Davis Vows to Veto Bills on Budget

Gov. Gray Davis left little doubt that he plans to veto a package of bills the Legislature will send him this week that would reduce the budget shortfall by $3 billion over the next five months, but only if the “car tax” is tripled first.

The governor has repeatedly implored fellow Democrats to resist a car tax increase, which he says would only worsen the state’s fiscal problems, and to make much deeper cuts.

Yet Senate Democrats pushed the package through Monday, and Assembly Democrats plan to do the same today. Supporters of the measure anticipated the governor would join them, if only to strengthen the case of state officials heading to New York this week to reassure bond-rating agencies that decisive action is being taken in California.

But Davis said that raising the vehicle license fee -- which, unlike most taxes, can be passed by a simple majority, without a single Republican vote -- would set the wrong tone for budget negotiations.

“I made my position very clear on that bill,” Davis told reporters Monday. “The Legislature is trying hard to make cuts. They need to try harder....

“I really think it’s a mistake to commit ourselves to the only revenue source that will be available without full participation by the Republicans, without looking at all the other areas of government that will have to be cut,” he said.

Davis has called on the Legislature to cut $5.4 billion from the 2002-03 budget to narrow a current-year deficit of more than $11 billion. The cuts would be a “down payment,” of sorts, on a budget hole that Davis projects will grow by $23 billion next year. He opposed raising the car tax out of concern that it would undercut the political viability of $8.3 billion in personal property, income and tobacco tax increases that he is proposing for next year.

Asked whether he feared a negative reaction from Wall Street if he vetoes the cuts approved by the Legislature, the governor suggested that alienating Republican lawmakers would be even more costly.

“I have to send a signal as to what needs to be done to right the financial ship,” said Davis, who added that he has informed Senate Leader John Burton (D-San Francisco) and Assembly Speaker Herb Wesson (D-Culver City) of “what I would do” on the legislation. He said he will formally announce his decision today.

Davis does not have the option of vetoing the car tax increase while approving the $3 billion in cuts, as the bills have language that makes one dependent on the other.

Finance Director Steve Peace said a veto from Davis would “simply be saying to the Legislature, ‘You have to go back to the drawing board.’ ”

Legislative leaders defended the bills. They said Republican opposition to all tax increases left them no choice but to move forward on their own.

“Democrats in the Legislature have spoken with one united voice,” Wesson said. “Only a balanced approach will resolve the state’s budget crisis.”

The increase would cost the average car owner $124 a year and raise about $4 billion over the next 17 months -- the same amount Davis is proposing to take from local governments to help fill the gaping hole in the budget.

Davis wanted local governments to simply absorb the cuts, which prompted an outcry from cities, counties and local police, who warned that the move would put critical public services at risk.

Legislative Democrats heeded their call and proposed making them whole by raising the license fee back to 2% of a vehicle’s value, the rate it was in 1998.

Some continued to hope that the governor would reconsider his veto threat.

“We need to recognize that the governor and Democrats in the Legislature need to make reductions now,” said Assembly Budget Committee Chairwoman Jenny Oropeza (D-Long Beach). “If we don’t, we’ll not achieve the savings that we need. I hope the governor will sign the bill and come to our view.”

Republicans had harsh criticism for the car tax and threatened to overturn it at the ballot box or in the courts if Davis signed it into law.

“You all want to start a tax revolt?” asked Sen. Tom McClintock (R-Thousand Oaks) during a Senate floor speech. “You are on.”

Sen. Ross Johnson (R-Irvine) warned Democrats that “there will come a time when you need Republican votes, when you need Republican help” and continuing “to stick your thumb in the eyes of Republicans” would have consequences later.

News of an impending veto from Davis did not appear to soften Republican opposition to other tax increases. Some even said they have already returned the favor by supporting all the governor’s proposed cuts, while Democrats approved little more than half of them.

Many of the reductions supported by the Legislature would be achieved by bookkeeping changes; they include delaying more than $1 billion in expected school payments from late June until early July, effectively shifting that expense out of this year’s budget and into next year’s.

Other cuts include a delay in construction of a prison near Delano, despite Davis’ urging that the Department of Corrections be spared.

The bills being passed in the Legislature do not include Davis’ proposals to change Medi-Cal eligibility requirements that would have cost hundreds of thousands of poor Californians their health insurance. Nor do they include a proposal to take $500 million in low-income housing money away from cities and counties.

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Times staff writer Carl Ingram contributed to this report.