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Suffer Now, Profit Later

February 20, 2003

Here's the bottom line from Wednesday's analysis of the state budget by the Legislature's nonpartisan fiscal advisor: Simply saying no, whether to higher taxes or budget cuts in pet causes, will drive the state into double the trouble. Legislative Analyst Elizabeth G. Hill called Gov. Gray Davis' budget plan credible and warned that failure to agree on key budget decisions soon would quickly worsen the state's gloomy fiscal situation. A $1 cut today can translate into $2 saved in the coming budget year.

What that means is that anyone objecting to Davis' plan should have a reasonable alternative in hand and that Davis must drop his "my way or the highway" attitude.

Hill says the Davis budget would eliminate the two-year shortfall facing the state, estimated by Davis at $35 billion. She astutely refused to get into an argument over the exact dollar amount of the shortfall. In January, Hill said it was only $26 billion for the rest of this fiscal year and all of fiscal 2003-04 beginning July 1. Now, she says, she and the governor differ over their revenue estimates by only about $1 billion, but she declined to say much more. That amount is negligible in light of the size of the problem.

Davis, even with Hill on his side, is in trouble on both sides of the aisle. He has proposed sales, income and cigarette tax increases along with billions in spending cuts. Lawmakers passed several billion dollars worth of immediate reductions in January but tied them to raising the vehicle license fee, which has been cut by more than 60% since 1998.

Davis says he will veto that Democratic-backed package. If he does, the governor should find other common ground with lawmakers quickly. Restoring the car tax -- or part of it -- should at least be reserved as an option.

As for Republicans, Davis wants to avoid a bitter fight because a few of their votes will be needed to pass a budget. But the GOP legislative leadership continues to vow full-bore opposition to any tax increase. Assembly Republican leader Dave Cox (Fair Oaks) talks of "a warlike environment" -- the sort of rhetoric that will only make the conflict worse.

Hill has her differences with Davis' plan to transfer $8.2 billion in state programs to local government, along with sales and income tax increases to finance them. Hill suggested some changes in which programs should be sent to the cities but had no objection to the concept.

She also recommended increases of $214 million in fees such as those levied on big polluters to finance air- and water-quality regulation programs. Davis proposed some of these fee increases and the Legislature has included many in Assembly Bill 10X, part of the budget cuts package.

The savings is relatively small, but it's a start. Davis should sign it the minute it hits his desk, kicking the first small branch out of a mighty logjam.

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