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Governor Jerry Brown released his proposed budget for 20011-2012 this past Monday.
The balanced budget slashes spending by $12.5 billion, including an eight to 10 percent cut in take-home pay for most state employees, and proposes a comprehensive restructuring of government operation.
“These cuts will be painful, requiring sacrifice from every sector of the state, but we have no choice,” Brown said. “For 10 years, we’ve had budget gimmicks and tricks that pushed us deep into debt. We must now return California to fiscal responsibility and get our state on the road to economic recovery and job growth.”
The Governor said his realignment plan, which he called “vast and historic,” will return decisions and authority to cities, counties and schools and “allow government at all levels to focus on core functions and become more efficient and less expensive” by reducing duplication of services and administrative costs.
Governor Brown’s budget also includes a temporary continuation of some taxes, including the current personal income and sales taxes, as well as the Vehicle License Fee rate, while the state pays off debt. This move supports the Governor’s pledge for no new taxes; however, will place the burden on the citizens of the state to decide whether to approve the same taxes they denied on the ballot just two years ago. Republicans of both houses have stated that they have no intention of allowing an initiative to be placed before voters.
The Governor’s spending plan assumes that all statutory changes to implement budget actions will be adopted by the Legislature in March, allowing the necessary ballot measures to be put before the people at a June special election. For the next couple of weeks the Legislature will be holding hearings, vetting these proposals and finding ways to minimize the impact of these cuts and maximize the dollars that the state has remaining to provide for services. It is expected that proposals considered in the past years will be suggested as alternatives to the Governor’s plan. These could include a proposal for a service tax, the 3% mandatory withholding for payments to independent contractors proposal, increased fees on chemicals and vehicles and other similar revenue increases.
In these tough economic times, the Legislature will be looking for any way to generate revenue for the state. With the realignment of government to the local level, any number of new taxes could be put on the shoulders of small business owners in the state. Norwood & Associates will closely monitor the budget committee hearings in an effort to discourage the introduction of such proposals.