Schwarzenegger warns sales tax increase might be needed

By Dana Hull and Edwin Garcia

Mercury News
Article Last Updated: 10/28/2008 11:45:40 PM PDT

Gov. Arnold Schwarzenegger told alarmed state education leaders Tuesday to expect $2 billion to $4 billion in education cuts, even as he said he plans to renew his earlier call for an increase in the state sales tax.

The governor warned that state revenues are dropping so fast that the budget signed late last month is already facing a gaping $5 billion to $8 billion hole.

"The governor talked a lot about how convinced he is that this budget shortfall can't be met with just cuts,'' said Bob Wells, executive director of the Association of California School Administrators, one of 20 state education and labor leaders who attended a Tuesday morning meeting with the governor. "And he's committed to lining up the votes for a revenue increase."

The tax comment came at the end of an hourlong meeting when someone asked Schwarzenegger what he meant during his talk about a revenue increase. It was then, according to Wells, that the governor said he was thinking of a state sales tax increase.

Contacted by the Mercury News, the governor's office declined to go into specifics but said much of the revenue proposals offered during this year's grueling budget battle will be back on the table at a special session, which he will call on Nov. 5.

The idea for a temporary 1 percentage point sales tax increase was floated this summer but was quickly rejected after failing to win support from even a handful of Republicans whose votes would have been
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needed. Such a tax increase would require a two-thirds vote.

"Our position on taxes has not changed," said Jennifer Gibbons, communications director for Assembly Republican Leader Mike Villines, R-Fresno. "We need to do things that are going to help the economy recover, not raise taxes."

Democratic leaders also seemed skeptical.

"Everyone knows it will take a comprehensive approach to solve this crisis, but we do have to be careful when looking at Californians who have already suffered deep cut after deep cut," said Assembly Speaker Karen Bass, D-Los Angeles, in a statement. "I want to hear exactly what the governor is proposing and I want to hear more about his strategy for being able to deliver votes this time."

The new budget crisis puts California leaders in a remarkably similar position to where they were this summer when Democrats, Republicans and the governor disagreed for months on how to solve the state's $15 billion projected deficit.

The protracted battle led to the state's most overdue budget in history and caused disarray among social service agencies, schools, prisons and others who rely on the state for their budgets.

The Legislature finally agreed to balance the books through accounting gimmicks and cuts to social programs, instead of tax increases. Schwarzenegger signed the $144.5 billion spending plan — 85 days past deadline — on Sept. 23.

Many said mid-year education cuts would spell disaster for California's schools.

"The fact is that we can't take a hit like this," said Scott Plotkin of the California Association of School Board Officials. "Teachers are teaching, bus drivers are driving buses. We can't scale back at this point."

Many schools have already cut librarians, counselors, and custodians from their staffs, and laying off teachers mid-year wreaks havoc and is wildly unpopular with parents.

"California is 46th in the nation in per-pupil funding," said Wells, who likened state schools to a low-income family that had already trimmed its household budget countless times. "When you're already on a starvation diet, to be told to trim more feels even worse."

Contact Dana Hull at dhull@mercurynews.com or (408) 920-2706.