First but Not Final Word

Davis patterned his major budget change after something Wilson did during the fiscal crisis of a decade ago. Then, Wilson and the Legislature erased a $14-billion deficit by raising taxes roughly $7 billion and cutting spending a like amount. Similarly, Davis proposes to reinstate the 10% and 11% income tax brackets imposed by Ronald Reagan in the late 1960s -- and to raise the sales tax by a penny on the dollar statewide, to more than 9% in Los Angeles. The new money, $8.3 billion including higher cigarette levies, would go to the counties to pay for the health and welfare programs they would absorb. By linking the tax increases to social services being taken over by localities, Davis makes reducing them in the future much harder. Moreover, Davis is taking back from the cities and counties nearly $3 billion annually in state payments that made up for the loss of shrinking car tax revenues.

Davis' income tax boost threatens to make the tax system even more volatile, increasing the gyrations that made the deficit so sudden and so steep. That needs fixing. The state also needs a disciplined budgeting process to halt the overspending that added to this crisis, something urged by GOP legislators in their initial counterproposal. Democrats must take it seriously to have any hope of GOP support for new taxation.

One small reason for optimism is the impending arrival of former state Sen. Steve Peace of San Diego as Davis' finance director. He is a longtime advocate of basic fiscal reform. One of Peace's first jobs will be figuring out whether the deficit is really $35 billion over 18 months -- or something less, as Republicans argue.

Davis rang the opening bell Friday and now the Legislature will take its turn in the arena. It has to do more than say "no."