‘Tricks’ seen in budget deal
A plan to close the state’s $15.2 billion budget gap largely depends on borrowing from future proceeds, including the state lottery, as well as other “accounting tricks,” county executive officer Rick Haffey said Monday.
The budget was headed toward approval late Monday as lawmakers negotiated last-minute changes to end the state’s longest-ever budget stalemate.
Gov. Arnold Schwarzenegger had threatened to veto the bill unless it addressed more of his concerns.
Though Nevada County isn’t being asked to loan the state any money to help close the budget shortfall, a long-standing concern, the budget would pass on worries about deep state cutbacks to the next fiscal year.
“It’s still a structural deficit,” Haffey said, debunking claims of a truly balanced budget in Sacramento.
The county already has accounted for the state cuts in its own budget, though funding for local crime lab fees, $200,000 to $300,000 per year, could be in jeopardy under the compromise reached in a closed-door session during the weekend, he said.
The county official’s concerns were echoed elsewhere.
“It just pushes the problem into next year,” said state Sen. Sam Aanestad, R-Grass Valley, who opposed the budget. “We’re using next year’s tax revenues to pay off the debt in this year’s budget.”
Some of the highlights of the compromise plan include:
– Increasing income tax withholdings by 10 percent for working families, resulting in less take-home pay for many workers. Taxpayers can adjust withholdings once the change takes effect.
– Generating quick cash by moving up tax deadlines for upper-income taxpayers and limited-liability corporations. They will pay 30 percent of their taxes in each of the first two quarters of the fiscal year instead of 25 percent. Some self-employed consultants who file quarterly tax payments, part of any rural telecommuting workforce, will feel the pinch.
– No plan to increase the state’s sales tax 1 cent for three years, as Schwarzenegger proposed.
– The latest plan restores all the 10 percent cuts to doctors, dentists and nurses providing care under Medi-Cal. But the cuts, which began in February, would not be restored until March 2009. As previously reported, local nursing homes and convalescent hospitals face Medi-Cal payments backlogs.
The plan “increases school funding by about $1.3 billion above the May revision,” according to a copy of the compromise, seen by The Union. “This results in about $3 billion in cuts below the workload budget level,” bringing the compromise figure to $58.1 billion.
The budget also closes some tax loopholes, such as one that allowed people to avoid paying state sales tax on boats and RVs if they took possession of them out of state and kept them there for 90 days.
It also includes a $10 billion plan to borrow against future lottery revenues, subject to voter approval. If voters reject the plan, however, it would leave a $5 billion hole during the next two fiscal years.
The budget allows the governor to cut up to 7 percent from state operations when revenue comes in less than expected. But it would exclude cuts to education and health and human services, two of the state’s biggest spending areas.
The governor also would have the ability to impose a four-month freeze on cost-of-living increases for benefits.
The budget increases the state’s rainy day fund from 5 percent to 10 percent of the general fund budget.
“It not only delays the day of reckoning, it makes it worse,” said Michael Herald, a lobbyist for the Western Center on Law and Poverty. “It’s going to accelerate revenues in the upcoming budget year, which are going to force us to have to make severe reductions in the 2009-10 year.”
Associated Press contributed to this report.
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