Highlights Ff Plan To Close California Budget Deficit

By: By The Associated Press
By: By The Associated Press

The California Legislature adopted a package of bills Thursday
to fill California's $42 billion budget deficit through June 2010.
It calls for a midyear fix to immediately reduce state spending and
raise taxes.
The revenue provisions of the final plan raise taxes by $1.6
billion less than in the plan originally debated by the Legislature
because a 12 cent-per-gallon gas tax was deleted. That amount will
be made up through line-item vetoes agreed to by the governor and
money California will receive from the federal stimulus bill.

Revenue
The plan would raise up to $12.8 billion through June 2010 by
imposing a variety of temporary taxes. The higher taxes would be in
effect for two years. The taxes would remain longer - through the
2013-14 fiscal year - if voters approve a state spending cap during
a special election in May.
Here are the specific taxes:
- Increases the state sales tax by 1 cent on the dollar,
generating $5.8 billion through the next fiscal year.
- Raises the fee for licensing vehicles to 1.15 percent of
market value, up from the current .65 percent. The move is
projected to generate $1.5 billion. A portion of the fee will be
dedicated to local law enforcement.
- Raises the state personal income tax rate by 0.25 percent,
generating $3.7 billion in the next fiscal year. If the state
receives more than expected from the federal government, the
increase in the rate would be reduced to 0.125 percent.
- Reduces the amount taxpayers can claim on a dependent care
credit to the federal level of $100 instead of $300, adding $1.4
billion.
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Cuts
Reduces state general fund spending by $15.1 billion through the
end of June 2010 by forcing education and social service programs
to absorb much of the pain. Among other cuts, the budget proposal:
- Reduces education spending by $8.6 billion over two years,
likely forcing schools to lay off teachers, slash salaries and
postpone spending on construction and textbook purchases. The
proposal also would give districts greater flexibility in spending
money that is normally dedicated to specific programs.
- Imposes a 10 percent across-the-board cut to the University of
California and California State University systems, saving $264.4
million.
- Continues furloughs for 238,000 state workers, trims overtime
pay and eliminates Lincoln's Birthday and Columbus Day as paid
state holidays, saving $1.4 billion. The furloughs would be reduced
from two days a month to one and workers would receive two personal
days off in exchange for giving up the paid holidays under a
tentative contract agreement reached recently between the governor
and the state's largest employee union.
- Eliminates annual cost-of-living increases for recipients of
the state's welfare-to-work program, known as CalWORKS, to save $79
million.
- Eliminates the state and federal cost-of-living increase for
seniors and the disabled who are receiving Supplemental Security
Income/State Supplementary Payment, saving $594.1 million.
- Depending on whether the federal government provides
additional aid, the budget compromise would make further reductions
to Medi-Cal, the state's health insurance program for the poor;
CalWORKS; in-home support for seniors; and other social service
programs by $948 million.
- Eliminates $1 million that was allocated for the state
controller's office to buy furniture as one of the conditions for
securing the last GOP vote.
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Borrowing
- Approves a $5 billion plan to borrow against the value of the
lottery's future revenue. Voters must approve changes to the
lottery to make it more marketable in the hope that it will bring
in more money, and then the state would have to entice investors to
buy the bonds.
- Authorizes the state to take out $6 billion in bonds to cover
bills that will not get paid in the current fiscal year. Lawmakers
expect to avoid this loan by using federal aid.
- $400 million transferred from various special funds.
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Ballot Questions
These questions will appear before votes May 19.
- Spending cap: Asks voters to impose a limit on the amount the
state can spend each year based on revenue growth over the previous
10-year period. Money above that amount would be saved in a rainy
day fund. That fund would be capped at 12.5 percent of revenue, and
any amount above that could be used to pay debt or for one-time
purposes. If voters approve the cap, then temporary taxes that are
part of the budget would be extended for an additional two years.
- Education: Asks voters to modify Proposition 98, the
voter-approved minimum school funding guarantee, to protect
education funding when state revenue rebounds after lean budget
years.
- Mental health: Asks voters to shift $227 million in
voter-approved funding from Proposition 63, the state mental health
fund, for two years to pay for a low-income child development
program known as the Early Periodic Screening, Diagnosis and
Treatment Program.
- Child development: Asks voters to redirect $608 million in
First 5 money for early child development to other children's
programs for five years. Voters approved Proposition 10 in 1998,
adding a 50-cent tax to each pack of cigarettes.
- Lottery: Asks voters for permission to hand out larger lottery
jackpots as a way to sell more tickets. Also grants the state
permission to stop using lottery proceeds for education programs.
Instead, school funding would be paid through the general fund.
This question will appear before voters in June 2010.
- Ask voters to amend the state Constitution to allow open
primaries for legislative, congressional and statewide elections,
including the governor's race. The top two vote-getters would
advance to the general election.
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Economic stimulus
- Grants up to $400 million in tax credits for companies with 20
or fewer employees that hire new workers over the next two years.
Allows businesses to claim a credit of up to $3,000 per full-time
job created.
- Provides up to $100 million a year for five years in tax
incentives for movie studios to film in California, known as the
runaway production credit.
- Reformulates taxes for corporations that operate in multiple
states. Republicans say the tax break would encourage investment in
California while critics called it a giveaway that could cost the
state $690 million a year.
- Allows unlimited public-private partnerships on state
transportation projects through 2017 and up to 4,500 beds in
community-based prisons for inmates nearing parole.
- Speeds up construction on 10 state public works projects, 5
local transportation projects and 10 redevelopment agency projects
and 5 state office buildings by allowing one company to do both the
design and construction.
- Removes environmental hurdles and accelerates permit approval
for 8 state road projects through 2010.
- A 2007 off-highway diesel regulation requires bulldozers,
airport baggage trucks and ski resort snowcats to begin reducing
emissions from their fleets in 2010. The rule phases in the
regulation through 2020 for fleets of large vehicles. The budget
proposal would delay the initial phase-in requirements, requiring
fewer vehicles to comply in the early years.
- Exempts environmental reviews for selling surplus state
property.
- A state grant program offers funding to companies that take
steps to reduce harmful emissions from their vehicles before state
air pollution requirements go into effect. The budget proposal
would allow farmers to access that money even if the requirement
has already taken effect.
- Exempts some rural communities from paying prevailing wage on
public work projects.
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Source: California state Assembly, Senate.


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