Quest for New Revenue Shifts to Car Owners

In a move that could attract Republican support for a budget agreement, Democrats have dropped their plan to tax wealthy Californians to help close a $23.6-billion shortfall and instead moved Friday to hike vehicle license fees for two years.

In another budget development, state Controller Kathleen Connell said her office would send out millions in advance payments to counties for welfare and other social programs, a day after the administration of Gov. Gray Davis announced it was legally barred from doing so.

Senate leader John Burton (D-San Francisco) had threatened to cut off talks with the administration until funding for the poor resumed. He said the mix-up appeared to be the result of a failed attempt by Davis to get a budget approved by applying pressure to Republican lawmakers.

“Anybody with any brains who thinks they can blackmail Republicans by threatening poor people’s money ought to have their heads examined,” Burton said.

The confusion triggered finger-pointing between Connell and the Davis administration, which had said it couldn’t make the payments without a budget.

Rita Saenz, director of the California Department of Social Services, said her office had made the announcement on the basis of information from Connell’s office last week that payments would not go out to the counties--a point of contention with Connell.

“We’re very glad the counties are going to get paid,” Saenz said. “That was always the hope.”

Connell’s decision to cut the checks means Los Angeles County will receive about $100 million it was counting on for programs including CalWORKs, the state’s welfare-to-work program.

With one problem out of the way, lawmakers turned their attention to approving a budget by the start of the new fiscal year on Monday. In the Capitol, talks Thursday turned to taxes.

Burton said that, while he still favors his proposal to reinstate higher tax rates for the wealthiest Californians, the plan is not supported by Davis. Burton indicated he was abandoning the plan, which failed to receive the single Republican vote it needed to reach the two-thirds majority required for passage in the Senate earlier this week.

“It’s off the board,” Burton said.

A legislative committee negotiating a compromise spending plan voted Friday to more than double vehicle license fees paid by drivers for two years, a move that would raise $5 billion. The committee also voted to increase the 50-cent hike on cigarettes proposed by Davis to 63 cents per pack, starting in August to raise $600 million.

The actions were taken as Democratic leaders negotiated with Sen. Maurice Johannessen (R-Redding), whose one vote, when combined with the upper house’s Democratic majority, would allow a budget and related bills to clear the Senate.

Johannessen said earlier this week that he would not support an increase in income taxes, but that vehicle license fees and sales taxes remained on the table. A copy of a proposal drawn up by Democrats to appease Johannessen shows new revenues from tax hikes and other budget changes at $3.5 billion, around the same level sought by Davis and about a billion less than Senate Democrats had proposed.

Burton said he was hopeful that the Senate might pass a budget today, but the possibility of winning approval of the plan in the Assembly remained clouded.

A standoff continues between Assembly Republicans and Democrats over a proposal by Davis to shift $1.7 billion in education funding from the current fiscal year to the next one. In exchange for their support for the Davis plan, Assembly Republicans want Democrats to earmark $400 million in funding in the fiscal year that begins July 1, 2003, to equalize spending on rural and urban schools.

For California taxpayers, the game of chicken could result in a $1.7-billion tax hike. Because the shift involves current-year spending it would have to be approved by the end of the fiscal year on Sunday, or risk blowing a $1.7-billion hole in the budget.

As legislative leaders clash over taxes and education funding, winning passage of a budget may boil down to issues of importance to just five lawmakers. Approval of the budget requires a two-thirds vote of the Legislature, which in addition to meaning a single Republican vote in the Senate means four GOP votes in the Assembly.

Consequently, Johannessen, who broke the budget impasse last year in the Senate, is the man of the moment. Burton said Johannessen is adamant about certain programs, including money for law enforcement grants.

In the Assembly, attention is focused on a handful of Republicans who broke from their caucus last year and voted with Democrats for the budget. They include David Kelley of Idyllwild, Dick Dickerson of Redding and Mike Briggs of Fresno.

One vote Democrats won’t be able to count on this year is that of GOP Assemblyman Anthony Pescetti of Rancho Cordova, who said he does not plan to support the budget.

“I do not support any of the taxes,” Pescetti said. “I had one conversation with someone from the governor’s office, and I said I was a no vote.”