Schwarzenegger's budget calls for temporary sales-tax increase
The governor announced the three-year tax hike and his formal plan just after a judge ruled to hear a dispute between Schwarzenegger and Controller John Chiang over state worker pay cuts on Sept. 12.
SACRAMENTO — Hoping to break a partisan logjam, Gov. Arnold Schwarzenegger went public today with his own plan for a budget, calling for a temporary one-cent sales tax increase, a large rainy-day cushion and new authority for him to cut spending when revenues slacken.
"We must meet in the middle," he said at a news conference. "All of us have been sent to Sacramento to find common ground and get results. . . . This compromise puts California on the road to fiscal sanity."
For weeks, the governor has privately talked to lawmakers about several elements of his proposals, but he presented a formal plan to lawmakers and the media today for the first time.
The most controversial element of his plan -- the sales-tax hike -- would remain in effect for three years. The following year, it would be reduced by one and a quarter cents, putting it below the current rate. The temporary increase would not apply to diesel, gasoline or jet fuel.
Schwarzenegger made his announcement just hours after a judge ruled that he would not hear a dispute between the governor and California Controller John Chiang over state worker pay until Sept. 12. The judge's decision meant that Schwarzenegger would not be able to cut the pay of most state workers to the federal minimum wage this month as he had planned.
Sacramento County Superior Court Judge Timothy Frawley agreed to expedite the case. But the timetable is not soon enough for Schwarzenegger to reduce the wages of most employees to the federal minimum to avert what his administration calls "a looming cash crisis" that could force the state to borrow at expensive interest rates to pay bills.
Cutting workers' pay to $6.55 an hour for August would have given the state an additional $764 million, said Lynelle Jolley, a spokeswoman for the state Department of Personnel Administration. Full wages would have been repaid after a budget was signed.
Chiang, who manages the state payroll, has refused to implement the salary reductions Schwarzenegger has called for, contending that the cuts are unnecessary and too difficult for his office to enact. Schwarzenegger sued the controller last week in an attempt to force him to comply.
evan.halper@latimes.com
michael.rothfeld@latimes.com
