Gov. Arnold Schwarzenegger on Thursday proposed a sweeping economic plan to close a projected revenue shortfall of $11.2 billion by raising taxes and cutting funds from public services and education.
The announcement comes less than a month before the 2009-10 class of lawmakers is to be sworn in Dec. 1, and six weeks after the governor signed a record-late spending plan for the state’s $15.3-billion deficit.
“We have a dramatic situation here,” Schwarzenegger told reporters Thursday in Sacramento. “We must stop the bleeding.”
To close the current shortfall in revenue, the governor proposed cutting $4.5 billion from state-funded programs and temporarily raising taxes by 1.5%, which is expected to generate $4.4 billion in new revenue.
Schwarzenegger also proposed a 90-day grace period to delay foreclosures and modify existing home loans; expediting hospital construction in California to inject about $164 million into state coffers; and shoring up the state’s unemployment insurance fund by ramping up contributions from businesses while cutting benefits to maintain the fund’s solvency, which is projected to be $2.4 billion in the red next year.
“Everyone has to give a little bit,” Schwarzenegger said. “Businesses will gradually pay more while we tighten benefits slightly. With an unprecedented drop in revenue, we absolutely have no choice.”
The largest portion of the proposed reductions would affect education.
Schwarzenegger’s proposal would slash $2.5 billion in funding to public schools and community colleges, and $131.8 million from the University of California and California State University systems.
While unfortunate, the cuts to California schools are unavoidable, state Director of Finance Michael Genest said.
“I think if the governor could, he would exempt schools,” he said. “But I think there is no way to do that.”
Reaction from local lawmakers in Sacramento, who met Thursday for a special session at the governor’s behest, was swift and defiant.
The impetus for meeting the state’s shortfall has taken on a greater urgency for members of the state Assembly and Senate as they race toward the fall of this term’s curtain on Nov. 30.
Covering the multibillion-dollar shortfall, however, will likely be difficult with some lawmakers opposing tax hikes while others decry cuts to public programs, such as education.
Democratic Assemblyman Paul Krekorian, a former member of the Burbank Unified School District’s Board of Education, praised the governor’s “balanced” approach to raise revenues through taxes but criticized his plan to cut money from schools.
“Cuts to education are not unavoidable,” he said. “If the governor and his Republican colleagues show the political will and courage to generate the revenue we need to meet our basic responsibilities we have to our constituents, then it’s not necessary to cut $2.5 billion more from public education.”
Krekorian did not elaborate on ways the state can generate revenue without cutting education, and would not say whether he intends to support the governor’s proposal, citing the infancy of the state’s negotiations.
Opposition to Schwarzenegger’s plan also percolated among state Republicans, who objected to the governor’s tax hike proposal.
Republican Assemblyman Cameron Smyth, whose district includes a portion of Glendale, is pessimistic that any member of his party will accept the proposed increase in taxes from 5% to 6.5%.
Schwarzenegger called on his fellow Republicans to accept the sales tax increase, an issue of contention during the summer’s budget negotiations when all but one of the state’s Republican lawmakers signed a pledge not to raise taxes.
But with elections in the rearview mirror — and the economy continuing its downturn — lawmakers might be more apt to accept his proposal, Schwarzenegger said.
“We are now after the election, which makes it easier to deal with things,” he said. “And sometimes, getting elected is more important than doing what is right. Plus, there has been a huge shift. Everyone here has gotten a wake-up call. We are running out of money.”
For Smyth, who was reelected Tuesday, his antipathy to higher taxes was less a campaign tool than a core belief.
“The governor needs to understand that for me, not raising taxes is what’s right,” Smyth said. “It’s more than a political ideology. It’s an economic philosophy. Most of my colleagues feel the same way.
“We have a real problem. We have to work together to solve it. I’m encouraged by the commitment from Republicans and Democrats to finding a solution. It’s not going to be easy.”
Republican women to host local conservative
The Glendale Workshop Republican Women Federated is slated to host Sonny Sardo at its next meeting Nov. 17.
Sardo, a Republican who sought Rep. David Dreier’s 26th congressional seat earlier this year, is scheduled to address the future of his party following Tuesday’s sweeping victory by President-elect Barack Obama and state Democrats.
Officials said the meeting will start at 10:30 a.m. at the Elks Lodge, 120 E. Colorado St., where lunch will be served for $15.
For more information and reservations, call (323) 664-9915.
Community group shifts its meeting dates
The Crescenta Valley Community Assn. announced this week it changed its meeting dates in November and December to the third Thursday of each month, citing holiday conflicts.
The group, a cross-section of volunteer organizations working to preserve the region’s historical structures and promote open space, will meet at 7 p.m. Nov. 20 and Dec. 18 in the community room of the Crescenta Valley Sheriff’s station, 4554 N. Briggs Ave.
The meetings in November and December had fallen on Thanksgiving and Christmas, respectively, but conflict with the dates on which the Crescenta Valley Town Council is scheduled to meet.
Organizers said there was no way around the conflict, as Nov. 20 and Dec. 18 are the only dates available to meet in the Sheriff’s station.
For more information, see www.crescentavalleycommunity.org.
— Jeremy Oberstein, Zain Shauk