A Thursday night floor vote is set in both chambers of the California legislature for a budget deal recently reached by Gov. Schwarzenegger and legislative leadership. Facing a $26.3 billion deficit, the plan calls for tough yet necessary spending cuts, relies heavily on accounting maneuvers and borrowing, but does not raise taxes.
Extension of the income, sales, and car tax increases passed in February was resoundingly rejected by voters in a May special election. Despite this Democrats have persisted in subsequent months with calls for higher taxes on everything from tobacco to energy to online purchases. 3 Republican votes are needed in each chamber to overcome the 2/3rds supermajority requirement to raise taxes in California. All Republican legislators and the Governor have pledged opposition to further tax increases. Americans for Tax Reform commends lawmakers for reaching a deal that, while far from ideal and full of many “kick the can down the road” provisions, does not raise taxes in the middle of a recession.
The budget agreement also permits oil drilling off the Santa Barbara coast. If approved, it will be the first offshore drilling lease in California in 40 years. It is reported that there are at least 9 billion barrels of oil off California’s entire coast and at least 1 billion barrels are located in waters that are solely controlled by the state. Procurement of resources found in state controlled waters alone could generate $5 billion for the state right away via securitization. Policy analysts point out that these reserves can be tapped in an environmentally sensitive way with slant drilling, which requires no new rigs.
ATR vehemently supports offshore drilling as a way to close the Golden State’s budget deficit without further hiking taxes. ATR testified to this extent at an April Minerals Management Service hearing in San Francisco. The bottom line is that this budget is not perfect. Far from it. It is, however, the best budget deal that has been struck by the Big 5 all year.