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Brown, Democrats Give Up On Tax Election

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“Trigger cuts” possible

By Lee Ragin, Jr. –

After months of seeking GOP votes, Gov. Jerry Brown decided four days before the new fiscal year that a bipartisan deal was impossible.

The Democratic governor wanted Republicans to pass a temporary extension of higher sales and vehicle taxes as a "bridge" to a fall election, but Senate Republicans would not vote for taxes.

"I thought we were getting close, but as I look back on it, there is an almost religious reluctance to ever deal with the state budget in a way that requires new revenues," Brown said.

Republicans said Democrats scuttled the deal because they were unwilling to do enough to make long-term changes to public pensions, institute a tough spending cap and provide regulatory relief for businesses.

The deal sidesteps Republican support and relies on $4-billion in newly projected revenue. Brown said he’ll allow more than $9-billion in taxes and fees to expire Thursday, because he couldn’t muster enough Republican support.

But if the revenue the state is counting on doesn’t materialize – the budget will trigger deep cuts to education and public safety later in the year. Lawmakers on both sides of the aisle are still fighting over the details. Democratic Senate Leader Darrell Steinberg says it’s not the budget his party wanted, but Republicans’ unwillingness to govern gave them little choice.

With no bipartisan agreement, the state sales tax will drop one percentage point and the vehicle license fee half a percentage point on Friday.

Senate Minority Leader Bob Dutton (R-Rancho Cucamonga) said in a statement “This latest budget is based on the hope that $4 billion in new revenues will miraculously materialize but does absolutely nothing to change government as usual.” Assembly Minority Leader Connie Conway says she doesn’t mind the potential “triggering” of cuts. But says it’s “disrespectful” to taxpayers that Dems aren’t looking at any other way to balance the budget. Will this austere budget be enough to close the state’s remaining $9.6-billion deficit? Will Brown pursue an initiative to ask voters to approve new taxes in the future?

Brown and Democratic leaders hammered out their majority-vote budget over the weekend to bridge the remaining deficit. The governor vetoed legislative Democrats' first plan June 16, contributing to legislators' loss of pay. The governor and Democrats have feuded ever since, but they refocused together once Brown gave up on Republicans.

The linchpin of the new deal is a projection that the state will receive another $4 billion in extra revenue in 2011-12 based on strong tax receipts in May and June.

The higher revenue forecast replaces the riskiest items in Democrats' first budget: a sale of state buildings, a quarter-cent local sales tax increase and taking $1 billion from First 5 commissions.

Lawmakers must approve cuts to education, corrections and safetynet programs that will take effect if revenues fall short of projections.

The most visible may be an additional seven-day reduction that state officials will encourage districts to take at the end of the school year if enough revenue doesn't come in.

Under the new plan, the University of California and California State University will each absorb additional $150 million reductions, for a total of $650 million apiece. They risk losing another $100 million each if the state falls short of revenues. The university systems already have said they will seek tuition hikes to offset new state reductions. Since January, Democrats will have solved the state's original $26.6 billion deficit with $11.8 billion in unexpected revenue, more than $12 billion in cuts and about $3.5 billion in fund shifts and internal borrowing. The budget will include a $500 million reserve.

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