SACRAMENTO — Gov. Arnold Schwarzenegger proposed during private negotiations over the weekend to close the state's $15.2-billion budget gap with a temporary but immediate one-cent hike in the state sales tax, according to legislative sources.
The proposal, floated in meetings with the Legislature's leaders and their staff, hinges on lawmakers agreeing to automatic spending restraints and new powers for governors to cut programs whenever the state falls into the red.
People involved in the negotiations said Schwarzenegger, who has repeatedly vowed never to raise taxes, would back away from the proposal in the absence of the spending controls.
The increase of one cent per dollar would take effect soon after a budget is signed and last three to four years; after that, the tax rate would gradually drop. It would ultimately settle at a level lower than the current statewide rate of 7.25%.
Los Angeles County residents could face a separate half-cent-on-the-dollar sales-tax increase. The Metropolitan Transportation Authority board has proposed such a measure for the November ballot, with the money to fund transportation projects. If both the MTA and the Schwarzenegger proposals were to be implemented, the sales tax in Los Angeles County would jump to 9.75%.
The governor could declare that over time -- perhaps a decade or longer -- his statewide plan amounts to a tax cut. In the near term, it would raise more than $5 billion per year.
Administration officials said they would not comment on proposals made during closed-door budget negotiations.
"The governor is pushing Republicans and Democrats to come to the table immediately and reach a compromise because of the looming cash crisis we face," said Schwarzenegger spokesman Matt David. "This compromise must include budget reform that prevents our state from being in this position."
State finance officials have said California could run out of cash sometime next month if a budget is not enacted soon. Without a budget in place, the state may not be able to borrow billions of dollars it needs to cover government expenses until the usual flood of tax receipts arrives in the spring. The new fiscal year began July 1.
It is unclear whether lawmakers will embrace the governor's proposal. His automatic spending restraints would be written into the state Constitution, something Democrats have long resisted, saying they could force steep cuts to schools and other programs and limit the Legislature's flexibility.
