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Round 2 for Davis on deficit But lawmakers from both parties showed little sign of budging from entrenched positions. Republicans said they continue to oppose new taxes. Davis' revised $100.4 billion budget proposes tax increases to pay off $10.7 billion of the deficit over five years and to fund a shift of some responsibilities to local governments. "We are willing to negotiate on everything except the issue of taxes," said Senate Republican leader Jim Brulte of Rancho Cucamonga. Democrats, sounding their own familiar refrain, accused Republicans of failing to negotiate and said no budget solution is possible without new taxes. "I'm extremely disappointed that after everything we've done, and after everything the governor has done, the Republicans have not moved an inch," said Assembly Speaker Herb Wesson, D-Culver City. In one small indication of remaining tensions between the parties, Republicans took issue with Davis' contention that he had met with legislative leaders 19 times. Their records indicated 11 such meetings. Still, the Democratic governor adopted a strikingly accommodating tone in presenting his changes. He said that he still preferred the proposal he made in January, which called for erasing the deficit in the coming fiscal year. But "unfortunately, both parties of the Legislature decided they did not like the one-year plan I proposed," he said. The plan Davis outlined Wednesday bears little resemblance to his January proposal. Gone is a $8.3 billion shift of responsibilities to local governments, to be funded by an array of tax increases. It's replaced by a more modest $1.8 billion "realignment" proposal. The new version would be paid for by a new 10.3 percent income tax bracket on annual incomes above $150,000 for individuals and $300,000 for married couples, and a 63-cents-a-pack increase on cigarettes, phased in over two years. The $10.7 billion deficit in the current fiscal year would be wiped out by selling bonds, which would be paid off with a new half-cent sales tax over about five years. On top of that, Davis' new budget proposal assumes that the vehicle license fee that Californians pay each year will be tripled under an existing law that calls for recent reductions to be reversed in tough budget times. That would raise $4.2 billion. All told, the revised budget proposal banks on about $8 billion from increased taxes, about the same amount Davis planned in his January spending outline. In another change, Davis backed off from a proposal to raise $2 billion by selling bonds on the strength of the state's year-to-year share of a legal settlement with tobacco companies. With many other states doing the same thing and tobacco companies struggling financially, the deal no longer makes sense, he said. He also scaled back -- from $1.5 billion to $680 million -- the amount he expects to get from renegotiating gambling compacts with Indian tribes. The process is complex and can't be finished in the coming fiscal year, he said. In January, Davis had proposed overhauling the system of funding school programs with separate pots of money by replacing $854 million of so-called categorical funding with block grants. After lawmakers rejected the idea, Davis gutted the proposal pending further discussion. The governor admits that his revised plan would lead to an $8 billion deficit in the 2004-05 fiscal year. After the Legislature passes a budget this summer, he said, it should spend the rest of the year on "structural reform" to avoid recurring shortfalls.
"This is something we must do if we want to right
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