the same time, the committee approved new spending and restored cuts that total hundreds of millions of dollars. For example, the committee approved $2.8 million to continue operating five private prisons for another year. Davis recommended closing all five prisons in his January budget proposal and agreed recently to keep one of them open.

Byron Tucker, a deputy press secretary for Davis, said the governor continues to believe there is no reason to keep the other four prisons open, and noted that the budget is not yet complete. (Plans for a new prison in the Central Valley town of Delano also remain on course after lawmakers approved funding for the project.)

Republicans voted against a successful bid to expand a health insurance program for poor children to include their parents at a cost of $50 million. But they joined Democrats in restoring $111 million for a juvenile crime prevention program, $38 million to help cities pay for booking suspects into county jails and $39 million for a tax program favored by environmentalists and rural communities that rewards landowners for keeping their land undeveloped.