California Senate Democrats responded to Governor Arnold Schwarzenegger's May Revise on Monday, proposing $4.9 billion in new taxes to close the state's $19.1 billion budget shortfall. Over $2 billion in added revenue would come from delaying corporate tax breaks, while $1.4 billion would come from changes to personal income taxes.
State Senator Denise Ducheny told KPCC's "AirTalk" that this proposal is because Republicans and the governor "have reneged on the rest of the deal," referring to proposed cuts to health and human services and education. Ducheny said that the Senate Democrats' plan would maintain current levels of taxes and services, while allowing no further tax breaks.
"Revenues are not going to be part of the solution," said H.D. Palmer, deputy director of external affairs for Governor Schwarzenegger at the California Department of Finance. Palmer said that California was coming off a huge tax increase and beginning to see the early signs of economic recovery. "The governor doesn't want to stomp on that emerging economic recovery," said Palmer, and added that the governor feels tax increases would do that.
"This feels pretty familiar," said the Los Angeles Times' Sacramento Bureau Chief Evan Halper on "AirTalk." "You've got to wonder how serious they are," said Halper, noting that the Democrats are proposing large tax increases that they may not be able to get their own caucus to support if it went to the floor. When asked whether they had the votes to pass their plan, Ducheny said, "We aren't taking a poll of individual members yet."
Ducheny emphasized the importance of maintaining certain programs, as cuts would threaten $5 billion in federal funding. She said their plan would allow the sales tax to be reduced by 1 percent next year, but substitute out the governor's new tax on insurance. "Let's just stick with what we know," said Ducheny. Ducheny said that Senate Democrats want to maintain the status quo on taxes and spending.
Halper saw this as potentially being a starting point for negotiation. "The governor's proposed all kinds of really draconian cuts, opponents would call them," said Halper. The governor calls this process "budget kabuki," Halper noted, where both sides ultimately "get serious" in the summer to work out a real deal. "The governor created this mess and refuses to take responsibility for it," said Ducheny.
Assembly Democrats come out with their plans later today or this week. Ducheny said she expects the Senate and the House plans to go to conference committee next week.