Gov. Arnold Schwarzenegger established a new state commission Thursday to overhaul the state's tax structure after facing significant volatility tied to stock market losses that already have hamstrung this year's budget.
The Republican governor, joined in Los Angeles by Democratic Assembly Speaker Karen Bass, blamed the state's latest budget problem on a tax system that relies on the top 1 percent of earners to pay a significant share of revenues. He said changes are necessary to even out the state's revenues over time to stabilize funding for state programs.
Schwarzenegger did not specify exactly what types of different taxes he would seek, though Democrats in the past have suggested expanding taxes beyond retail and assessing services, such as lawn mowing or auto repair.
The governor signed a $103.4 billion general fund budget in September, but experts now believe the state could be $10 billion short of what was in that spending plan. The governor essentially confirmed that estimate Thursday, saying state "revenues have taken a major dive of 10 percent."
"We are paying for the price right now of this outdated revenue system," Schwarzenegger said. "Just as we have signed the budget a month and a half ago, we are now already having a major problem. The stock market has come down 20 percent since then. And, of course, our revenues have taken a major dive of 10 percent."
The new panel, formally titled the Commission on the 21st Century Economy, will have 12 members, with six appointed by the governor, three by Senate President Pro Tem Don Perata and three by Bass. Schwarzenegger expects them to begin meeting in November and report their findings by April 15.
The volatility in state revenues are hardly a new phenomenon. Schwarzenegger's executive order says the state experienced a 28.1 percent increase in personal income tax in 1999-2000 but a 25.9 percent decrease in 2001-02.
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