Consumer Federation of California

"Governor Schwarzenegger offered gimmicks instead of solutions to a budget crisis created largely by the cumulative effect of decades of tax cutting that has reduced revenues by $12 billion in this year alone. He also misinterpreted the May 19 election as a voter rejection of any tax measures. In fact voters support a mix of targeted tax increases and program cuts. Voters soundly rejected a scheme that cut corporate taxes by billions and that shifted the burden onto workers and middle class consumers.

The Governor suggests that budget woes would diminish if the state grants school districts new authority to fire the workers who mow the lawns and repair the plumbing in our dilapidated public schools. He wants to leverage the budget crisis to achieve a long term Republican policy goal: contracting out and replacing school employees who earn a living wage with workers employed by for-profit businesses at the minimum wage and with no health insurance. This policy change would increase the ranks of the working poor, place more demand on taxpayer-funded public hospitals, and result in substandard maintenance work that will cost our schools more to repair over the long run.

The Governor also wants to use the budget crisis to advance his political goal of eliminating boards and commissions that include independent legislative appointees. Cost savings in consolidating many of these boards under administrative staff that answer only to the Governor is infinitesimal, about $8 million out of an estimated $24 billion revenue shortfall.

The political gain for the governor is substantial, should he dispose of independent boards that are designed to represent the public’s interest. Some of these boards may be outmoded. The Governor’s proposal should be given careful scrutiny before any boards are eliminated. This proposal would reduce the budget shortfall by about 0.003%, a symbolic cut not worth emphasizing in a major address to the legislature. 

The Governor failed to discuss the $2.5 billion in permanent tax cuts lavished on  profitable corporations in the 2008-2009 budget deals at a time he was raising taxes on workers and consumers and cutting funding to schools, transit and health clinics.

A poll conducted at the time of the May 19 election found that over 60% of Californians who voted No on Proposition 1A ‘ mislabeled by the Governor as anti-tax voters ‘ support increasing alcohol and tobacco taxes and establishing an oil severance tax. Among all voters, nearly three-quarters support these tax measures. Strong majorities of voters also want to close loopholes that allow big corporations to pay less in taxes than average working Californians, and support a temporary tax increase on top income earners making over $272,000 a year.

The only winners this year are profitable corporations who saw their taxes cut as the rest of us paid more. While lawmakers grapple with the imminent crisis, we must plan for long term solutions to the structural budget shortfall. Tax justice demands that wealthy businesses pay their fair share before we further decimate our schools and hospitals.’