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Brown Plans California Campaign to Keep Taxes as New Cuts Loom

Jerry Brown, governor of California, says he will release a new budget in May that will show how he intends to erase the state's remaining $15.4 billion budget deficit. Photographer: Ken James/Bloomberg
Jerry Brown, governor of California, says he will release a new budget in May that will show how he intends to erase the state's remaining $15.4 billion budget deficit. Photographer: Ken James/Bloomberg

April 5 (Bloomberg) -- California Governor Jerry Brown said he’ll propose a new budget next month and plans to campaign in Republican districts to win support for a statewide referendum to retain $9.3 billion of higher taxes and fees.

The plan will show how he intends to erase the most-populous U.S. state’s remaining $15.4 billion deficit, said Brown, 72. The Democrat will outline his new budget May 14. By tradition, that’s when California governors update their initial spending measures with the latest revenue projections.

Brown will begin a series of events around the state to persuade voters that Republican lawmakers are wrong to block his plan to extend expiring tax and fee increases for five more years to prevent deeper spending cuts to schools and public safety. The temporary increases are set to end in June.

“The minority holds the key here and we simply have to call upon their sense of loyalty to the people of California to help,” Brown told reporters today.

A tax extension formed the cornerstone of the governor’s January deficit-cutting proposal and he sought a June referendum on the issue with Republican support. Last month, Brown said he had broken off negotiations for a statewide vote after being presented with a widening list of Republican demands. By law, lawmakers need a two-thirds majority to pass tax increase, which Democrats lack even though the party controls the Legislature.

Selling ‘Gimmicks’

“Rather than continuing to negotiate with Senate Republican Leader Bob Dutton on a bi-partisan budget with long-term solutions, Governor Brown is going on a dog-and-pony show to sell voters on short-term gimmicks and $50 billion in tax increases,” said Jann Taber, a Dutton spokeswoman.

Brown took office in January on a pledge to repair financial strains that have left California with the lowest state credit rating, A-, from Standard & Poor’s. He and Democrats already have approved some budget bills to reduce what was a $26.6 billion deficit through June 2012 by cutting spending by $8.2 billion and borrowing $3 billion internally.

The governor wants voters to pass extensions of a 0.25 percentage-point increase in personal income-tax rates; a 1 percentage-point boost in the retail-sales levy, to 8.25 percent; an increase in auto-registration fees of 0.5 percentage point, to 1.15 percent of a vehicle’s value; and a reduction of the state’s annual child tax credit to $99 from $309.

Timing for Budget

Brown had sought a June referendum on the tax extensions so he would know the outcome before the start of the fiscal year July 1. Brown has said that without the extensions, he would be forced to make deeper spending cuts.

In a series of events for voters, Brown said he plans to explain what will happen if he has to make more cuts. One stop will be Riverside County, home to Dutton of Rancho Cucamonga.

“Governor Brown will be speaking frankly and directly with the people of California about the budget,” said Gil Duran, a Brown spokesman.

“The Inland Empire is facing serious hits to education, public safety and other core needs as a result of Republican obstruction in Sacramento, so it is a place Governor Brown plans to visit,” Duran said.

To contact the reporter on this story: Michael Marois in Sacramento at mmarois@bloomberg.net

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

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