Gov. Arnold Schwarzenegger took another major step Thursday
toward achieving his longstanding goal of obtaining a new state
budget on time without raising taxes as he released the May Revise
of his budget proposal.
Based primarily on deals privately brokered between key
institutions whose funding is closely tied to the state budget,
such as the University of California, Schwarzenegger set the state
budget at $102.8 billion.
The revised proposal is $3.7 billion higher than the
governor’s January proposal of $99.1 billion.
Cuts to key institutions were outlined, including a cut of $660
million for state colleges and universities. Funding for the UC
would fall from $2.9 billion to $2.67 billion.
To partially offset cuts, the governor proposed that both
undergraduate and graduate fees be raised and also called for an
increase in nonresident tuition. The UC Board of Regents must still
approve fee increases, and will likely discuss the matter at their
meeting in San Francisco next week.
Other major cuts include $2 billion less for elementary, middle
and high schools, $1.3 billion cut in funds for city and county
governments, and a $476 million reduction in funding for
prisons.
The deep cuts to many programs without raising taxes has angered
many Democrats at all levels of state government.
“Let’s be clear: This is still a grossly unfair
budget,” said State Treasurer Phil Angelides.
The governor is intent on making good on his pledge to reduce
the state budget deficit without raising taxes.
“I remain firmly opposed to tax increases, because no
state can tax its way to prosperity or financial health,”
Schwarzenegger said in a statement.
To come through on his promise, the state must see a marked
increase in revenues, which the governor hopes will be attained
through a rebounding economy.
The governor is counting on new revenue sources that include
$38.6 billion from personal income taxes, $24.6 billion in sales
taxes, $7.9 billion in corporate taxes, $2.1 billion from insurance
taxes, $303 million in liquor taxes and $135 million in estate
taxes.
Estimated income taxes for the next budget year are $559 million
higher than the governor’s January estimate. Sales taxes are
predicted to be $417 million less than the previous estimate.
Other sources of revenue include a $1.2 billion one-time revenue
rake from a tax amnesty plan that ended in April.
Many state institutions, including the UC, agreed to absorb cuts
in funding this year in return for a pledge from Schwarzenegger to
protect state funding for the programs for years to come.
By isolating certain constituencies and working deals with them
individually, the governor has managed to steal much of the
bargaining power of the Democrat-controlled state Legislature.
Many local government leaders accepted an agreement Wednesday to
take cuts, with the promise of a ballot measure in November which
would prevent the state from using local revenues to balance state
budgets in the future.
But many have questioned whether Schwarzenegger will make good
on his promises to institutions such as the UC.
“What’s not in this budget are the promises that
have been made by this governor behind closed doors in the last few
days,” Angelides said.
“These agreements are only agreements between the
government and the stakeholder groups. … They are not legally
enforceable,” said Mike Dennis, a UCLA professor of public
policy.
Dennis added, “The history of interaction between
stakeholders and the state indicate that the state can just not be
trusted to follow through on agreements when the economy goes bad.
… What makes us think we can trust the state now?”
The Legislature must still approve the budget and will attempt
to do so by the constitutional deadline of June 30.
Many legislators were angered by the governor using back
channels to produce agreements with stakeholders, and some
Democrats in the state Assembly and Senate have vowed to fight the
governor’s budget proposal.
Proposals in the May Revise for the UC are the same as those set
forth in the compact agreed upon by UC officials and Schwarzenegger
earlier this week.
According to the compact, the UC will take cuts now and raise
fees in hopes of increased funding by the state in the future.
The compact calls for an increase in graduate fees of 20
percent, or $1,050. Undergraduate fees will rise 14 percent, or
$700. The governor had called for a 40 percent increase in graduate
fees and a 10 percent increase in undergraduate fees in
January.
Nonresident tuition will increase 20 percent, unchanged from the
January proposal.
Fees will continue to increase over the next three years at an
average of 10 percent each year for undergraduates.
The governor also provides full funding for the UC’s
newest campus in Merced, which is still under construction.
Though the budget proposal cuts the UC budget for 2004-2005, the
university hopes to see some funding increases beginning in
2005-2006.
Starting 2005, the state will increase funding to the university
by 3 percent annually, and add an additional 2.5 percent to allow
for an enrollment growth of 5,000 students per year.
The governor also promises to add 1 percent per year to the
UC’s budget from 2008 to 2010.
The governor has promised to restore $4 million in UC internal
funds for outreach programs. The January budget proposal completely
cut state funding for outreach.
The May Revise also includes funding for Cal Grants to cover the
14 percent undergraduate student fee increase. The original January
proposal did not include such funding.
With reports from Adam Foxman and Lindsey Morgan, Bruin
staff.