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June 24, 2011 > Bid to renew tax hikes for a year fails in Senate

Bid to renew tax hikes for a year fails in Senate

By Lien Hoang, Associated Press

SACRAMENTO, Calif. (AP), Jun 10 - The state Senate on Friday rejected extending tax hikes for another year to help close California's $9.6 billion budget deficit but approved a bill that would allow local communities to more easily go to voters for tax increases.

The Senate voted 22-15 along party lines for the so-called bridge tax, which would have continued for one year increases in the sales and vehicle taxes enacted in 2009. The measure fell five votes short of the two-thirds majority needed.

The higher tax rates will expire by June 30 unless they are renewed.

Democrats want a one-year renewal to give school districts certainty over their funding before the new school year begins.

``It is simply fiscal prudence to extend existing tax rates for a brief period of time,'' said Sen. Noreen Evans, D-Santa Rosa.

In their attempt to continue the tax increases, Democrats for months have tried to bring Republicans on board. But with few signs of a breakthrough as a budget deadline looms, the Legislature might have to solve the remaining shortfall solely through spending cuts, which both parties have said they do not want.

The Senate's actions Friday represented lawmakers' first votes on the budget since Gov. Jerry Brown revised his spending plan in May. Senators approved most of the Democratic governor's proposals, including nearly $3 billion more to schools than originally planned.

But they made little headway toward raising state revenues.

To that end, Democrats read letters from their local sheriffs and school districts, listing thousands of additional job cuts, larger class sizes and threats to public safety they said would result from an all-cuts budget without the tax extensions.

Republicans countered that voters won't approve tax extensions, so the bridge tax does nothing but hurt businesses and families and delay the inevitable need for budget cuts.

``I want to fix the problem,'' said Senate Minority Leader Bob Dutton, R-Rancho Cucamonga. ``This doesn't fix it. What this does is kicking the can down the road.''

Brown wants lawmakers to call a special election in September so voters can decide whether to extend the sales and vehicle tax hikes for five years and the personal income tax increase for four years.

The ``bridge'' refers to the period of time between when a budget is adopted for the fiscal year that begins July 1 and when voters would go to the polls to decide whether they want to renew the 2009 tax increases.

Those increases have had Californians paying an extra 1 percent in sales tax, a half percent more for vehicle licenses and a quarter percent higher income tax rate. Some tax filers also have received a lower tax exemption for dependents.

The Brown administration estimated the temporary increases have boosted the average amount each California pays in taxes by $260 a year.

Once the bridge tax bill failed, Democrats instead passed legislation that allows cities, counties and school districts to increase taxes in their local jurisdictions with voter approval.

SB23, by Senate President Pro Tem Darrell Steinberg, D-Sacramento, passed with minimum support, 21-16.

Republicans accused Democrats of pouting about the tax extensions and therefore taking up Steinberg's bill, which would go into effect as soon as the Assembly approves it and Brown signs it.

``This seems borne out of petulance about not being able to pass taxes,'' said Sen. Sam Blakeslee, R-San Luis Obispo.

Steinberg later said he proposed the measure both to pressure Republicans and to give schools and law enforcement other funding options.

``This bill, SB23, is one of the few tools, maybe the only tool left to those who are going to bear the brunt of the failure to gain the state revenue, to be able to meet their responsibilities,'' he said.

Lawmakers face a June 15 deadline for passing a balanced budget and will begin losing their salaries and per diem payments if they miss it.

``We're not trying to drag this out to the 15th so everyone loses their pay,'' Dutton said. ``But the fact of the matter is, we do feel we can solve this problem and get California moving in the right direction.''

He outlined a list of changes sought by Republicans in return for putting tax extensions before voters, including a cap on state spending; pension, tort and education reforms; and revisions of environmental laws.

On Friday, senators also voted on bills that make minor changes to the budget and require just a majority vote. Following Brown's wishes, Democrats put forth legislation that would use the bulk of unexpected revenues for schools, while families on foster care and welfare would get a smaller fraction. The bills also reduce the cost of prison health care and help secure federal money for employment programs.

The Senate resumes debate at 10 a.m. Saturday, when it will vote on a bill to extend a fee on nursing homes, as well as one allocating more than $1 billion in back pay to several counties and state agencies. Lawmakers might also take another stab at the tax extension measure but will spend much of the day in caucus.

The Assembly will not meet until Monday.

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Associated Press writer Adam Weintraub contributed to this report.

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