Gov. Arnold Schwarzenegger said he wanted a state budget deal by Christmas. Well, it's Christmas. Where's my budget deal?
The governor and Democratic leaders negotiated Monday and Tuesday, but talks essentially are on hold until Friday, when they will meet via videophone. The governor went to Idaho for the holiday.
What are they negotiating about?
The governor wants Democrats to sign off on a broader exemption from the state's environmental laws for highway projects and on more flexibility to use private contractors and investors on public projects. He also wants deeper cuts to welfare grants and in-home supportive service payments, and elimination of two state holidays and overtime pay on holidays for state workers.
How will that help the deficit?
Schwarzenegger says the first two items will help jump-start the state's economy by expediting infrastructure projects. If he can reach agreement with Democrats on these points, presumably he would sign the $18 billion package of spending cuts and tax increases Democrats approved last week.
Tax increases? What taxes?
A three-quarter-cent per dollar increase in sales taxes, a 2 1/2 percent surcharge on income tax liability in tax year 2009 and a 9.9 percent tax on oil production. The Democrats' plan also replaces the current state taxes on gasoline of 26 cents per gallon with a 39-cents-per-gallon fee. Republicans plan to sue if the governor signs the package, claiming Democrats illegally passed the tax bill with a majority, instead of a two-thirds vote that requires GOP support.
Isn't the deficit higher than $18 billion?
The state budget deficit keeps getting worse. The $103 billion general fund budget that lawmakers adopted for the fiscal year ending June 30, 2009, is at least $14.8 billion in the red, due largely to lower tax collections because of the struggling economy. If you add in the following fiscal year for which state budgeters are now planning – the one ending June 30, 2010 – we could be $40 billion in the hole.
How would $18 billion help?
The midyear fix could help the state avert a looming cash crisis that may force them to issue IOUs. And a partial fix would signal to Wall Street that the state may finally be getting its fiscal house in order, which in turn could loosen credit markets.
– Dan Smith, Bee Capitol Bureau Chief
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