Angelides Seeks to Press GOP for Tax Hikes

State Treasurer Phil Angelides called on Gov. Gray Davis and Democratic legislators Monday to step up pressure on Republicans to raise taxes, saying GOP intransigence threatens to undermine California’s public school system.

Angelides said that even the $8 billion in tax hikes proposed last month by Davis, also a Democrat, could fall short of what California needs to protect schools from harmful spending cuts.

He called on Davis and the Democrats who control the Legislature to consider a menu of further tax hikes to offset some of the $5.2 billion in school cuts proposed by the governor through June 2004.

Republicans, who say higher taxes would inhibit economic recovery, dismissed Angelides’ position as posturing by an official with an eye on running for governor in 2006.

Angelides said the Legislature’s GOP minority “should be called to task for its willingness to rip the textbooks out of our children’s hands before they even consider reasonable funding proposals.”

“The question before us is not whether we can afford to educate our children, but whether there is the political will to do so,” he wrote in a letter to Davis, state Senate President Pro Tem John Burton (D-San Francisco) and Assembly Speaker Herb Wesson (D-Culver City).

Angelides, a former state Democratic chairman, plans to visit schools in the districts of GOP lawmakers in Northern California on Thursday to draw attention to the potential impact of school cuts in the absence of tax hikes.

By thrusting himself into the political debate over the budget crisis, Angelides is raising his profile on key issues -- schools and taxes -- as he prepares for a possible gubernatorial campaign.

Assembly GOP leader Dave Cox of Fair Oaks said Angelides’ moves were aimed at attracting attention to himself. He invited Angelides to tell voters in his district that Democrats had “squandered” the state’s budget surplus, so “now we need to raise taxes in order to satiate their spending desire.”

“Tax increases are not on our agenda,” Cox said.

Money, he said, “is not the total answer for improving education in the state of California.”

Davis and the Legislature are struggling to close a record budget gap projected to reach at least $26 billion by June 2004. Davis estimates the gap at nearly $35 billion.

Democrats have called for spending cuts and tax hikes to close the gap. But Republicans say any tax increase would harm the economy.

To pass a budget, it takes a two-thirds vote in each house of the Legislature, so Democrats cannot raise taxes without the support of at least two Senate Republicans and six in the Assembly.

Although most attention has focused on the breach between Democrats and Republicans over how to solve the budget mess, Angelides’ letter highlighted the discord among Democrats.

He essentially aligned himself with Burton and other liberals who have called for bigger tax hikes and smaller spending cuts than what Davis has recommended.

Burton said Angelides could play a constructive role in pressuring Republicans on schools.

“It couldn’t hurt,” he said.

The governor also welcomed the treasurer’s plan “to bang the drums in the districts of Republicans,” said Davis spokesman Steven Maviglio.

But given the sharp drop in tax collections, Maviglio said, it appears impossible “to shape a budget that leaves education untouched from any cuts.”

In a telephone interview, Angelides cast school spending as key to safeguarding California’s economy for future generations.

“I believe deeply that in the richest state in the wealthiest nation on Earth, we ought to be able to find ways to fund the most basic of investments that go to our economic strength,” he said.

He added: “We ought to stand united and make the case for funding education and then be honest about it: That’s going to require new revenues.”

Among his suggestions: higher alcohol and corporate-income taxes; expansion of the sales tax to auto repairs, legal work and other services, and assessment of commercial property at market value.

In his letter, Angelides also cited the recent tax-hike proposals by Republican Govs. Kenny Guinn of Nevada and Gov. Dirk Kempthorne of Idaho.

“The myopia of the Republican leadership here in California stands in stark contrast to the reasonableness of their colleagues in neighboring states,” Angelides wrote.

Angelides also denied that his remarks were related to his decision on whether to run for governor.

“Whether I do or not, time will tell,” he said. “But the fact is that this is something I feel strongly about.”

The depth of the California’s fiscal troubles was underscored again Monday when the state’s credit rating took another hit: Moody’s downgraded California a notch to its lowest rung of states.

Earlier downgrades have cost the state hundreds of millions of dollars in higher borrowing costs.

But state officials said the bond market had already adjusted California’s interest rates in anticipation of the move by Moody’s.

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Times staff writer Evan Halper contributed to this report.