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California budget impasse: not over 'til it's over

Schwarzenegger vows to veto the deal lawmakers approved Tuesday, extending the longest fiscal standoff in state history.

By Staff writer of The Christian Science Monitor / September 17, 2008

Sacramento, Calif.

The budget deal that California lawmakers had hoped would end the longest fiscal standoff in state history hit a big obstacle late Tuesday: a governor who says they’ve merely kicked all the problems down the road to next year.

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Gov. Arnold Schwarzenegger (R) has a big veto pen – and he’s waving it now. Legislative leaders, for their part, are expected to attempt an override, counting on Republican members to stick with the budget compromise because it does not include an explicit tax increase.

Indeed, if there’s any lesson from California’s 11 weeks of budget stalemate, it’s that antitax sentiment is alive and well. The deal that political leaders struck to close a $15.2 billion deficit allowed GOP lawmakers to hold firm to a no tax hike pledge – even as Governor Schwarzenegger and his business allies were signaling support for a temporary sales tax increase.

Instead, the deal cut $9.6 billion in spending, then moved future revenues forward and delayed payments on obligations so as to appear to balance this budget.

The plan “takes our problems and makes them even worse,” Schwarzenegger said Tuesday, in announcing he would veto the budget legislation. “The way this budget is right now, we will need a huge tax increase next year or to cut education severely.” (Education spending accounts for about half of the general fund budget.)

The governor also did not get all the "rainy day" provisions he requested as a way to buffer the state from future shortfalls.

The battle signals that more than three decades after the opening salvos of the Reagan Revolution, this state still has a lot of antitax moxie. The cohesion of the Republican resistance means California has probably reached its high-water mark on taxation for the foreseeable future.

"It shows there's absolutely no support out there for a tax increase," says Tony Quinn, a veteran Sacramento political analyst. Republican lawmakers "would have held out to December if they had to, because there was no critical pressure to get the budget done by raising taxes."

Nor, given the recent past, are new taxes likely in the near future, he says. In 2004, voters rejected stripping the supermajority requirement for passing state budgets that gives Republicans a virtual veto. Then voters rejected further taxes on the rich and tobacco and oil companies.

"That's in liberal California. If they won't tax the rich, Big Oil, or tobacco companies, who will they tax?" asks Mr. Quinn.

Californians are in a show-me mood when it comes to taxation, argues Mark Baldassare, pollster and head of the Public Policy Institute of California.