Gov. Jerry Brown’s budget proposal has tax hikes, deep cuts

SACRAMENTO — Gov. Jerry Brown proposed a delicate trick shot Monday to balance California’s budget: persuade Democrats to slash social services, ask Republicans to place taxes on the ballot, then persuade voters to pay additional money for five more years.

The political hurdles are significant, and they have confounded his predecessors. Even if Brown can somehow navigate his way through the Capitol, voters have rejected tax-related proposals the past two years, most notably a 2009 measure backed by former Gov. Arnold Schwarzenegger and lawmakers.

That fact didn’t deter Brown on Monday.

“I think there is a significant number of people who have an open mind,” Brown said. “And it’ll be up to the Legislature, myself and the business community and citizen groups and parent-teacher associations to make the case. And then whatever the people say, obviously we’ll live with that.”

If Brown has any hope, it’s because he has a brief honeymoon period with voters and can blame the state’s budget problems on Schwarzenegger, analysts say. Brown, a former two-term governor, returned to the executive office in November with 53.8 percent of the vote.

“It’s not an easy sell,” said Mark Baldassare, president of the Public Policy Institute of California. “But there may be a window early on in the Brown administration for voters to accept something less than ideal, I think, in the same way that Schwarzenegger had the same window in March 2004.”

The Democratic governor wants to solve the state’s $25 billion-plus deficit with a mix of taxes, spending cuts and fund shifts. The plan includes higher taxes on sales, vehicles and income for five years that voters would have to approve, worth $11 billion over 18 months.

Before it gets to the ballot, Brown wants the Legislature to approve deep cuts in social service programs, ranging from $1.5 billion in welfare-to-work to $1.7 billion in Medi-Cal, the state’s Medicaid program. He wants to impose restrictions on how often Medi-Cal patients can see doctors and reduce the amount of time families can receive welfare benefits, among other ideas.

Brown hopes the cuts will be a show of good faith to the electorate that state leaders are serious about reducing state government.

What happens if the taxes don’t pass? Brown would likely have to target K-12 schools, higher education and public safety programs.

He acknowledged that the state cannot cut social programs much deeper than he has proposed. Courts have ruled against cuts to Medi-Cal and in-home care for low-income disabled and elderly. He would already have to get federal permission to impose some of the reductions in his budget now.

Brown made a point of not cutting K-12 schools in his initial budget, though he wants to defer $2 billion in payments until the next budget year, one of the few accounting tricks in his plan.

Should voters reject the taxes, schools could lose $4 billion to $5 billion, according to David Sanchez, president of the California Teachers Association.

School groups are enthused about the prospect of more tax revenues, but it’s far from certain that businesses will get behind them.

California Chamber of Commerce President Allan Zaremberg said in a statement that “we will need to carefully weigh the cumulative impact of the budget proposals against their impact on the economy.”

Teresa Casazza, president of the California Taxpayers Association, said Friday, “This is not the time to be considering these taxes. I don’t think voters believe in an economic recession like this, the solution is more taxes.”

A PPIC/Pew Center on the States poll showed last year that 76 percent of California residents oppose raising income taxes to address the state budget.

Brown tried Monday to emphasize the tax proposal as an extension of existing rates. That may be true of sales and vehicle taxes, which expire at the end of June, but employers are now withholding fewer state taxes because income tax rates fell Jan. 1.

“To even have a chance, it’s critical that it be characterized as an extension of existing taxes,” said Rob Stutzman, a Republican political consultant. “He has to at least get that correctly defined, which I think has started to get away from the governor already.”

Stutzman said Brown must tie the taxes to some fundamental change in state government. Just telling voters the budget situation is miserable won’t be enough.

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