Taxing their Way Out of the Mess

From the Sac Bee...

State Senate leaders threw down the fiscal gauntlet Wednesday, rejecting Gov. Arnold Schwarzenegger's proposal to tap the state lottery for money and proposing $11.5 billion in new taxes to balance the deficit-ridden budget.

"There's not enough money there to fund next year," Senate President Pro Tem Don Perata said as he unveiled the Senate version of the budget. "We're proposing to raise taxes."

Schwarzenegger wants to borrow against future profits of the state lottery and use $5.1 billion of the loan proceeds for his $144.4 billion budget, plus nearly $600 million in loans from various special funds.

He would fill the rest of the estimated $15.2 billion hole in the state's general fund with spending cuts.

He said he opposes broad new taxes, a position echoed by Republican legislators.

Assembly Democrats have adopted a version of the lottery plan and called for $6.4 billion in new revenues.

Neither Democratic faction, however, has specified what taxes it wants to raise.

Wednesday's release of the Senate budget sets the stage for a two-house conference committee to begin reconciling the minor differences in the two Democratic versions, but the big-ticket issues of major spending cuts and taxes will be negotiated by the governor and legislative leaders.

The constitutional deadline for legislative approval of a budget is June 15.

But Perata said he doesn't expect to have a budget in place before Aug. 1. He noted the state faces a looming cash flow shortage in August if a new budget is not signed.