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Governor Schwarzenegger Releases Compromise Budget

He calls Republicans and Democrats to the middle of the aisle.

 

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Photo by: Joe McHugh, Office of the Governor

This afternoon, Governor Arnold Schwarzenegger announced a new budget proposal for the state of California that he says is a good compromise.

 

He began the announcement by calling on state legislators to come out of their “ideological corners” and come together.

 

“Its time for the dialogue to stop and for action to be taken,” he told reporters.

 

Our state budget is currently wading through a 15 billion dollar shortfall, and is two months overdue as neither side has been able to work out a solution.

 

“This is shameful,” Schwarzenegger said.

 

So far Republicans have refused to raise revenue, with Senator George Runner telling KHTS “We don’t have a revenue problem, we have a spending problem.”

 

Democrats are looking to increase income taxes, which mainly target wealthier Californians, to make up for the budget shortfall.   

 

While Democrats account for a hefty majority in the legislature, California requires that a 2/3 majority vote must be cast for the budget.  

 

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In the middle, Governor Schwarzenegger’s office has been pushing for a temporary one-cent sales tax increase, where the revenue would be used to establish a rainy day fund for the state when times get rough.

 

Democrats so far have been reluctant to support a sales tax in particular, saying that it heavily affects the poor. Republicans refuse to raise any taxes at all.

 

All the back and forth has now prompted Governor Schwarzenegger to unveil a new plan, which institutes a slew of changes including;

 

 

  • Instituting a temporary one-cent sales tax increase that will last three years. After which, a permanent ¼ cent sales tax reduction would take place, hypothetically leaving California with a 9.25% sales tax rate until 2011, then afterwards it would stand at 8%.

 

  • $2 billion in additional spending cuts.  

 

  • Giving future Governors the power to reduce state operations budgets by up to 7 percent without modifying or suspending the law. Governors will be able to freeze Cost of Living Adjustments (COLAs), rate increases or increases in state participation in local costs, as designated in the Budget Act, for up to 120 days.

 

  • Increasing the state’s budget stabilization (rainy day) fund amount to 12.5% of the yearly revenues. This mandates that 3% of the general fund be transferred into the rainy day fund each year, unless the fund is already full, in which case only 1.5% will be transferred. Also, all budget surpluses will be automatically sent to the rainy day fund.

 

  • Institutes an economic stimulus package that aims to keep movie production in California, increases overtime flexibility for employees, and expedites the distribution of transportation, housing and water bond revenue to start new projects.

 

ImageOne item in Schwarzenegger’s proposal that has not changed was his ballot initiative to sell off future lottery revenues for cash.

 

Our Governor says that his budget isn’t just for show.

 

“Take this seriously, because this is where I’m willing to go,” he said, mostly directing his comments towards the legislature. “It is key that we finish this year with victories and not another year where nothing gets done just because everyone is stuck in their ideology.”

 

State legislators like our Assemblyman Cameron Smyth have now begun to analyze the new proposal.  Tune in to KHTS AM-1220 Thursday morning at 9:40 a.m. where Assemblyman Smyth will on the air live with morning show host John Summers to discuss his take on Schwarzenegger’s new plan.