California Gov. Calls for Tax Increases
By Alexa H. Bluth
Associated Press Writer
Friday, January 10, 2003; 3:48 PM
SACRAMENTO, Calif. –– Gov. Gray Davis proposed deep cuts in schools, health and welfare and called for $8.3 billion in tax increases on shoppers, smokers and the wealthy Friday to help close a nearly $35 billion budget deficit.
The plan involves a huge shift of state health and welfare programs to local governments.
"All the tasks before me were hard, but they had to be made," said Davis, a Democrat who was grudgingly re-elected in November after a first term marked by a dramatic financial downturn and a power crisis.
The governor's long-awaited announcement sets the stage for a political battle over raising taxes in the nation's most populous state.
Davis' plan proposes a total of $20.7 billion in budget cuts this year and next – including $4.5 billion in cuts to education.
He proposed a 1-cent sales tax increase that would raise about $4.5 billion and would cost the typical family about $200 to $250 a year. He also called for a $1.10-per-pack increase in cigarette taxes. And he asked for a tax increase on the state's top earners.
The tax proposals have support from Democrats, who control both houses of the Legislature and want more money to protect programs. But the Republicans – whose votes will be needed to get to the two-thirds approval required for the passage of a budget – have called higher taxes damaging to the economy and vowed to block any budget that includes them.
The Republicans also question the magnitude of the shortfall, saying Davis inflated the deficit figure to justify tax increases.
If the two-year shortfall reaches Davis' $35 billion prediction, it will be by far the largest ever experienced in California. The deficit is blamed largely on the downturn in the economy and the slide on Wall Street.
All the revenue from Davis' proposed tax increases would be funneled to local jurisdictions to take on a raft of state health and welfare services.
Officials said the shift would prevent many mental health, child care and court programs from being cut altogether – but would force local governments to administer them. The programs include state drug courts, homeless programs and community health.
Davis' budget plan also calls for a variety of new fees on libraries, veteran homes and motor vehicles.
The governor proposed to make deeper cuts to Medi-Cal health insurance program for the poor. Davis wants to reduce rates to health care providers by 5 percent, above an already proposed 10 percent cut. He is also calling for scrapping 10 more optional benefits for Medi-Cal recipients, including optometry, physical therapy and hospice.
© 2003 The Associated Press
