The Assembly voted Tuesday to cut $3.5 billion from the state budget adopted in September, but only if Gov. Gray Davis agrees to an increase in the license fee on most motor vehicles.
Rather than their earlier plan to triple the vehicle license fee across the board, Democrats proposed -- and the Assembly approved -- applying the increase only to vehicles worth more than $5,000.
The Democrats argued that the change means they are proposing to impose a "levy" -- not a fee -- which under state law cannot be reversed by referendum.
The move set off a furor among Republicans.
"This is a gimmick," said Assemblyman Guy Houston (R-Livermore). "It is not about exempting the poor. It is about exempting the voters."
It wasn't the only "gimmick" Republicans objected to. Republicans also criticized Democrats for insisting that the $3.5 billion the Assembly voted to cut from education, health care, environmental protection and prison spending this year won't take effect without the car tax increase.
Assembly Democrats said they linked the measures because the car tax increase is one of the few ways they can raise revenue with a simple majority vote, rather than the two-thirds vote normally required, and that any delay in enacting it could cost the state hundreds of millions of dollars. Almost all other tax increases would require the support of at least some Republicans, who are united in opposing them.
But the tactic puts the governor in a bind. Davis has argued that immediate cuts are needed to begin solving California's budget crisis, but has repeatedly warned against tripling vehicle license fees to 2% -- back to the 1998 level -- because he believes that such a move would make other tax increases politically unviable. In addition, Davis argued that raising the vehicle tax would help local governments but would do nothing to solve the state's budget crisis.
After the Assembly vote, Davis reiterated his opposition to the increase in the vehicle license fee, even as part of the package that the Assembly considered Tuesday.
The legislative analyst's office said the car tax increase would cost $124 for the owner of a vehicle valued at the state average of $9,200.
Despite exempting vehicles worth less than $5,000 from the increase in the fee, proponents said they still expect that it would raise about $4 billion over the next 17 months.
That would reimburse city and county governments for the loss of $4 billion in state assistance that Davis is proposing to cut off as part of his plan to close a shortfall projected to be between $26 billion and $35 billion over that time span.
Local-government leaders have said the loss of that assistance would cripple their ability to deliver critical services, such as police and fire protection.
Davis also wanted the Assembly to make significantly deeper cuts than it did. The governor has called for reductions of at least $5.4 billion in the 2002-03 budget by the end of this month. Republicans announced support for virtually all of Davis' cuts to reach that number.
The $3.5 billion in cuts contained in the package considered Tuesday include reductions in assistance to universities and elimination of a cost-of-living increase for people on welfare. They also include a $1 billion savings achieved by deferring some public education payments from this year to next.
But Democrats rejected many of the steepest reductions proposed by Davis, complaining that they would be too hard on the poor.
Among the proposals rejected were changes in Medi-Cal eligibility that could cost hundreds of thousands of Californians their health insurance, and a grab of $500 million from cities and counties used for low-income housing.
Nor did Assembly Democrats approve the governor's proposal to make all of the education cuts immediately, instead deferring about $1 billion in public school spending a few weeks so it comes out of next year's budget.
They acknowledged that the move might ultimately cost public schools more, but said that education groups are willing to take a bigger hit to avoid the chaos that midyear cuts could cause districts.
Assembly Budget Committee Chairwoman Jenny Oropeza (D-Long Beach) defended the lawmakers' package.
"It's a balanced approach," she said. "We are taking real action on time, as promised."
The Senate will take up the Assembly's budget package Thursday, meaning that it could land on the governor's desk by the end of the week.
Senate President Pro Tem John Burton (D-San Francisco) said he is unenthusiastic about linking the car tax to the budget cuts but is not ruling it out.
"It doesn't make or break the deal for me whether they are hooked or not," he said.
The car tax isn't the only place where fellow Democrats are veering far off Davis' course. They also pushed through the Assembly millions of dollars in prison cuts that Davis had warned could jeopardize public safety.
The cuts would be made by delaying construction of a prison near Delano and providing work credits for prisoners qualified to work but for whom no prison jobs are available.
The Senate will consider steeper reductions in the state prison system Thursday, including releasing certain nonviolent offenders a month early and softening the penalty for shoplifting with a prior conviction.
At a hearing of the Senate Public Safety Committee, Burton lashed out at law enforcement officials pleading for approval of a higher vehicle license fee, or VLF, but at the same time opposing the Senate's attempts to reduce state prison costs.
"You can't have it both ways, Charlie," he roared at the witnesses, adding that unless law enforcement officials changed their tune, "you can kiss the VLF goodbye and I mean it.... If you think I'm kidding, try me."
Times staff writers Carl Ingram, Dan Morain, Nancy Vogel and Gregg Jones contributed to this report.
Breakdown of Assembly Spending Cuts:
Here are highlights of the $3.5 billion in cuts from the 2002-03 state budget, as approved by the state Assembly on Tuesday. The Senate is expected to consider the package Thursday.
Local government assistance: $900 million. State government would reduce aid to cities and counties, but the amount would be replaced by an increase in the vehicle license fee approved by the Assembly and pending in the Senate.
Public schools: $2.5 billion. The amount includes deferring $1.1 billion in payments until next fiscal year, trimming community colleges by $300 million and reducing spending on instructional material by $103 million.
Universities: $130 million. Reductions to California State University and University of California systems.
Health care: $24 million. Eliminates cost-of-living increases for people collecting disability and welfare payments.
Source: Times staff