By Daniel Weintraub
Despite an unexpected surge in tax collections, Gov. Jerry Brown is sticking to his proposal to renew nearly $10 billion in temporary taxes that have expired or are expiring this year.
The only major change in his tax plan is a delay in the reenactment of a .25 percent surcharge on income tax rates until Jan. 1, 2012.
And while Brown still pledges to take his plan to the voters, he now wants the Legislature to pass it first, before July 1, and then ask the voters to ratify it in a special election, probably in November.
Brown acknowledged that an improving economy and the good fortune of some of the state’s wealthiest residents will likely mean a surge of about $6.6 billion in unexpected tax revenues this year and next. But he said that is not enough to dig the state out of its hole.
Even with that money, he said, the state still has a $10 billion “structural deficit” – a permanent gap between revenues coming in and spending required by current law.
Brown said he wants to use some of the revenue surge to make up for the delay in reenacting the income tax increase. About $1.6 billion of the new money will go to kindergarten-through-community college education. And about $1 billion will go to erase the need to shift that amount from a special tobacco tax fund that pays for children’s services in counties across the state.
Another $400 million will be needed to make up for planned cuts in the prison system and mental health programs that have been impossible to implement.
“This is a program that’s honest, it’s all laid out there and I think it makes sense for California,” Brown told reporters.
He said a competing Republican plan that would not extend the temporary taxes would leave the state with a worse deficit than it has today.
If the taxes are not extended, Brown said, the cuts required to balance the budget would set off a “war of all against all” by interest groups seeking to avoid the pain.
“If this thing falls apart, there will be all manner of untoward outcomes and animosities and division,” Brown said. “I think it will be very divisive for California. I think we will flounder.”
Although Brown said he was willing to accept a spending limit and cuts in public employee pensions to get the tax extensions he is proposing, Republicans indicated that they will be even more opposed to his tax plan than before.
“Rather than curbing government spending, the governor’s revised budget still sets the state on a course of excessive spending growth in the future – spending that relies on tax increases,” said Senate Republican Leader Bob Dutton. “With $6.6 billion in new revenues…we don’t need, and it’s ridiculous to ask voters for, five years of new taxes.”