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LS BROWN BUDGET.JPGAfter weeks of battling in public and negotiating behind the scenes, Gov. Jerry Brown and the California Federation of Teachers have reached a compromise on a November tax initiative.

The deal would result in a smaller sales tax hike and larger tax increase on the wealthy than the Democratic governor wanted. CFT had been circulating an initiative with no sales tax hike and a two-step increase on earners starting at $1 million.

"This united effort makes victory more likely and will go a long way toward balancing our budget and protecting our schools, universities and public safety," Brown said in a prepared statement Wednesday afternoon.

The new deal would raise the statewide sales tax by a quarter-cent rather than half-cent per every dollar of purchase. It would retain the governor's three higher tax brackets starting at $250,000 for single filers. But the last marginal tax hike - at $500,000 for singles and $1 million for couples - would increase by 3 percentage points rather than Brown's original 2 percentage points.

The income tax hike on the rich would also last longer than Brown's proposal, going for seven years instead of five. The sales tax hike would still expire at the end of 2016.

"Our coalition welcomes the opportunity to join Governor Brown, Senate Pro-tem Steinberg, Speaker Pérez and their allies in crafting this win-win measure," Joshua Pechthalt, President of the California Federation of Teachers and a co-chair of the Millionaire Tax Campaign, said in a statement.

"Our values and principles are clearly reflected in this new initiative that now includes a 50% decrease in the sales tax rate, reduces the burden on working families and ensures a greater contribution from the 1%. These changes will generate $2 Billion in additional vital funding in the next fiscal year, and we are determined to ensure those funds benefit the communities that have been hit hardest by budget cuts and our cash-strapped higher education institutions."

Cutting a deal so late in the signature-gathering season ramps up the pressure on proponents, as well as the costs. The new initiative would be filed in the next couple of days, sources said. The LAO has 45 days to return an analysis to state Attorney General Kamala Harris, who then must write ballot language for petitions.

If the initiative gets fast-tracked, it would land on the streets in early April under the most optimistic timetable. Proponents think they may have four to five weeks to collect a million-plus signatures, a compressed period that would raise the cost per signature.

Some key points for budget watchers: Based on Brown's more optimistic assessment of capital gains, the plan would raise an additional $2 billion for the upcoming 2012-13 budget because it relies more heavily on the income tax increase, according to Senate President Pro Tem Darrell Steinberg. That hike is retroactive to Jan. 1, 2012.

The money raised would also count entirely toward the state's general fund, helping reduce future cuts to areas other than K-14 education, such as health and welfare, corrections and higher education.

The new initiative would be a constitutional amendment and lock in a funding shift for counties to pay for new local responsibilities such as housing low-level offenders and monitoring parolees.

Brown plans to continue collecting signatures for his current initiative as a back-up measure, sources said.

Fred Glass, communications director for the California Federation of Teachers, confirmed that the group is talking to the governor about possibly merging the initiatives, but said "we're not quite there yet" on a deal. He said he does not know what the sticking points are, but anticipated that an announcement could come as soon as this morning.

It's not clear where the business community will land. For weeks, Brown has touted his lack of opposition from big business groups, a fact confirmed recently when the California Chamber of Commerce and California Business Roundtable opposed the CFT plan and another rival measure by wealthy attorney Molly Munger.

But in their opposition, business groups made clear they opposed the other measures because they were either "permanent" or "virtually permanent." Brown's income tax hike extends by two more years in a nod to CFT, but that would be less palatable to business groups who took issue with the time length of the other initiatives.

While the clock is ticking for turning in petitions, Glass said collecting the signatures in time is still doable. He said he did not think it would cost much more than the typical price tag of several million dollars.

"I don't see that it would be a whole lot more," he said. "The people who would be doing it would be doing it more intensively, they'd have to hire more people, but they'd be doing it for a shorter amount of time."

Michael Arno, a veteran of the petition circulating industry, said collecting the number of signatures needed in what could turn out to be a less than 30-day window has "never been done." He estimated that it would cost $3 to $5 million, with paid signature-gatherers earning "numbers that we've never seen before" to circulate petitions.

"It's not out of the realm of possibility, it would be reliant on a compliant AG and a compliant secretary of state," he said of the turnaround for drafting and certifying the ballot language.

Arno, who is working for Munger's rival tax initiative, noted that as many as eight other ballot measure campaigns could turn in signatures for verification in the coming months. Any move by county election officials to move Brown's initiative ahead of the others would spark "howls of favoritism" from the other campaigns.

Fred Kimball, who is circulating petitions for the governor's initiative, said one campaign he worked for in 2010 turned in signatures on May 16 and still managed to qualify in time. He pegged the shortest circulation window he's seen at 32 days.

"The dynamics of this would be a little bit different because everyone's already here and ready to go," he said of signature gatherers already out in the field.

Kimball said he is still circulating petitions for the governor's proposal. The current rate is $1.50 a signature, the highest of all measures in the field.

Torey Van Oot contributed to this report. Post was updated at 1:25 p.m. with updated revenue figures from Senate President Pro Tem Darrell Steinberg. and at 2:36 p.m. with a statement from the CFT and the Brown's statement at 2:55.


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