Blood and Cuts

California benefited mightily from the booms in high-tech equipment, the once-fabled dot-coms and the stock market. All three have collapsed like shouted-at souffles, with al Qaeda doing more than its share of the shouting. The most affluent top 10 percent in this state -- making $100,000 and up -- provide a whopping 80 percent of California’s income-tax revenues. With computer markets saturated, the dot-coms evaporated, initial public offerings and stock options disappearing, and the stock market limping, those earners have not been earning enough to keep California‘s budget perking along at the increased levels of spending of the Davis era.

Should Davis and the Democrats who run the Legislature have realized that booms don’t last and put the surpluses of just a few years ago aside for today‘s rainy day? Of course. But Davis remembers the last time that state leaders started socking away a big surplus. He was Jerry Brown’s chief of staff at the time, and the result was Proposition 13, the massive property-tax cut that benefited corporate California as much as homeowners. More recently, George Deukmejian returned a more modest surplus to the public rather than invest it in public services or public works, and we all enjoyed the extra hundred bucks. The natural inclination in this culture is to look at a big pot of money and figure out how to spend it, whether it‘s on schools or just ourselves.

So what are the solutions beyond cuts? The most common proposals for raising revenue are reinstating the top bracket of the income tax -- cut by Pete Wilson, which according to the California Budget Project would raise $3.1 billion -- and restoring the full vehicle license fee (also cut by Wilson), which would raise $3.9 billion.

A new 50-cents-a-pack cigarette tax backed by Davis during an earlier round of negotiations on the current budget would raise a few billion more. A sales tax on services is also talked about. But the real money looks to be in corporate taxes, which as you see yield far less money than most suppose. This would raise an enormous howl from the business community, which would point out, not without merit, that it is hard pressed in a tough economy. And the Republicans -- who offered no budget plans of their own during the campaign -- have vowed so far to oppose all revenue increases in a Legislature in which nearly all increases, except the vehicle license fee, require some of their votes to reach a needed two-thirds.

In a further sign of the seriousness of the crisis, the Burton and Davis camps are eschewing their frequent sniping, with the fiery liberal Burton declining to blast the more conservative Davis for his proposed cuts in programs for the ill, the elderly and children, and Davis press secretary Steve Maviglio praising Burton for committing to a schedule that ”will get the job done next month.“

In a conference call last week, Davis, pressed by the Weekly to say when he thought the state would resume its customary growth, promised to have an answer by January. UCLA forecasters are talking about 2004 for economic recovery, the state’s legislative analyst says late 2003, but no one really knows yet, especially given the uncertainty caused by the prospective invasion of Iraq.