California governor signs new budget relying heavily on taxes

June 27, 2012: Gov. Jerry Brown finishes signing the the last of of the budget related bills that had been passed by the Legislature earlier in the day, at his Capitol office in in Sacramento, Calif. (AP)

SACRAMENTO, Calif. – Gov. Jerry Brown signed a new budget for California on Wednesday that relies heavily on voters approving his proposed tax hikes in November.

Democrats passed 21 budget implementing bills on a majority vote intended to satisfy the governor's demand for deeper cuts to close a $15.7 billion deficit, and Brown signed the main bill before a midnight deadline.

"In my view, we are poised to enter a new and better era in California. An era of budget stability with the opportunity to begin building and rebuilding," Senate President Pro Tem Darrell Steinberg, D-Sacramento, said about completing the package.

The spending plan for the fiscal year starting July 1 includes welfare and social service cuts. It also assumes voters will approve Brown's tax hike on the November ballot.

If voters reject the tax initiative, a series of automatic cuts will be triggered, including three weeks less of public school for the next two years.

Brown believes the tax initiative will raise $8.5 billion in the new fiscal year starting July 1 by increasing the sales tax by a quarter cent to 7.5 percent for four years, and boosting the income tax on people who make more than $250,000 a year for seven years.

"This is a game of chicken where you want to swap our educational system for tax increases, tuition for tax increases," said Assemblyman Tim Donnelly, R-Twin Peaks. "This is an abject disaster."

A recent Field Poll found California voters divided on the initiative, with 52 percent in favor and 35 percent opposed.

One of the bills could give the tax initiative top billing on the November ballot ahead of a competing tax hike proposal by wealthy civil rights attorney Molly Munger. The bill would require bond measures and constitutional amendments to appear on the ballot ahead of other initiatives and referendums.

Brown's proposed tax hikes would be temporary but include constitutional changes to local government funding.

Being atop the ballot would help the governor's initiative stand out on what will be a crowded ballot. So far, 12 measures have qualified. A water bond proposal is currently first but is expected to be delayed by the Legislature.

"If the result of this action is that our children's education does not need to be cut by $5.6 billion, so be it," Sen. Mark Leno, D-San Francisco, told senators Wednesday before the legislation passed.

Brown, a Democrat, had delayed taking action on the main budget bill that lawmakers sent him 12 days ago. It enacts a roughly $92 billion state spending plan for the fiscal year starting July 1.

Democratic leaders have agreed to deeper cuts to satisfy the governor's demands, including restructuring the state's welfare program, streamlining health insurance for low-income children, and reducing child care coverage and college aid.

Since then, Democrats who control the Legislature have been scrambling to draft companion legislation needed to implement the budget. Democrats have majorities in both the Assembly and Senate and can pass the budget without any Republican votes.

Democratic leaders agreed to Brown's request to phase in a two-year time limit for new welfare recipients to find work under the state's welfare-to-work program known as CalWORKS.

The two sides also agreed to eliminate Healthy Families, a children's health insurance program for low-income working families, by slowly moving 880,000 children into Medi-Cal, the state's version of Medicaid.

In addition, the state would reduce funding for child care assistance while college aid under the Cal Grants program would be reduced beginning in the 2013-14 school year. Lawmakers targeted for-profit colleges such as ITT Technical Institute and University of Phoenix in requiring higher graduation rates to qualify for state aid.

Democrats also included legislation that would appropriate more money for California's public universities if the University of California and California State University agreed to freeze tuition rates. The funding is contingent upon voter approval of Brown's tax hike measure.

Community colleges would get $50 million more as well.

Other legislation would allow Brown to furlough state workers without an agreement with their unions for a 5 percent reduction in wages. Service Employees International Union Local 1000, the state's largest state employee union, has tentatively agreed to a plan in which covered workers will take 12 unpaid days of leave over 12 months starting July 1.