Burton Calls Budget Plan ‘Unworthy’

The powerful Democratic leader of the state Senate on Monday sharply criticized Gov. Arnold Schwarzenegger’s budget, and began staking out a counterproposal centered around an increase in income taxes on the wealthiest Californians.

Senate President Pro Tem John Burton (D-San Francisco) dismissed the Republican governor’s financial plan as “unworthy” of Californians because of its proposed cuts in programs for the poor -- cuts he blamed on Schwarzenegger’s decision to reduce the vehicle license fee by $4 billion upon taking office in November.

Schwarzenegger presented his $99-billion budget last week, calling for substantial cuts to social service programs and hikes in college and university fees but no general tax increase. He acknowledged that many of the cuts would be painful but that they were necessary -- and temporary -- to overcome next year’s looming $14-billion budget deficit.

“I don’t think people voted for him to take away money from the elderly, blind and disabled,” Burton said. “I don’t think they voted for him to take health care away from young children.... I don’t think they voted to cut higher education.”

He added: “And I don’t remember [Schwarzenegger] running on that. Or maybe I missed that commercial.”

In a Sacramento interview with Roger Hedgecock, a conservative talk radio host in San Diego, Schwarzenegger did not respond to Burton but expressed optimism about budget discussions with Democrats, who hold a majority in the Senate and Assembly.

“We just have to meet and talk and talk and find a way to negotiate,” Schwarzenegger said. “There will be fights and there will be arguments, but we will do it.”

Schwarzenegger’s finance department wasn’t as diplomatic.

“It’s understandable that some members of the Legislature may have a tough time coming to grips with this budget because the bill has finally come due for years of overspending,” said H.D. Palmer, a spokesman for Finance Director Donna Arduin.

The political calculus made by Burton and other Democrats is that a majority of Californians would support an increase in income taxes on top earners over taking health insurance away from the state’s poorest residents and limiting access to the state’s universities. Previous public opinion polls have shown majority support for such a tax hike.

During a 45-minute Capitol news conference, Burton took issue with the governor’s claim that he “inherited” California’s budget problems, arguing that Schwarzenegger had expanded the deficit from $10 billion to $14 billion when he cut the car tax in November.

On Friday, Schwarzenegger opened his budget campaign by going out of his way at a news conference to flatter Burton, but the crusty Senate leader showed no inclination to soften his criticism of what he considered to be the most severe cuts proposed by Schwarzenegger. Burton and other Democrats, who question whether the governor actually favors deep program reductions or is bowing to the will of more conservative Republicans, are looking to test Schwarzenegger’s resolve in the face of interest group protests over the proposed cuts.

Burton emphasized that a higher income tax paid by wealthy Californians would be a logical place to raise new revenue to stave off some of the proposed cuts. An increase in the income tax on top earners is one that has been put in place temporarily by Republican governors in the past.

“We have people making half a million a year after deductions, taxable income,” Burton said. “That’s a fair amount of money. If you have to come up with another two, three, four hundred dollars, you can afford it. Basically what people would be paying for is a just society.”

Other Democrats make the same case.

“We’ve got to have an increase in some taxes,” said Sen. Sheila Kuehl (D-Santa Monica), accusing Schwarzenegger of essentially raising taxes “on very small parts of the population” through proposals such as increasing university and community college tuition and state park fees.

Republicans, whose support is needed to push any new taxes through the Democratic-dominated Legislature, said raising taxes on wealthy Californians would push them out of the state, resulting in a further revenue decline and lost jobs. California revenues rely heavily on the state’s personal income tax.

“We raise the taxes on them, they leave,” said Assemblyman Ray Haynes (R-Murrieta). “They go to Florida or Texas.”

Haynes said that after Republican Gov. Pete Wilson and the Legislature raised taxes by about $7 billion in the early 1990s, revenue fell more than $1 billion.

“We are right at the limit of what we can charge,” he said. “That’s what John [Burton] forgets. He will have less money for the poor and disabled.”

Legislative Analyst Elizabeth Hill will present lawmakers with a written overview of the governor’s budget plan today. The report is a prelude to a more substantial review of the budget that the nonpartisan analyst will present in February, evaluating the governor’s plans as well as providing alternatives for cutting the deficit. Hill was vocal last year in calling for lawmakers to consider tax increases.

Schwarzenegger’s budget is already drawing fire from interest groups. On Monday, advocates for low-income Californians descended on the Capitol to warn of the consequences of the governor’s proposed cuts.

Anthony Wright, executive director of the nonprofit Health Access, said at a news conference that Schwarzenegger’s spending plan would result in the state losing as much as $800 million in federal matching funds because of enrollment caps and other measures.

“The overall impact of Gov. Schwarzenegger’s budget is to deny tens of thousands, if not hundreds of thousands, of Californians health care,” Wright said.

As the budget debate begins, the state faces a very real possibility of running out of money in June, when billions of dollars of short-term loans from banks come due. That threat hinges largely on whether voters approve in March the governor’s proposal to sell $15 billion in bonds to help balance the budget.

Wall Street analysts are anxiously monitoring the governor’s campaign to get that bond approved, though bond rating agencies had a neutral reaction to Schwarzenegger’s budget plan.

“It is a proposal,” said Steven G. Zimmerman, managing director of ratings services at Standard and Poor’s. “It is someplace to start.”

Burton found fault with a number of other assumptions and proposals in Schwarzenegger’s first budget. He expressed skepticism as to whether Schwarzenegger would be able to collect $500 million from Indian casinos that currently do not pay the state a percentage of their profits.

Burton also was dismissive of Schwarzenegger’s proposals to save money by finding waste and fraud in government operations. While acknowledging that a certain amount of waste and fraud existed, Burton added: “Put it all together and you’re going to come up with chump change.”

*

Times staff writers Peter Nicholas, Jeffrey L. Rabin and Nancy Vogel contributed to this report.