One
of the Toughest Budgets Ever
Governor Gray Davis delivered the annual "State
of the State" address January 8 and offered a short preview
of his anticipated 2003-04 budget plan, which will confront the
state's $34.8
billion deficit. Saying that his is "one of the toughest
budgets ever sent to the Legislature," Davis kept his remarks
brief and provided few details about his plan to remedy the budget
shortfall. The governor emphasized his priorities for the year with
themes of job creation, cutting regulatory red tape for small businesses,
and structural reform of the current State Budget process.
Presently, the
state relies on a small percentage of wealthy Californians paying
taxes on capital gains and other income to pay for a majority of
state programs. California is "painfully dependent on volatile
sources of revenue," the governor acknowledged in his speech.
When the economy is strong, revenues overflow. When the economy
is performing poorly, revenue shrinks and, consequently, programs
funded by those revenues shrink as well.
While no details
have been provided about where the governor will obtain revenues
to balance out the budget, several options have been suggested and
include possible new "sin" taxes on cigarettes and alcohol;
raising the top personal state income tax bracket; creating a sales
tax on services such as legal, financial, and even health clubs;
increasing taxes on candy and snack foods; and increasing commercial
property taxes are among those most frequently mentioned. The governor
is expected to release his budget proposal on January 10.
Legislative
Battle?
In December, the governor proposed $10
billion in cuts to the current 2002-03 budget, and while the
Legislature convened a special session to deal with the state's
budget problems, lawmakers have not yet taken any action. As a result,
Davis is now asking the Legislature to approve those cuts by the
end of January.
The governor
has implied that his administration will focus on both severe funding
cuts and improved revenue as part of his solution to the state's
enormous budget deficit. Davis also announced that he would ask
the Legislature to support his bid for expansion of power by enabling
him to make mid-year spending reductions during a fiscal emergency
without legislative approval, which the law currently requires.
Build California
Governor Davis stated that he would speed up the scheduled release
of several infrastructure General Obligation Bond programs that
state voters recently approved, such as housing, school, park and
water bonds. His administration dubbed this concept "Build
California." The governor said that more than $21 billion in
school, housing, park, and water bonds are critical to jump starting
the state's economy and creating over 500,000 jobs within the next
four years.
Links to
Budget Information
The "State
of the State" lacked many details, which are expected to
be divulged on Friday, January 10 when Governor Davis releases his
2003-04
State Budget proposal.
The governor's
release of his proposal is merely the first step in a complicated
budget dance between the governor, the Legislature, state agencies,
lobbyists, and the public that is not mandated to end until mid-June
but often stretches into early fall.
Capitol insiders
go right to the source to get their copies of the State Budget Highlight
Summary and other budget materials at the Department of Finance's
Web site: www.dof.ca.gov.
Please check back regularly to ACWA's Web site for details and analysis
on how the governor's proposed State Budget could impact water agencies
in California.
Wendy Ridderbusch, State
Legislative Advocate
Jenn Brace, Communications
Specialist
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