Governor Arnold Schwarzenegger announced his revised budget today. California is now looking at a $15.2 billion deficit, which the Governator is hoping to close by (a) selling bonds backed by expanding the California Lottery (raising $5 billion), (b) and cutting an additional $12.2 billion in additional spending cuts. If the lottery bonds don’t happen Schwarzenegger proposes a “temporary” one cent increase in California’s sales tax.
Both Republicans and Democrats in the legislature reacted negatively to the Governator’s proposal. Bill Lockyer (D), Treasurer: “[This is a] sizable bet that Californians will double their current level of lottery participation within a few years.” He doesn’t think it’s realistic.
President Pro Tem of the State Senate, Don Perata (D-Oakland) told Reuters: “Democrats are not going to accept this budget…I reject its defeatism.”
Mike Villines, Assembly Minority Leader (R-Clovis), told AP: “The idea that we use the lottery to pay down debt is a good one. Tying it to borrowing is, I think, a mistake, and tying it to a tax is a mistake.”
With Democrats still proposing to create new taxes to balance the budget and Republicans promising not to approve any new taxes, it still looks to me like the unstoppable force meeting the immovable object. A budget requires a 2/3 approval in both houses of the state legislature, so Democrats and Republicans will eventually have to come to an agreement. Expect the emphasis this year to be on “eventually” as I expect the budget to drag on well past the constitutional deadline for passage of June.
Press Coverage:
Associated Press
Reuters
San Jose Mercury