Yacht buyers will continue to benefit from a loophole that allows them to avoid sales tax on their boats, after Republicans in the Assembly blocked an effort to close it Tuesday.
The vote came hours after Gov. Arnold Schwarzenegger asked state agencies to consider freezing hiring for nonessential workers and to make reductions in their travel and public outreach budgets to save $100 million.
Closing the tax loophole -- "sloophole," as it has come to be known by Democrats -- takes a two-thirds majority vote in each house of the Legislature, which requires some Republicans to get on board.
Not enough of them did Tuesday, so on a 47-18 vote by the 80-member Assembly, the move to scuttle the tax benefit failed.
Last week, lawmakers voted to cut schools, healthcare and welfare programs by $2 billion.
"It is unconscionable to cut education and welfare while not closing this loophole," said Assembly Budget Committee Chairman John Laird (D-Santa Cruz). "Everyone needs to be part of a budget solution, including yacht owners."
Republicans, who say forcing yacht buyers to pay the tax would drive jobs out of California, called the proposal "political gamesmanship" that would do little to close the state's multibillion-dollar deficit.
"Let's focus on the real budget, the real problems and what we have to do," said the Assembly's Republican leader, Mike Villines of Clovis.
In a news conference earlier in the day, Schwarzenegger called on lawmakers to end the tax break, which applies to buyers of yachts, airplanes and luxury RVs if they keep their newly purchased vessels out of state for 90 days.
The governor also announced the $100-million administrative cut, which will do little to reduce the state's projected deficit of $14.5 billion.
And Schwarzenegger used the occasion to call on lawmakers to finalize their plan for closing the budget gap within the next month instead of waiting until the July deadline for passing a budget.
"There are some people in this building that think that if they can wait and wait, and push it to the end, that that will get us into bigger financial difficulties and challenges, that that will make us then raise taxes," he said. "But they're making a big mistake. There will be no raising taxes."
Assembly Speaker Fabian Nunez (D-Los Angeles) called the request to complete the budget within a month "unreasonable" and waved off the governor's refusal to consider taxes.
"Democrats have a very different point of view," he said. "I respect the governor, but I don't share the same values he has."