Politics & Government

California seeks balanced budget with tax boost, school cuts

Aides to Gov. Arnold Schwarzenegger rolled out a new plan for closing California's gaping $40 billion budget deficit Wednesday that cobbles together elements of earlier proposals and adds a new tax increase, a shorter school year and a "what if" quest to borrow $4.7 billion.

"We are facing a major crisis, probably the most challenging budget situation the state has ever faced," said Mike Genest, Schwarzenegger's finance director. "The governor believes in acting immediately."

Schwarzenegger is out of state and vacationing at the family residence in Sun Valley, Idaho. But Genest and a half-dozen Finance Department staff members briefed reporters on a plan that incorporates a proposal of spending cuts and tax increases the governor made earlier in December.

That plan called for a temporary increase in the state sales tax, expanding the sales tax to cover some services, a nickel-a-drink alcohol tax, a new tax on oil production and a $12 hike on vehicle registration fees. It also called for $15.4 billion in spending cuts, including requiring state employees to take two-days-a-month unpaid furloughs through June 30, 2010 and give up two paid holidays each year.

The new elements include reducing the dependent care exemption on state income tax returns from the current $309 per dependent to $103; carrying over some of the deficit into the 2010-11 fiscal year; borrowing funds from voter-created programs that service the mentally ill and pre-kindergarten children's health services; changing the operating rules for the state lottery in an effort to make it more profitable, and borrowing $4.7 billion from the private sector.

Read the full story at sacbee.com.