Tax initiative will dominate Brown's agenda in 2012
SACRAMENTO, Calif. --
With his first-year agenda unfinished, Gov. Jerry Brown will deliver his vision for resolving California's fiscal problems during his State of the State address on Wednesday.
The 73-year-old Democrat is opening the second year of his latest term by making the case for higher taxes to fund schools, universities, public safety and other services. Earlier this month, Brown released a proposed spending plan that cuts welfare and health services. He also is seeking voter approval for temporary increases to the sales tax and income taxes on the wealthy.
The governor has said that in doing so, he was trying to plan for California's future by steering the state toward fiscal stability. He proposes to do so by raising taxes, improving government efficiency and paying down debt.
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Story: Gov. Brown to announce revenue forecast "The stark truth is that without some new taxes, damaging cuts to schools, universities, public safety and our courts will only increase," he wrote in a letter accompanying his budget earlier this month.
Brown's State of the State message is expected to parallel the ideas he laid out in his budget proposal earlier this month. His top initiatives for the year include improving government efficiency and paying down debt. One way he has proposed to do that is by enacting changes to the public employee pension system, which is underfunded by at least $75 billion.
The governor has introduced a detailed plan to revamp the system and said the Legislature must approve something close to those reforms to gain credibility with voters.
Anti-tax advocates predict that public labor unions' grip on Democrats in the Legislature will end up killing fundamental pension reforms and thereby foiling Brown's plan to ask voters for a tax increase.
"If he is able to get meaningful reform, then he has a chance of passing his tax increase. But we don't think he will be able to do that," said Jon Coupal, president of the Howard Jarvis Taxpayers Association.
The group is teaming up with the California Taxpayers Association and Small Business Action Committee on their own initiative to impose a tougher state spending cap using a formula driven generally by population and inflation growth.
Part of Brown's pension proposal would move future state and local government workers into a hybrid system that would include 401(k)-style plans. Democrats in the Legislature have yet to take up his plan.
Shortly after the governor delivers his speech to both houses of the Legislature, he will start making his case to the public. Brown is scheduled to speak to an invited audience at Los Angeles City Hall and will meet privately with teachers at Bret Harte Elementary School in Burbank later in the day.
Brown will repeat his sales pitch Thursday during a meeting of the Orange County Business Council in Irvine. He then will stop at the City Club of San Diego, which supports civic discussions.
Last year, Brown tried and failed to persuade Republicans, the Legislature's minority party, to support his plan to ask voters to extend a series of temporary tax increases. In the end, taxes were not extended and the state imposed billions of dollars in cuts.
This year, he faces an equally daunting hurdle. He estimated the state is facing a $9.2 billion deficit on a $92.5 billion budget for the next fiscal year, which starts July 1.
Brown is trying to gather support for a November ballot initiative that would raise the income tax on those making $250,000 or more a year and boost the state sales tax by a half cent. The administration estimated the temporary tax increases would raise about $7 billion a year, but the Legislative Analyst's Office has pegged that figure at around $4.8 billion in additional revenue, primarily because it differs from the administration on how much money can be raised from higher income taxes on the wealthy.
The governor released his budget earlier this month and asked the Legislature to help him make the case to voters by first limiting state spending on basic programs, such as health care for the needy and social service programs. Democrats, who control the Assembly and Senate, have indicated they are not willing to make more cuts to programs that aid the poor and working class.v If voters reject his tax increases, Brown has warned that the state would be forced to cut $5.4 billion in spending, mostly from public schools. That translates to three fewer weeks of school.
"This ballot measure will not solve all of our fiscal problems, but it will stop further cuts to education and public safety and halt the trend of double-digit tuition increases," the governor wrote.
But making the case to voters will be difficult. The state's economy is still struggling, and distrust of the Legislature and how it spends taxpayer money remains at a record high. Republicans on Tuesday posted a video response criticizing the governor's tax proposal, predicting voters will reject it.
"Governor Brown says the sky will fall if the voters don't agree to a $35 billion tax increase," Assembly Minority Leader Connie Conway, a Republican from Tulare, said of Brown's taxes over five years. "You and I know this simply isn't so."
Senate Minority Leader Bob Huff, a Republican from Diamond Bar, said the Legislature needs to grow jobs by reducing regulation and enact pension reform to save taxpayers' money.
Brown also faces competing tax measures that could confuse voters if they all make the ballot.
The California Federation of Teachers and other groups are backing a so-called millionaire's tax that would raise income tax rates by 3 percent to 5 percent for individuals who make more than $1 million a year. Civil rights attorney Molly Munger, who is the daughter of Charles Munger, a longtime financial partner of Warren Buffett, is leading the Our Children, Our Future initiative to raise income taxes on a sliding scale to generate $10 billion for K-12 schools and early childhood programs.
While closing the budget deficit is Brown's top priority, his spending plan also commits seed money to a number of expensive projects that he hopes will guide California in the decades to come. The allocations include his support for a $98 billion high-speed rail line that has been heavily criticized for its ballooning price tag and reflect the first year of implementation for a cap-and-trade program on greenhouse gases.
He also wants to give school districts greater flexibility in using money by reducing rules and restrictions, and to budget at least 4 percent annual increases in state support to the University of California and California State University systems starting in 2013.
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