Highlights of plan to close Calif. budget deficit, The Associated Press

By The Associated Press
7:10 p.m. February 16, 2009

Here are key provisions of the proposal to close California's $42 billion budget deficit through June 2010:

Revenue
The plan would raise up to $14.4 billion through June 2010 by imposing a variety of temporary taxes. The higher taxes would be in effect for two years. However, Republicans would allow taxes to remain longer – two more years – if voters approve a state spending cap during a special election in May.

Here are the specific taxes:
– Increases the state sales tax by 1 cent on the dollar, generating $5.8 billion through the next fiscal year.
– Raises the fee for licensing vehicles to 1.15 percent of market value, up from the current .65 percent. The move is projected to generate $1.5 billion. A portion of the fee will be dedicated to local law enforcement.
– Adds a 12-cent gasoline tax, raising $2 billion.
– Imposes a one-time, 5 percent surcharge on people who owe personal income tax at the end of 2009 to generate $3.2 billion. If the state receives more than expected from the federal government, the surcharge would be reduced to 2.5 percent.
– Reduces the amount taxpayers can claim on a dependent care credit to the federal level of $100 instead of $300, adding $1.4 billion.
– Redirects $201.6 million of tribal gambling revenue from the state Department of Transportation to the general fund over the two-year period. The money is intended to offset the effects of increased traffic around Indian casinos.

Cuts
Reduces state general fund spending by $15.1 billion through the end of June 2010 by forcing education and social service programs to absorb much of the pain. Among other cuts, the budget proposal:

– Reduces education spending by $8.6 billion over two years, likely forcing schools to lay off teachers, slash salaries and postpone spending on construction and textbook purchases. The proposal also would give districts greater flexibility in spending money that is normally dedicated to specific programs.
– Imposes a 10 percent across-the-board cut to the University of California and California State University systems, saving $264.4 million.
– Continues a two-day-a-month furlough for 238,000 state workers, trims overtime pay and eliminates Lincoln's Birthday and Columbus Day as paid state holidays, saving $1.4 billion.
– Cuts the medical budget for the state prison system by 10 percent, saving $181 million.
– Eliminates annual cost-of-living increases for recipients of the state's welfare-to-work program, known as CalWORKS, to save $79 million.
– Eliminates the state and federal cost-of-living increase for seniors and the disabled who are receiving Supplemental Security Income/State Supplementary Payment, saving $594.1 million.
– Depending on whether the federal government provides additional aid, the budget compromise would make further reductions to the courts; Medi-Cal, the state's health insurance program for the poor; CalWORKS; in-home support for seniors; and other social service programs by $948 million.

Borrowing
– Approves a $5 billion plan to borrow against the value of the lottery's future revenue. Voters must approve changes to the lottery to make it more marketable in the hope that it will bring in more money, and then the state would have to entice investors to buy the bonds.
– Authorizes the state to take out $6 billion in bonds to cover bills that will not get paid in the current fiscal year. Lawmakers hope to avoid this loan by using federal aid.
– $432.6 million transferred from various special funds.

Ballot Questions
– Spending cap: Asks voters to impose a limit on the amount the state can spend each year based on revenue growth over the previous 10-year period. Money above that amount would be saved in a rainy day fund. That fund would be capped at 12.5 percent of revenue, and any amount above that could be used to pay debt or for one-time purposes. If voters approve the cap, then temporary taxes that are part of the budget would be extended for an additional two years.
– Education: Asks voters to modify Proposition 98, the voter-approved minimum school funding guarantee, to protect education funding when state revenue rebounds after lean budget years.
– Mental health: Asks voters to shift $227 million in voter-approved funding from Proposition 63, the state mental health fund, for two years to pay for a low-income child development program known as the Early Periodic Screening, Diagnosis and Treatment Program.
– Child development: Asks voters to redirect $608 million in First 5 money for early child development to other children's programs for five years. Voters approved Proposition 10 in 1998, adding a 50-cent tax to each pack of cigarettes.
– Lottery: Asks voters for permission to hand out larger lottery jackpots as a way to sell more tickets. Also grants the state permission to stop using lottery proceeds for education programs. Instead, school funding would be paid through the general fund.

Economic stimulus
– Grants up to $400 million in tax credits for companies with 20 or fewer employees that hire new workers over the next two years. Allows businesses to claim a credit of up to $3,000 per full-time job created.
– Provides up to $100 million a year for five years in tax incentives for movie studios to film in California, known as the runaway production credit.
– Reformulates taxes for corporations that operate in multiple states. Republicans say the tax break would encourage investment in California while critics called it a giveaway that could cost the state $690 million a year.
– Allows unlimited public-private partnerships on state transportation projects through 2017.
– Speeds up construction on 15 state public works projects, 5 local transportation projects and 10 redevelopment agency projects by allowing one company to do both the design and construction.
– Removes environmental hurdles and accelerates permit approval for 10 road projects in seven counties through 2010. Allows the state to expand partnerships with private companies to build projects from design to construction.
– A 2007 off-highway diesel regulation requires bulldozers, airport baggage trucks and ski resort snowcats to begin reducing emissions from their fleets in 2010. The rule phases in the regulation through 2020 for fleets of large vehicles. The budget proposal would delay the initial phase-in requirements, requiring fewer vehicles to comply in the early years.
– Exempts environmental reviews for selling surplus state property.
– A state grant program offers funding to companies that take steps to reduce harmful emissions from their vehicles before state air pollution requirements go into effect. The budget proposal would allow farmers to access that money even if the requirement has already taken effect.
– Exempts some rural communities from paying prevailing wage on public work projects.

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