July 9 (Bloomberg) -- Opponents of California Governor Jerry Brown’s proposed tax increase say they were handed more ammunition by the Legislature’s vote to start funding his $68 billion high-speed rail project.
The Democratic governor, whose party controls both the Senate and Assembly, received authorization to spend $4.75 billion from bonds to begin construction of a bullet train in the most indebted U.S. state.
The vote follows adoption of a budget that will chop three weeks off the school year for 6 million public-school students if voters reject Brown’s tax initiative. At the same time, the 74-year-old governor and fellow Democrats are at an impasse on lowering public-employee pension costs, while polls show waning support for the rail project.
“It’s incredibly tone-deaf to reject something voters want, like pension reform, while approving something they don’t want, like high-speed rail,” said Aaron McLear, a spokesman for the anti-tax campaign. “Enacting billions of dollars in unpopular spending while dismissing popular reform is not the way to sell” a tax increase.
One in three likely voters, including one in five who back Brown’s initiative, said they’d be less inclined to support the tax increase if lawmakers funded the rail project, according to a Field Poll released July 5.
California is the only U.S. state working to lay tracks for trains running as fast as 220 miles an hour (354 kilometers an hour), after Congress cut off 2012 funds for such projects. Construction on the system, to link San Francisco with Los Angeles, is to begin with a 130-mile stretch of rail down California’s Central Valley.
Republicans and some Democrats in the Legislature criticized the plan for its cost, the initial route through the less-populated valley, and the wisdom of spending on high-speed rail when deficits have cut funds for schools and the poor.
Democrats said they needed to move forward with the spending to capture $3.3 billion of promised federal funds. Brown and his supporters also said jobs created by the project will lower unemployment, which reached a rate of 10.8 percent in May, above the national rate of 8.2 percent.
“In 2008, the voters passed the high-speed rail initiative,” approving bonds for the project, said Senate President Pro Tem Darrell Steinberg, a Democrat from Sacramento. “Now I know that polls wax and wane, but four years after a voter-approved initiative, the people expect us to get going.”
Voter surveys are on Democrats’ minds because Brown and a teacher’s union have put a measure on the November ballot asking to temporarily raise taxes. The sales levy, already the highest in the U.S., would go to 7.5 percent from 7.25 percent. Income tax rates would rise on earnings over $250,000 a year. Those making $1 million or more, now paying 10.3 percent, would be assessed at 13.3 percent.
If the higher taxes are rejected by voters, $6.1 billion will be automatically cut from state spending -- $5.5 billion coming from schools, enough to pay for 15 days of classes.
“We’re cutting the school year, releasing violent felons early, and the governor wants to increase taxes on every Californian while spending billions we don’t have on a project citizens don’t want,” said Senator Doug LaMalfa, a Richvale Republican. “Voters simply aren’t buying the line that we need to cut education and public safety but have ample money for high-speed rail, and they’re right not to.”
Democrats respond that funds from bonds sold for the high-speed rail project can’t be put to other uses.
While 53 percent of voters approved a bond issue for the project in 2008, a USC Dornsife/Los Angeles Times poll published June 3 found that 59 percent would oppose it if given another chance to decide.
“The voters in November will judge us on whether we get pension-reform done, and whether or not we continue on what thus far has been a very productive session and very productive year,” Steinberg said. “They will judge the tax measure on its merits.”
To broaden popular support for the rail plan, the California High-Speed Rail Authority in April chopped $30 billion off a price tag that had ballooned to $98.5 billion. When voters approved the bonds in 2008, the state was estimating the cost at $43 billion.
The initial route runs from Merced, about 120 miles south of Sacramento, the capital, to the San Fernando Valley, north of Los Angeles. To connect with the population centers of Los Angeles and San Francisco, the bill authorizes $2 billion of bond funds to upgrade existing commuter and freight lines to handle high-speed traffic.
Brown endorsed the project in January, saying California’s future hinges on spending billions to link its cities with bullet trains and on other big public-works projects.
“In 2008, California voters decided to create jobs and modernize our state’s rail transportation system with a major investment in high-speed rail and key local projects in Northern and Southern California,” Brown said in a statement after the Senate vote.
He praised lawmakers for their “bold action” that puts Californians “back to work and puts California out in front once again.”
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