The governor and Legislature have not yet agreed on a budget for the fiscal year that began July 1, and the Legislature has yet to take a vote on budget legislation.
Last week, the governor met with the four legislative leaders in an attempt to get budget negotiations moving. Meanwhile, Democratic leaders indicated that they plan to put a budget plan up for a vote before the Legislature's scheduled adjournment date tomorrow. (CalTax: Every Californian should be outraged over the lack of proper process. The bills are not yet in print, have not been vetted, and the public has not had an opportunity to comment.)
The Democratic leadership's budget reportedly may include the following provisions, to be amended into various Assembly and Senate bills:
· Impose an oil severance tax, cut sales and use tax rate. (This is described as a majority-vote bill, despite the massive tax increase.)
· Revise local property tax and sales tax allocations.
· Require financial institutions to perform data matches for the state's tax agencies, suspend professional licenses of those who are delinquent with tax payments, and make changes targeting "abusive tax shelters."
· Expand sales and use tax nexus to out-of-state retailers that have specified connections to certain in-state businesses, and add a use tax reporting line to the state income tax form.
· Delay implementation of recently approved business incentives, allow the Board of Equalization to impose a collection cost recovery "fee," and implement Democratic leadership's "tax swap" that would increase the income tax and car tax, while lowering the sales tax rate.
Meanwhile, Governor Schwarzenegger said that he would like to extend the sales tax to "all services," coupled with a rate cut and decreases in the income tax and corporate tax. He added that he remains opposed to any proposal that would increase taxes overall. CalTax Vice President of Communications and Research David Kline told The Sacramento Bee that a tax on services is not a good idea, because it would increase consumer costs at a time when Californians are struggling.
Also, a plan to borrow $2 billion from the California Public Employees' Retirement System pension fund in anticipation of future savings from pension reform is being examined. (CalTax: This would compound the state's fiscal problems by borrowing into the future to pay for current spending.)
While the Legislature has yet to vote on a budget bill, lawmakers have found time for other activities. During the August 26 floor session, senators spent several minutes on a trivia contest regarding the history of women's right to vote. In the Assembly, the leadership made headlines last week by announcing that the house will now begin enforcing its dress code.
In other budget-related news:
California Loses Bid for "Race to the Top" Education Funds. California schools will miss out on $700 million in education grants after finishing among the losing states in the second round of the federal "Race to the Top" contest, federal officials announced August 24. California came in 16th out of 19 finalists. States were asked to submit applications with plans to improve student achievement, focusing on areas that the Obama administration has deemed priorities in education reform.
California's teacher unions opposed the state's application. A California Teachers Association spokeswoman said the union opposed the idea of states competing for funding because "it creates winners and losers." The president of United Teachers Los Angeles said his union opposed the state's application because union leaders were not included in creating the reform strategies. (Source: Los Angeles Daily News, August 24.)
Cal-TaxReports, August 30, 2010
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