Capitol Alert

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Gov. Jerry Brown this morning acknowledged California will take in $6.6 billion more in tax revenue than once thought over the next 13 months, but reiterated his call to extend tax increases to avoid deep budget deficits in future years.

Brown's revised budget proposal pegs the deficit at $9.6 billion through June 30, 2012. The plan would eliminate 5,500 state jobs and 43 boards and commissions.

Brown's new budget assumes that trend will continue and projects the state will also take in $3.6 billion more in the next fiscal year.

Because of California's Proposition 98 guarantee, the state would owe K-12 schools and community colleges about half of those revenues. Brown's plan envisions schools getting about $3 billion more next year than it is getting this year.

Brown's January budget called for an extension of higher sales and vehicle tax rates, as well as a retroactive extension of higher income taxes, all for five years. The governor is still calling for the 1 percent sales tax extension and the 0.5 percent vehicle license fee extension after June, when the rates are slated to decrease.

But he is requesting that the 0.25 income tax surcharge be delayed until 2012. It would last until 2015. The move acknowledges the state's income tax surge this fiscal year, as well as the political difficulty state leaders would have faced by hiking the income tax retroactively by several months. Taxpayers have withheld income taxes since January assuming a lower rate than Brown was proposing.

He said he wanted the voters to weigh in on the tax increases "as soon as possible."

Assembly Republicans last week issued a plan last week they said would balance the budget without tax extensions. The GOP proposal relies on a revenue bump smaller than the one Brown projects, as well as a roughly 10 percent reduction in state worker compensation and depleting special funds for mental health and childhood development.

Brown repeatedly referred to the $34.7 billion in the state's outstanding obligations from years of internal borrowing -- what he called the "wall of debt."

"Yes, we've got some more revenue, but we've got a lot of obligations," Brown said. "If you adopt the Republican plan....that debt doesn't go away."

Brown is still calling for the elimination of redevelopment agencies, which he originally believed would net the state $1.7 billion. He has scaled back his approach to enterprise zone tax credits for employers, which he originally wanted to eliminate. Instead, he will seek to limit the credits to new hires.



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