It wasn't pretty, but California extracts a budget deal

In the end, a deal was done. A Republican senator in California’s legislature got what he wanted: assurances that lawmakers would support an election reform that makes it easier to vote moderates into office. In return, he cast the vote that ended a three-month budget deadlock that threatened the state’s financial solvency and gave new meaning to the phrase “political polarization.”

The holdout vote came early Thursday, after all-night negotiations in Sacramento. It means California will probably resolve its $42 million budget shortfall by raising taxes on consumption and by cutting spending. While waiting for lawmakers to resolve their differences, the state has delayed thousands of construction projects, required furloughs of government employees, and saw its credit rating fall to dead last among the 50 states.

“This might be the end for me” politically, said Sen. Abel Maldonado, who cast the deciding vote. “This vote assures that it’s not the end for the people of California.”

He said the election reform he wants – to switch to a so-called open primary in which voters can choose to cast ballots in either the Democratic or Republican contests – will level the playing field for moderate candidates and, thus, help to end California’s yearly gridlock over the budget. The state constitution would need to be amended for this change to take place. As a result of Senator Maldonado's horse-trading, lawmakers agreed to let voters decide the matter.

Tax increases and state budgets both need a two-thirds “supermajority” of legislators to be approved – a requirement that proved to be the sticking point even though Democrats control both the Assembly and the Senate. Many voters now see the supermajority mandate as something that needs changing, say some political pundits.

“Our most recent polls show that Californians are now fed up with the two-thirds requirement,” says Mark Baldassare, president of the Public Policy Institute of California. “It’s one of the features that makes this state very difficult to govern, despite its wealth, popularity, and creativity.”

Some politicians expressed anger at Maldonado, and others at the whole ordeal.

“This is a disgusting process,” said Sen. Gloria Romero, a Democrat from East Los Angeles. “This is not good government.”

If, as expected, the Assembly approves the budget, and if Gov. Arnold Schwarzenegger (R) signs it, as he has said he would, tax hikes will kick into effect – about $13 billion worth in all. Californians will pay an additional one cent in sales tax for every dollar spent on merchandise and services, raising the tax to 8.25 percent. That’s the highest rate in the nation.

Vehicle license fees will double from 0.65 percent to 1.15 percent of the value of an automobile. Governor Schwarzenegger had won acclaim by eliminating that car tax upon taking office after the recall election that ousted former Gov. Gray Davis (D). A proposal to raise the gasoline tax by 12 cents a gallon was cut.

The income-tax rate for Californians will depend on how much California receives from the federal economic stimulus package. It’s estimated to get from $9 billion to $11 billion. Not knowing ahead of time how much that aid will be is one thing that made the process so difficult, according to Barbara O’Connor, a communications professor at California State University, Sacramento.

On the spending side, cuts total $11 billion. Education takes the biggest hit.

Republican lawmakers say the budget, overall, will severely hurt residents who are already socked by the worst recession since the 1930s.

“It is foolhardy in the extreme to think that adding $450 in new sales taxes to the price of a car, in addition to reinstating the onerous car tax, is going to be a net economic benefit to our California economy,” said Sen. Sam Aanestad. “It won’t. Instead it will make a bad situation worse and prolong the economic pain for California economies.”

Before the impasse was over, US Sen. Barbara Boxer stopped by Wednesday to remind California lawmakers that Democrats in the US Senate managed to win just enough Republican votes to pass President Obama’s $787 billion stimulus plan. Without the new state budget, 276 public works projects were slated to be halted Thursday and an additional 10,000 government workers were to receive layoff notices.

Wire service material was used in this report.