California breaks budget impasse; Update: Tax swap, not cut

The California Republican rebellion in the state Senate has ended, and California has a budget deal.  Democrats negotiated for the one Republican vote they needed and got it from Abel Maldonado, in exchange for an elimination of a gas tax increase and some electoral reforms.  The agreement will still mean billions of dollars in new taxes for an already-overburdened state economy:

The state Senate approved a long-awaited budget early Thursday intended to wipe out a $42 billion deficit, possibly steering the state clear of a fiscal disaster.

Leaders secured the final vote needed from a moderate Republican in late-night negotiations by agreeing to his demands for election changes, government reform and removal of a gas tax increase, giving them the two-thirds needed to pass the package, 27-12.

The budget awaited approval from the state Assembly, which had been expected to approve previous budget deals earlier this week but has yet to weigh in on the late changes. The Assembly was set to take up the bill immediately.

What did Maldonado get for his vote?  One point in particular appears to have clinched the deal.  Democrats agreed to put a referendum on the ballot approving open primaries, which Maldonado hopes will generate more moderate candidates for general elections.  California has had closed primaries for decades, and some people attribute that to the polarized nature of California politics.  On the other hand, it will likely open the door to partisan mischief through Operation Chaos-like organized protests.

Other than that, the big win for Maldonado was the removal of a big increase in the state’s gasoline tax, which is already sky-high.  He also demanded more program cuts than in the previous agreement, an end to legislative pay increases when budget deficits arise, and to cancel the order of new office furniture for the state controller.  The change in the gas tax and the sundry budget cuts Maldonado demanded now put budget cuts higher than tax increases ($15B to $12B, respectively).

The Assembly will likely pass this immediately, rather than drag it out over the loss of the gas tax. It’s a net loss for Republicans, and also for Californians.  They already pay almost the highest overall tax rate in the country.  Despite what Schwarzenegger says, the problem isn’t a lack of taxes — it’s a lack of fiscal discipline and an overly large nanny state.  Cutting 10% of California’s budget, which is what this does, is about as effective as cutting 10% of one’s sugar intake for diabetic management.  A responsible legislature would redline vast amounts of the state’s bureaucracy, paring it back to a per-capita outlay in alignment with most of the other states in the nation.  in FY2006, California ranked 6th in the nation, behind Alaska, Hawaii, Delaware, New York, and Wyoming.

Update: HA reader Ryan S points out that the elimination of the gas tax doesn’t actually eliminate the extra tax burden, according to the Sacramento Bee:

Leaders also agreed to Maldonado’s demand to eliminate the 12-cent additional gas tax, which was estimated to bring in $2.1 billion through June 2010. The money will be replaced with a 0.25 percent increase in the state income tax, federal stimulus dollars and more than $600 million in line-item vetoes.

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