Tax hikes are sticking point for budget plan

By Steve Wiegand
swiegand@sacbee.com
and Jim Sanders
jsanders@sacbee.com

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SACRAMENTO — Democratic legislative leaders vowed Wednesday that the Legislature will pass a "share the pain" plan early next week that will close the state's deficit without shredding the social service safety net.

Whether it will contain a tax hike on cigarettes and a new tax on oil production, however, is problematical.

An hour or so before Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker Karen Bass, D-Los Angeles, made their early-next-week prediction, Gov. Schwarzenegger said he wouldn't sign a plan balanced with tax increases.

"I am very, very much against any tax increase whatsoever," the governor said. "And I'm also talking about fee increases. None of that will fly with me."

The rhetorical staking out of ground by key figures in the current version of the fiscal melodrama came a day after the Legislature's joint budget conference committee adopted a plan to balance the budget for the fiscal year that starts July 1.

The plan includes about $2 billion in new oil production and cigarette taxes to help bridge the $24 billion budget gap, and a $15-per- vehicle registration fee to finance the state park system.

Steinberg and Bass said the conference panel's plan was a "reasonable response" to the deep cuts and revenue shifts the governor proposed last month.

They offered a fusillade of figures to back up their contention: About 45 percent of the governor's proposals were entirely accepted by the committee, according to Bass, and 93 percent were accepted to some degree.

The key differences are that the governor's plan cuts more deeply into education and health and social services programs for the poor, elderly and disabled, while the Democratic plan would replace some cuts with revenues from the tax increases.

"The people of California and the Legislature have to ask a question," said Steinberg. "Is it more important to not look at increasing the tax on tobacco products, versus eliminating 900,000 kids from the health care rolls? We're not willing to do that."

But the tax idea is apparently anathema to the governor, who met with Bass and Steinberg earlier in the day.

The governor reminded reporters that the budget adopted in February for the fiscal year that starts July 1 included more than $12 billion in tax increases.

"To now, four months later, come out with another tax increase is irresponsible," the Republican governor said.

Bass and Steinberg seemed reconciled to the likelihood that the tax hike proposals would fail. Steinberg said that if they did, the package they sent the governor would have a reserve $2 billion smaller than he had sought.

If the governor sticks to his insistence that the plan contain a $4.5 billion reserve, the money lost from a failure to pass the tax hikes could be made up by borrowing $2 billion from cities and counties.