Senate GOP leader rules out tax hikes to balance budget

Saying the ailing economy is putting enough stress on taxpayers, Senate Republican leader Dave Cogdill said Tuesday that Republicans will oppose any tax hikes to bridge California's budget deficit.

Cogdill suggested the deficit, which he pegged at $16 billion for the fiscal year beginning July 1, could be wiped out through service cuts and tapping into the reserves of voter-approved initiatives intended for early childhood education, mental health services and transportation.

Taxpayers already are grappling with "record gas prices (and) food prices going through the roof," Cogdill, R-Modesto, said during a meeting with The Bee Capitol Bureau.

"They're very concerned about their mortgages, and whether or not they're going to be adjusted to a point where they'll join the lengthening line of foreclosures," he said. "To put tax increases on people at this time, it makes absolutely no sense."

Senate President Pro Tem Don Perata, D-Oakland, has suggested expanding the sales tax to include services such as consultants, dry cleaners, lawyers and technology support. And Assembly Speaker-elect Karen Bass, D-Los Angeles, believes the deficit cannot be closed through cuts alone.

Democrats, meanwhile, are likely to oppose Cogdill's suggestion to borrow money from three initiative-created funds: the county-based First Five commissions for children, established by Proposition 10; Proposition 63 to expand mental health services; and the Proposition 42 gas sales tax for transportation purposes.

Sen. Darrell Steinberg, the Senate's incoming president, said "no way" will he allow proceeds from Proposition 63, which he sponsored, to be used to defray the budget deficit.

"The voters of California passed an initiative which specifically prohibits the state Legislature from taking the money to balance the budget," said Steinberg, D-Sacramento, adding that such a raid on the initiative would be "unlawful."

Gov. Arnold Schwarzenegger has estimated the deficit may reach $20 billion. But Cogdill said that, based on recent tax receipts, he believes the gap is closer to $16 billion. Cogdill said that number could be pared to $8 billion to $10 billion by implementing Schwarzenegger's proposed 10 percent across-the-board cuts.

The deficit, he said, could be trimmed even more by borrowing from some of the roughly $6 billion he estimated are parked in coffers of the three voter-approved initiatives.

"There's some latitude there relating to the state's ability to use those funds," Cogdill said, taking a different view than Steinberg. "Obviously, there's still some questions there that need to be answered."

Democrats have suggested closing some "tax loopholes" – on privately owned boats, planes and recreational vehicles, for example. Cogdill said "we're certainly willing to look at those things."

"It (depends on) how you define a loophole," he said.

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• * * * Call Aurelio Rojas, Bee Capitol Bureau, (916) 326-5545. Kevin Yamamura of The Bee Capitol Bureau contributed to this report.