Schwarzenegger Rhetoric Today on Budget Doesn’t Match Reality Including Republican Assembly Vote Against Closing Yacht Tax Loophole6 min read

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Governor Schwarzenegger announced at a press conference today his desire that legislators pass a budget by March so that cuts can take effect immediately at the beginning of the new fiscal year for the state in July. He also announced a hiring freeze, issued an Executive Order for an additional $100 million of cuts, and repeated his rhetoric that the state has a spending problem and not a revenue problem.

But as he was speaking, events occurring elsewhere in Sacramento showed a sharp disconnect between his bluster and reality. A Senate Committee hearing looking to see what had been done with the multi-billion bond for prisons passed last year, designed to avert a Federal Court ordered release of prisoners because of overcrowding and lack of medical care, was told in the middle of their hearing about the hiring freeze, after having heard from Administration witnesses about the gains that were being made and were planned to catch up on staffing the prisons. Committee Chair Senator Gloria Romero, said she was handed a note about the freeze, and wanted to know how it stacked up with the notoriously understaffed prisons and pledges to beef them up.

Schwarzenegger said that Assembly Republicans should vote to repeal the yacht tax loophole that allows millionaires to avoid paying taxes on their high priced toys—but Assembly Republicans voted unanimously to reject the bill passed by the State Senate on Friday to close the “sloophole” as it has been called. Mind you, this is not a tax increase, it just requires those who purchase yachts to pay the same sales tax that you and I pay when we purchase items in California—puts a lid on tax avoidance—and involves only $26 million.

Republican Assembly Leader Mike Villines spoke against the bill—the only one that was voted down out of the measures proposed by Governor Schwarzenegger as part of an emergency special session to deal with the current year’s budget shortfall. Villines started his floor statement, stating, “Let me be very clear, I’m not working for Thurston Howell,” referring to the millionaire on Gilligan’s Island, for those old enough to remember that TV series. He described the Republican’s vote on the Assembly version of this bill on Friday as a “vote of conscience,” said “we need to do big things,” and said the vote on the bill represented “political gamesmanship.”

In closing, Assemblymember John Laird, Chair of the Budget Committee said: “This is not a game…. It is no game for the people who lost their medical care from our vote on Friday. And it is no game to the educational institutions that lost hundreds of millions of dollars in that same vote. And what we are talking about is taking the principle of a bipartisan solution—that everybody has to give.”

The vote was 47 in favor, all Democrats and 19 opposed, with another 13 Assembly Republicans taking a powder on this one and not voting—far short of the 54 vote—the two-thirds vote needed for passage. This bodes very poorly for the chances of quick passage of a budget that needs two-thirds in both houses.

Afterwards, Laird said, ““It is unconscionable to not close the yacht tax loophole when we’re making cuts to public education and medical care. If California’s teachers and students, as well as those receiving medical care, can take cuts, so can California’s yacht owners.”

At another press conference earlier in the day, Senator Dean Florez, the Chair of the Senate’s Committee on Foodborne Illnesses, spoke of legislation he was authoring to reimburse local school districts who have had their cafeteria budgets devastated in losses in having to destroy recalled hamburger meat—part of the beef scandal. Schwarzenegger was asked about this and said, sarcastically, “When Senator Florez finds the money for it, I’ll be glad to support it.”

Florez is also proposing that the California step up its inspection of meat processing plants in the state in light of the scandalous lack of action by the US Department of Food and Agriculture—and to place digital cameras in slaughterhouses for monitoring. The Governor said that “the beef recall is horrendous and outrageous when you look at the footage on television of the ways those animals were treated.” He had he had already send the Federal government a letter saying the state was prepared to work with them and “do everything we can.”

Yet the Governor’s Budget Balancing Reduction Proposals made in January cuts the California meat inspection program: Page 879, according to the Governor’s Department of Finance, says:

“The proposed reduction will eliminate the National Animal Health Monitoring and Reporting Systems; biologics regulation; Animal Care Program; and aspects of the Meat Inspection Program….

“The reduction will reduce State animal health officials’ knowledge of both state and national disease trends, and may reduce federal funding for animal disease surveillance. It will eliminate State regulatory expertise related to humane and proper treatment of domestic farm animals.”

The Schwarzenegger budget talk today is nothing but cuts and more cuts. And he wants it done in a hurry. While there is vague talk from the Governor at today’s press conference about selling the lottery and “other ways of creating the extra revenue without raising taxes”—that sounds a bit to me like painless dentistry.

I should point out that the Governor is anticipating the Legislative Analyst report tomorrow indicating a greater budget deficit due to dropping state revenues—and a worsening California economy. He will not call it a recession. He wants quick action on cuts to deal with this and a budget passed before the May Revise—at record speed—but has not made any proposal whatsoever—since January–as to what those cuts should be. Passing a budget before the legally required May Revise is foolish enough—and passing it without knowing the April revenues or the possibilities of new court cases and liability for the state is also illusory.

All this speedup at the same time that there are rumors of the Governor’s office talking about delaying the May Revision from May 14 to May 21. And talk of a “hiring freeze” after he has made many new appointments since January with hundreds of thousands of dollars in new salaries.

I guess it’s Kabuki theater. The floors of this building don’t match up with what’s in other parts of it. We’ll become painfully aware of this—either on the Governor’s recklessly unrealistic timetable for only cuts—or as this plays out—but with specifics.

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