California’s legislature sent a $1 billion bipartisan package of budget cuts to Governor Schwarzenegger; the Governator signed the package yesterday. The budget cuts will come primarily from school funding and from Medi-Cal (California’s medical program for low income individuals).
Yet Californians should carefully watch their wallets. Assembly Speaker Fabian Nunez (D-Los Angeles) wants the $13.5 billion shortfall to be balanced 50% from spending cuts and 50% from revenue increases. For those who aren’t in government, revenue increases are more commonly referred to as tax increases. Given California’s abysmal ranking as a state to do business, politicians in Sacramento should be talking about tax cuts instead of tax increases to balance the budget.
If California implements tax cuts, these might lead to more businesses locating in California and more tax revenue. But that’s thinking outside of the box, and the Democrats in control of the legislature in Sacramento rarely do that. Luckily for California’s taxpayers, the budget requires a 2/3 vote—Republicans in both houses must approve the budget balancing methods for it to pass into law. Expect a very contentious legislative session this Spring in Sacramento.