Effort to Raise Sales Tax Is Revived

Senate Democrats will make the case today that only half a penny stands between California’s working its way out of its current fiscal mess and the state’s sliding into insolvency.

In an effort to back Republicans into a corner, Democrats are expected to vote unanimously in favor of a state spending plan with just one more new tax: a temporary half-cent sales tax to back bonds that would pay off $10.7 billion of California’s budget shortfall over the next five years.

“This is a ‘preventing government from shutting down’ budget,” said Sen. Don Perata (D-Alameda), noting that the state’s damaged credit rating will probably get worse without a budget agreement when the fiscal year begins July 1.

Yet the plan is all but dead on arrival. Republicans say they are united against new taxes and will not support any budget that includes them. Already angered by the Davis administration’s decision Friday to triple the so-called car tax, Republicans said they are poised to reject the sales-tax proposal.

“This continues their wild spending spree,” said Sen. Richard Ackerman (R-Irvine). “We had no input in this. If they want real negotiations and to include us, they should do so.” At least two Senate Republican votes are needed to meet the constitutional two-thirds requirement for approval of a budget.

Democrats say they are extending an olive branch as the state faces a very real prospect of running out of money in August. In the plan, Democrats abandon their push to boost taxes on the incomes of high earners and tobacco. The money those taxes would have generated is replaced with $1.5 billion in borrowing against tobacco company settlements and $2.4 billion in federal aid.

The reliance on borrowing and other “Band-Aids” means the budget would fall out of balance quickly. Ackerman said it does not deal with the multibillion dollar “chronic” deficit that is the result of the state’s spending more than it receives.

“It is not a balanced budget,” he said. “It creates an even larger hole” in the future.

Senate Democrats said the Legislature would set up a commission that would begin immediately after a budget is passed to explore solutions to that problem. The Legislature would then ask voters in March to consider proposals for reforming the state’s tax system to even out the year-to-year imbalance.

Senate President Pro Tem John Burton (D-San Francisco) said passing a spending plan with Band-Aids offers the best hope of freeing up lawmakers to deal with the budget’s structural problems in time to bring proposals before voters.

“It is like you have a patient with double pneumonia, which is this year’s problem, and the patient also has cancer, which is a problem for next year and beyond,” said Burton. “You cannot operate on the long-term cancer problem until you deal with the pneumonia.”