California Gov. Jerry Brown’s push to close the most-populous U.S. state’s budget deficit by putting a $9.3 billion tax referendum before voters in June is approaching an end as last-minute talks with lawmakers falter.
Brown, 72, has been trying to win Republican support for his plan to let voters decide on extending sales, income and vehicle-tax increases set to end in June. Keeping them for five more years is crucial to close a $15 billion budget gap without deeper cuts to services including education and public safety, the governor said.
The talks stalled late last week after Republicans gave Brown and fellow Democrats who control the Legislature 53 demands, such as curbing teacher tenure and boosting funding for county fairs, in exchange for supporting the referendum. That prompted Democrats to say they were ready to abandon talks and pursue alternatives such as gathering signatures for a November vote or finding a way to call a June ballot without Republicans.
“This takes us clearly to a point where we will quickly have to decide whether or not to pursue solutions that do not require Republican votes,” Speaker of the Assembly John Perez, a Democrat from Los Angeles, told reporters after seeing the list on March 25.
The Republican list called for a ballot measure that would dismantle the current public employee pension system that guarantees benefit levels regardless of investment returns, replacing it with a hybrid including elements of a traditional plan and a 401(k) account where beneficiaries bear more risk.
They also want voters to approve a cap on state spending based on a formula tied to inflation and population changes. They also said any extension of taxes and fees should expire after 18 months.
The Republicans also want to reduce regulations they said hinder business growth. They want to limit legal damages sought in environmental lawsuits and exempt urban redevelopment projects from most environmental review.
“The Democrats’ response to the Senate Republicans’ budget solutions proves that they were never serious about a true bipartisan budget, but instead are only interested in Republicans giving in to their demands for more taxes,” said Bob Dutton, the Senate Republican leader.
Brown wants voters to pass extensions of a 0.25 percentage- point increase in personal income-tax rates; a 1 percentage- point boost in the retail-sales levy, to 8.25 percent; an increase in auto-registration fees of 0.5 percentage point, to 1.15 percent of a vehicle’s value; and a reduction of the state’s annual child tax credit to $99 from $309.
The governor needs the election to occur in June so he can know the outcome before the start of the fiscal year July 1.
Brown signed budget bills last week that reduced spending by $8.2 billion and shrank the deficit by another $3 billion through loans and transfers. He’s promised more cuts if the tax extensions are rejected and has publically chastised Republicans for opposing his plan to let voters choose taxes or more cuts.
“I will feel a lot better about making $10 billion to $12 billion more of spending cuts if the people have said that’s what they want,” Brown said last week.
Failure to strike a deal and pass the plan would hand Brown his first legislative defeat since he took office in January. He served two previous terms, from 1975 to 1983, and was elected in November on pledges to use his experience to strike deals and repair the financial strains that left California with resurgent deficits totaling more than $100 billion in the past three years.
“You can’t expect to ram through a complete agenda as a minority party when all the governor is doing is asking to give the people the right to vote,” said Gil Duran, a Brown spokesman. “Any reasonable person knows you can’t get 53 things for the price of one.”
California’s general-obligation debt shares with Illinois the lowest credit rating of any state from Moody’s Investors Service, with a fifth-highest A1 grade. Standard & Poor’s gives California an A-, its fourth-lowest level for investment-quality securities and the worst for any state.
© Copyright 2016 Bloomberg News. All rights reserved.