Gov. Arnold Schwarzenegger delivered a long-threatened veto of a Democratic plan to cut $18.1 billion from California’s two-year $41.6 billion budget deficit.
After three weeks of negotiations, Schwarzenegger and Democratic lawmakers failed to reach a compromise that would convince him to sign the plan, which would partially close the growing budget gap through $9.3 billion of revenue increases, $7.3 billion of spending cuts, and $1.5 billion of interfund transfers.
The controversial Democratic plan was passed by the Legislature with no Republican votes just before Christmas. It skirted the state constitution’s requirement of a two-thirds majority for tax hikes by reclassifying some taxes as fees and then replacing them with new taxes of the same amount, which Democrats claimed was not technically a tax hike.
Democrats have majorities in both houses of the Legislature, but they need GOP votes to meet the two-thirds threshold required to pass budgets and tax increases.
The Howard Jarvis Taxpayers Association and Republican legislators filed suit Tuesday in California’s Third District Court of Appeals in Sacramento to seek an injunction against the plan, which they said violated Proposition 13’s two-thirds majority requirement for tax hikes.
Schwarzenegger said he vetoed the plan because he preferred deeper spending cuts and more “economic stimulus” — in the form of relaxed labor and environmental laws.
“The measures you sent me punish people with increased taxes, but do not make the serious cuts in spending necessary to balance our budget; do nothing to help keep California families working during this recession; and do nothing to help Californians facing foreclosure in this mortgage crisis,” Schwarzenegger said in his veto message.
He now says he will try to convince lawmakers — including Republicans who have pledged to oppose all tax hikes — to support a budget plan he put forward late last month.
The governor’s plan would close the deficit with $16.5 billion of spending cuts, $14.8 billion of tax and fee increases, and $10.3 billion of borrowing, about half in revenue anticipation warrants and half in lottery bonds. His legislation would require a two-thirds majority to pass.
“Today is the day we must turn the page,” Schwarzenegger said at a news conference Wednesday afternoon. “It’s time for all legislators to come to the table.”
Lawmakers need to act soon to close the budget gap because the state will face cash shortages as soon as February, according to Controller John Chiang. He said he may have to issue IOUs to pay vendors and tax refunds because the state will have more bills coming due than cash coming in.
“We have three weeks before we go off the cliff,” Schwarzenegger said.
Democratic lawmakers said they will keep negotiating, but they are unsure if Schwarzenegger will ever be able to muster any Republican votes for a plan that raises taxes.
“If he could come and say to us, 'I have three votes in the Senate and I have three votes in the Assembly’ … we would be delighted and would sit down and take up the whole $41 billion,” said Assembly Speaker Karen Bass, D-Los Angeles.
