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Editorial

To fix California's budget, we need taxes too

An all-cuts solution would be too painful. Lawmakers should approve Gov. Jerry Brown's tax extensions.

May 22, 2011

Lawmakers in Sacramento traditionally put off the toughest budget decisions until the governor's office updates its spending plan in mid-May with fresh estimates of revenue and costs. Those estimates are now in, and one thing should be even clearer than it was when Gov. Jerry Brown released his original budget in January: Legislators can't cut their way to a balanced budget.

Granted, a projected $6.6-billion surge in tax revenue has narrowed the budget gap. So have the steps already taken by lawmakers, including more than $10 billion in spending cuts (mainly to safety-net programs and higher education) and almost $3 billion in borrowing. But the state still faces a shortfall of more than $10 billion. The nonpartisan Legislative Analyst's Office and legislative Republicans have both identified more cuts that could be made, but the reductions would take far too great a toll on the young, the elderly and the vulnerable.

Just to pick out a few examples, cutting $500 million more from the University of California system, as the legislative analyst suggested, would force the campuses to hit students with a 32% increase in tuition in midyear, UC President Mark G. Yudof said. And the Republican proposal would wipe out funding for early childhood and mental health programs — a penny-wise, pound-foolish approach with ugly long-term consequences for schools, hospitals and prisons.

To avert such destructive cuts, Brown and his Democratic colleagues in Sacramento want to maintain California's personal income, sales and vehicle tax rates at their 2010 levels. Those rates, which had been increased temporarily in 2009, are scheduled to revert by July 1. This year's budget gap is reason enough to delay those reductions. Here's another: The state is expected to have annual shortfalls of $10 billion at least through fiscal 2014-15, caused in part by a decade's worth of borrowing to paper over past budget gaps.

Even with the tax increases, state government spending would fall to pre-recession levels. And when measured against total personal income in the state, general fund spending would drop to its lowest level in almost 40 years.

The debate over taxes has dragged on too long, and the uncertainty is damaging in its own right. As Legislative Analyst Mac Taylor pointed out Thursday, the uncertainty would only be magnified under Brown's plan to extend the tax rates, then ask voters a few months later whether to repeal them.

Rather than continuing to flirt with a ballot measure, legislators should take stock of the cuts they've already made — such as eliminating 5,500 state jobs, closing up to 70 state parks, slashing welfare grants to pre-1987 levels, siphoning $1 billion out of early childhood education programs and requiring the poor to make co-pays for medical care — and recognize how damaging it could be to go further. The right move now is to generate more revenue to close the budget gap. And the least painful course is to keep in place the rates Californians have already been paying.

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