- The Washington Times - Wednesday, May 15, 2002

SACRAMENTO, Calif. (AP) Gov. Gray Davis proposed yesterday tax increases and deep cuts to close an estimated $23.6 billion budget deficit, reneging on his oft-stated pledge to not raise taxes.
Mr. Davis, a Democrat seeking a second term, blamed the shortfall on the economic aftermath of the terrorist attacks September 11 and a downturn in the stock market.
The shortfall is almost double January predictions and amounts to one-third of the state's general fund.
"This budget reflects my view, and the views of most economists, that sometime in the next 12 months, California will experience a recovery," Mr. Davis said.
Mr. Davis wants to make $7.6 billion in cuts that would include deep reductions in health programs and aid to local government.
He is calling for a temporary increase in state vehicle-license fees and a cigarette-tax increase. The plan also includes putting off programs until better fiscal times and shifting education money.
Mr. Davis proposed restoring vehicle-license fee rates that have been slashed to about a third of their levels in 1998. The state pays $3.8 billion a year to reimburse cities and counties for revenues lost by the reduction.
His plan would also borrow $4.5 billion, using as collateral money the state expects to collect from a settlement with tobacco companies in 1998.
The plan is a drastic departure from the budget surpluses, tax cuts and generous spending of Mr. Davis' first two years in office. The state began to see anemic revenues more than a year ago in the midst of a national slump, tumult in the high-tech industry and a statewide electricity crisis.
The picture steadily worsened as tourism and travel dropped off and security costs jumped after September 11.
Mr. Davis pledged for months that he didn't intend to raise taxes to fill the budget hole. But Democratic lawmakers contended it would be impossible to solve a multibillion problem without tax increases.
The plan likely sets the stage for an intense election-year fight. Republican lawmakers have said they will not supply their votes which are necessary for the required two-thirds passage of the budget for a budget with a tax increase.
Lawmakers must review Mr. Davis' spending plan and present him with a final budget. State law requires the Legislature to send a budget to the governor by June 15, but the deadline is unenforceable and seldom met. The fiscal year begins July 1.


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