State Republicans say no

Newport-Mesa’s local state lawmakers said they will not support Gov. Arnold Schwarzenegger’s proposal to raise the state sales tax by 1.5%, despite his proposed cut in government spending of $4.5 billion.

Schwarzenegger called the legislature back up to Sacramento on Thursday to announce the plan and begin an emergency session to try to resolve a recently projected $11.2-billion budget shortfall before Nov. 30, when this legislative cycle ends. He called the plan a compromise in a news conference, noting that it asks for almost equal amounts of cuts and new taxes.

When the Assembly and Senate passed a late budget six weeks ago, it projected an increase in revenue from last year. But California depends heavily on taxes from profits earned in the stock market, and the market’s recent crash crippled the revenue estimates counted on in the initial budget, said state Deputy Director of the Department of Finance H.D. Palmer.

Schwarzenegger is proposing to make up for the lost revenue by cutting $4.5 billion in spending — most of it coming out of the education budget — and raising the state sales tax by 1.5%, which would leave consumers in Newport Beach and Costa Mesa paying 9.25%.

State Sen. Tom Harman and Assemblymen Chuck DeVore and Van Tran all said Thursday that they would oppose the proposal as long as it contained a tax increase. Spending is already way too bloated, and a tax increase is unnecessary, they said.

“If the governor couldn’t get us interested in a 14% increase in the sales tax this summer, I’d like to know how he plans to get us interested in a 21% tax increase now,� DeVore said.

DeVore and Tran think they have a united Republican caucus in the Assembly, much like they did in the last round of budget negotiations, and therefore will not have to give ground on the tax issue. Democrats have a 50-30 majority in the Assembly, but need at least four Republican votes for a two-thirds majority on measures that would raise taxes. A united Republican front refusing to pass any budget with a tax increase eventually succeeded in taking taxes out of all proposals in September.

The passed budget relied heavily on inflated revenue projections, though, and won’t be solvent in its present state, according to the governor’s office.

Meanwhile, the Democratic leadership said it is unwilling to make up all of the lost revenue through additional cuts to education or social programs.

“We’ll know pretty early on whether this will be taken seriously by our Republican colleagues or not, and by seriously I mean, are they interested in solving the problem? You cannot have a negotiation if there are certain things you are unwilling to negotiate, such as taxes,� said outgoing Senate President Pro Tem Don Perata.

Perata, along with the governor and the three other major party leaders of both houses, plans to meet today to discuss the budget, in hopes of reaching a compromise. The local Republican representatives said it would be unrealistic to expect a compromise in 24 days, given the long negotiations the first time around.

“Any form of a tax increase is a non-starter for me and for most Republicans,� Harman said. “I’m pessimistic. We’re deadlocked philosophically over this issue and months and months of negotiations have done very little. So to think that we can do this in 24 days — that’s pie-in-the-sky thinking.�

Harman thinks that more spending can be cut from the budget than Democrats are willing to accept. In addition to the $2.5 billion the governor wants to cut from Proposition 98 educational spending and the more modest cuts to social programs, more can be stripped, according to Harman. Extra savings could be gained by decreasing the amount of workers the government employs and making further cuts to government funding of education, he said.

“You need to look at the big-ticket items. Education is the 800-pound gorilla in the budget. It gobbles up 52% of the general fund. I’m a big supporter of education but I see all the money that they get and I see the increases in spending and I’m not seeing what we’re getting for our money,� Harman said.

DeVore and Tran agree that additional spending cuts could be made. DeVore has also been pushing hard for a plan to drill oil within a three-mile strip of the California coast, which he says will bolster revenue.

According to DeVore, negotiating with the Democrats on tax increases would serve to derail that plan, which he said is gaining popularity in the legislature.

In calling for the special session, Schwarzenegger said in a news conference that he expected a compromise to be easier to reach because the election is finished. If some of the proposed measures are not passed soon, though, the $11.2-billion shortfall prediction will balloon, according to the deputy finance director.

“We need to move on this now because we need to put these measures into place quickly in order to create the revenues and cuts necessary to fill the shortfall. This is a situation in which time is literally money,� Palmer said.

ALAN BLANK may be reached at (714) 966-4623 or at [email protected].