State faces new budget shortfall, new tax ideas

Assembly minority leader Mike Villines (R-Clovis) leaves his office near the Assembly chamber in Sacramento, California, on Monday, September 15, 2008 more than an hour before the expected vote on the state budget. The state budget is more than two months overdue. less Assembly minority leader Mike Villines (R-Clovis) leaves his office near the Assembly chamber in Sacramento, California, on Monday, September 15, 2008 more than an hour before the expected vote on the state ... more Photo: Robert Durell, Special To The Chronicle Photo: Robert Durell, Special To The Chronicle Image 1 of / 3 Caption Close State faces new budget shortfall, new tax ideas 1 / 3 Back to Gallery

Less than a month after the Legislature approved more than $12 billion in tax increases to help bridge a $41 billion budget deficit, Democratic lawmakers have proposed more tax and fee measures they say would curb devastating cuts to state programs.

The proposals include a 25-cent fee for shoppers who use plastic bags; a tax on cigarettes to fund programs discouraging tobacco use; a $50 per ounce tax on marijuana; a higher income tax for the rich to help pay for schools; a tax on oil produced in California; and a tax on pornography.

Many of the tax ideas are not new, reappearing in the state's legislative pipeline each year with little success because they lacked support from Republican lawmakers to clear the two-thirds majority required for approval.

But with Friday's forecast of state finances by the nonpartisan legislative analyst, which showed California will face an additional $8 billion shortfall in the fiscal year that begins July 1, new revenue ideas have to be considered, some lawmakers say.

"I think we're in a period in time where everything's on the table. We're going to be $8 billion down before the ink dries on the current budget," said Assemblyman Curren Price, D-Inglewood (Los Angeles County).

Price's AB462 would increase the income tax by 1 percent for residents earning more than $1 million a year. The state's public university systems would receive 60 percent of the funds generated by the tax increase, while K-12 schools would get 40 percent. The bill also calls for a five-year tuition freeze at California's public universities.

"Education should be our prime priority," Price said. "We frequently are shipping funds away from education. My proposal is one way of ... trying to insulate education funds from those kinds of cuts."

But getting Republican support will not be easy. Assembly GOP leader Mike Villines of Clovis (Fresno County), one of three Assembly Republicans who voted for taxes in the latest budget package, said taxes to close additional budget shortfalls can't be on the table.

Sen. Dennis Hollingsworth, R-Murietta (Riverside County), who became the Senate minority leader last month after a coup during the marathon budget session, said passing any more taxes or fees "would add insult to injury to California taxpayers."

Even Senate President Pro Tem Darrell Steinberg, D-Sacramento, is skeptical that the Legislature would approve new tax measures because too few Republicans support them.

"Frankly, our focus ought to shift to tax reform," he said. "That means seriously addressing the volatility in our tax system. That means realigning the relationship between state government, local government and school districts. Whoever is providing the service ought to be able to raise revenue."

Last month's passage of the $12.5 billion tax package as part of the budget "was an exception to the rule because of the magnitude of the problem," Steinberg said.

Still, the Senate leader said he will not discourage lawmakers from introducing tax bills.

"It doesn't bother me that members are introducing their ideas. That's the messy democracy that we live in," he said.

Sen. Denise Ducheny, D-San Diego, chair of the Senate Budget Committee, said she introduced a bill to increase the income tax for the rich while lowering the rate for middle-income families to "start a public discussion" on changes to the state's tax system.

"I think we do need to talk about tax reform," she said.

Ducheny's idea is to lower the top income tax rate, which is 9.3 percent, to 9 percent for those at the bottom of that bracket, while increasing wealthier taxpayers' rates as high as 11 percent. The bill would generate another $2 billion a year for the state, she said.

But not all ideas are about raising taxes at the state level.

AB1342, by Assemblywoman Noreen Evans, D-Santa Rosa, would give local governments greater authority to increase taxes by allowing cities and counties to raise vehicle license fees and income taxes.

Evans, who also chairs the Assembly Budget Committee, said cities and counties need such flexibility, especially when the state is slashing spending.

"This is a tool that we can give them to return some level of accountability and responsiveness to cities and counties," she said.