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UPDATED: California Budget Impasse Broken

Santa Maria senator works out compromise that appeases opponents, eliminates gas tax.

California has a budget, thanks to some overnight negotiation and a vote switch by Senator Abel Maldonado.

The impasse was broken around 7 a.m. when the Assembly voted on a plan the Senate approved just two hours earlier. Maldonado, a Republican from Santa Maria, met Wednesday evening with Governor Arnold Schwarzenegger to talk about concessions that could make the proposal more palatable and emerged on the majority side.

The changes in the budget proposal approved by both houses of the California legislature include:

  • The removal of a 12-cent increase in gasoline tax
  • Freezing legislator pay in years when California runs at a deficit
  • Cancelling a $1 million planned expenditure for furniture for the Controller’s Office
  • Changing primary elections to make them open to all parties instead of dividing along party lines (this must be approved by the voters)

Schwarzenegger is expected to sign the proposal later today.

Before local legislators left to catch up on sleep, they let the media know where they stood on the budget passage.


“If you asked all 120 members of the legislature, every one of us could find things we didn’t like, but there are some things that were positive not only for the state, but also for Santa Clarita,” said Assemblyman Cameron Smyth. “I’m talking about the inclusion of the $100 million tax credit for the film industry, something I’ve been pushing for during my time on the Santa Clarita city council as well as my time in the legislature. That really does have an impact on California and the economy of Santa Clarita.”


“Clearly my biggest disappointment is the inclusion of several billion dollars in tax increases,” he said, referring to the bump in sales tax and income taxes. “We were successful in removing the 12-cent gas tax at the last minute and that was positive. I don’t believe increasing taxes is the way to economic recovery.”


Smyth said the taxes could be in effect from two to four years, depending on the outcome of a special election set for May of this year.


Although the budget nightmare seems to be over, next year’s budget looms just months away.


“This is actually a two-year budget; we fixed the ’08-’09 budget and the one we approved this morning is the ’09-’10 budget. We were actually joking that this is the earliest that California has ever passed a budget.


“We expect the governor’s May revise that revenues will probably still be down and we’ll have several million dollars to work around,” he continued. “But we made it clear, my Republican colleagues and I have made it clear that tax increases are completely off the table for any future budget. I didn’t support them this time, but we know we’re going to look at other ways to close that gap come May.


Tax cuts for small businesses were also part of this morning’s deal, which Smyth applauded. Basically, small businesses who hire new staff will get tax credits up to $3,000.


“Hopefully that will spur the economy and help them out,” Smyth said.


To hear Smyth’s full interview, click the player below.


{enclose CamSmythbudget_newscut.mp3}


Freshman Senator Tony Strickland felt the taxpayers are being asked to take on an unfair burden.


“Today is a sad day for California’s hardworking families. Sacramento politicians have been overspending for years, treating the taxpayers of California as a personal ATM—and the funds are overdrawn. Tax increases do not, have not, and will not solve our budget crisis. After lawmakers raised taxes in 1991, revenues dropped.  Higher taxes cost jobs.”


“Tax increases will not bring small businesses back to our state. Tax increases will continue to chase vital jobs out of California at a time when we are critically in need of reversing our state’s high unemployment.  With California already fourth in the nation in unemployment, I fear this budget will turn San Francisco and Los Angeles into the Detroit of the West.”


Sen. George Runner announced that he voted against the budget bill because it fails to adequately solve California’s horrific financial problems.


“First, it raises $70 billion in taxes on California families and small businesses over the next five years,” Runner said. “Let me repeat a mantra I have said for many years: The taxpayers did not get California into this mess; poor fiscal stewardship by the Legislature and Governor did. So why then should the taxpayer carry the burden?”


“History has shown that consumers do not respond as predicted by the ever-confident pro-tax lawmakers,” Runner said. “Instead, many consumers modify their spending behavior; they postpone purchasing new cars when car registration doubles; they make larger purchases out of state or online when the sales tax is increased.


“Some consumers cancel travel plans, or cancel everyday services like cable and newspapers subscription or curtail dining out to prepare for the increase in income tax payment. In other words, new and increased taxes have only a negative effect on consumers.”


Runner added that some families and businesses just leave the state altogether and fall into the waiting arms of neighboring states Nevada, Arizona and Texas.


“My Republican colleagues have negotiated some positive policy changes, such as easing burdensome environmental regulations to speed construction projects, public private partnerships, and no early release for felons. However, despite these advancements, I do not believe they balance out the negative impact of the tax increases,” Runner said.


“This budget also does not go far enough to address the rampant problem of illegal aliens draining the state coffers — in education, health, social services and public safety. With this budget, we’ve done nothing more than kick the problem down the road – to be solved another day by another body of elected officials. The question is will California be salvageable?”


Los Angeles County Supervisor Mike Antonovich was disappointed in the budget, pointing out several shortcomings that he hopes the legislators will work on in the coming months.


“What was missing was a comprehensive package of structural reforms including eliminating or consolidating overlapping departments and high-paying political commissions — limiting stipends for members of necessary commissions to $150 per meeting.  Also needed is a 2-year state budget, a part-time legislature and abolishing term limits.


“Imposing one of the highest tax rates in the nation is a tax-and-spend orgy that further drives businesses, individuals and jobs out of state.  It is also another raw deal for County and state taxpayers who are currently subsidizing excessive state spending, government growth, entitlement programs and over $1 billion a year in benefits for illegal aliens in Los Angeles County.”


While most of the legislators were headed home for some much-needed rest, their down time is limited. Both the Assembly and Senate are expected to convene in Sacramento bright and early Monday morning.

UPDATED: California Budget Impasse Broken

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