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Pass Budget, Then Move On

July 02, 2002

Here we are again, the second day into fiscal 2002-03 with no state budget. Budget struggles in recent years were worked out with relative amity and a lot of horse-trading between the parties. But this election-year deadlock has a feeling of real bitterness to it.

Assembly Republicans oppose any tax increase. Gov. Gray Davis and Democrats say there is no way to close a $23.6-billion shortfall without some tax hikes.

The budget passed Saturday by the Senate contains $3.6 billion in tax and fee increases. In the Assembly, the GOP was adamant about not raising taxes but vague about where to get the needed cuts. In that case, Democrats said, there was nothing to negotiate. Stalemate.

Both sides argue with fervent political rhetoric. But the most telling statement came from Davis aide Susan Kennedy, who said, "Believe me, if we could have cut our way out of this and not raise taxes, Gray Davis would have done that in a moment."

Indeed, the governor had to be dragged into a tax increase, since he knew he would be hammered with it by his Republican reelection foe.

The revised budget that Davis submitted in May proposed doubling the annual license fee on autos, bringing in $1.3 billion by taking back much but not all of the fee reduction of the last three years. The Senate initially substituted a temporary income tax increase on the wealthiest Californians but went back to the auto fee last weekend to win the necessary votes.

This patchwork budget proposal contains about $7 billion in program cuts, but much of the remaining deficit is offset with deferred spending, loans and other fiscal gimmicks. No doubt more cuts are possible, but the GOP demands would seriously curb services to the most needy, in particular those who rely on Medi-Cal health care. Schools and local governments also would suffer deep cuts.

Republicans say Davis caused the deficit by spending too much, but they fail to document their charge that the cost of government has risen more than under his GOP predecessors. The cause was in large part the sudden plunge in income tax revenues.

California taxpayers, who have received billions of dollars in state and federal tax relief, should be willing to temporarily yield a small percentage of that to keep the state from cutting back further on trauma centers or college scholarships.

The state will continue to function for now. But at some point, true difficulty will set in as the state is unable to pay for equipment and supplies. The budget now before the Assembly is tolerable for one budget cycle in a very bad period in the state's fiscal history. There are no good alternatives. The Assembly should hold its nose, pass the budget and concentrate on improving the state's fiscal outlook before the next budget comes due.

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