Brown Reaches Deal With Union to Compromise on Tax Increase

California (STOCA1) Governor Jerry Brown, who wants to close a $9.2 billion deficit with higher taxes, agreed to join forces with the state’s second-largest teachers’ union, which backed a competing measure to put more of the burden on top earners.

Brown’s agreement with the California Federation of Teachers will ask voters to raise income taxes higher than he initially sought for those making more than $300,000 a year, and seek a lower increase in sales levies, Senate President Darrell Steinberg, the chamber’s leading Democrat, said today.

Brown’s plan had been vying for a spot on the November ballot with the teachers’ union’s proposal and a third tax measure championed by Molly Munger, the daughter of Berkshire Hathaway Inc. (BRK/A)’s vice chairman, Charles Munger. Brown and fellow Democrats had warned that voters confronted by three measures might reject them all.

“The governor and the federation of teachers have come together and joined forces in such a way that that dramatically increases our chances of success,” Steinberg said of the compromise.

The proposal would raise $2 billion more than Brown had said his measure would generate in the fiscal year starting in July, Steinberg said. The governor had estimated his proposal would raise $6.9 billion a year.

Second-Largest Union

The federation, representing 120,000 school employees, is California’s second-largest educators’ union after the California Teachers Association, with 325,000 members. The larger union had endorsed Brown’s plan.

Under the new measure, those making more than $250,000 a year would see their income tax rates increase by 1 percentage point. Those making more than $300,000 would see an increase of 2 percentage points, instead of the 1.5 percentage points in Brown’s initial plan. Earnings of more than $500,000 would be taxed 3 percentage points higher, instead of the 2 percentage points sought by Brown.

The increases would expire in seven years, instead of five under Brown’s proposal. Sales taxes would rise by a quarter of a cent instead of a half cent under Brown’s measure, to 7.5 percent instead of 7.75 percent, and would expire in four years.

“We have been trying to make the governor’s proposal more progressive,” Fred Glass, a spokesman for the federation, said today in a telephone interview. “The polling backs our position.”

New Filing

Brown and the federation will have to file a new initiative and present more than 800,000 valid signatures to county elections officials around April 20 to qualify for the November ballot, according to the Secretary of State’s office. Signatures already collected for Brown and the union’s separate measures won’t count.

Just over half of California’s likely voters backed Brown’s plan in a poll released March 7 by the Public Policy Institute of California (85265MF). Support had diminished due to the competition, said Mark Baldassare, president of the nonpartisan institute.

Brown’s office referred requests for comment on the matter to his political strategist, Steve Glazer. When asked about a compromise, Glazer said today in an e-mail, “Stay tuned.”

The agreement leaves proponents competing with a similar measure being pursued by Munger, a Los Angeles civil rights attorney. That initiative would generate about $10 billion by raising income taxes on most Californians and dedicate the extra money to schools.

Steinberg said talks continued in an effort to persuade Munger to drop her proposal.

“We don’t anticipate that it will change our plans,” the Munger measure’s campaign manager, Addisu Demissie, said in a statement. “We have an open line of communication with the governor’s office and we look forward to continuing the dialogue.”

To contact the reporters on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net; James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.