So the governor signs the budget bill this week and it came in about $160 million short, so he started making line-item cuts in the neighborhood of $490 million (the extra is for a rainy-day fund, just in case the state runs dry – yeah, like that’s gonna happen again). And no sooner than the ink dries, the legislators cry foul and say they’re gonna sue, claiming the vetoes were illegal. Don’t you just love the way this state works?

More than 60% of Arnold’s vetoes were in the health and human services area. Plus, state parks got sliced an additional $6 million for a total of $422 million, which means about 100 parks will be closed.

However, cities and counties (and contractors and public works officials) were relieved that the gas tax takeaway plan was scuttled. So, I guess they won’t sue now (see my last blog).

The final package left nearly $2 billion in gas tax funds alone at the local level over a two-year period. Following approval by the senate, the assembly rejected the governor’s proposal to shift approximately $1 billion for 2009-10 and nearly $800 million for 2010-11 of local gas tax revenues from local governments and instead use the funds to pay debt service on transportation bonds.

What’s really going to haunt the state government down the line are bonds and credit, which fund infrastructure and redevelopment projects. And even though this budget passed, the state’s credit rating continues to dip mainly because it continues to issue IOUs (210,000 of them so far, worth more than $1 billion).

Reforms? How about a grand total of $50 million saved by eliminating some boards and commissions? Boy, that will sure make a difference.

Expenditure reductions included a third furlough day for state workers. How come the legislature is not included in this furlough program?

So the $26.3 billion shortfall is taken care of. I read somewhere recently that the Dept. of Finance and state treasurer figure because of the income tax shortfall during this recession, that we could be $6 billion or more in the hole in a couple of months.

Meanwhile, the governor’s Commission on the 21st Century Economy, which was created by executive order earlier this year to re-examine and modernize California’s out-of-date revenue laws that contribute to feast-or-famine state budget cycles, will not be making a recommendation until sometime in September (it was suppose to issue a report July 31).

I’m not sure where the state’s construction industry stands on some of the commission’s initial recommendations, but they include two packages:

  • A uniform personal income tax rate of 6%; standard deduction of $15,000 single/$30,000 joint; itemized deductions for mortgage interest, property tax and charitable contributions, phased out at higher income levels; elimination of corporation and state sales taxes; and imposition of net receipts tax.
  • And two PIT rates for the second option – 3.75% up to $25,000 single/$50,000 joint, 7% at higher income levels; standard deduction of $15,000 single/$30,000 joint; itemized deductions (same as above); reduction of corporation tax rate to 7%; and imposition of new fuels tax.

I am sure, however, that most if not all our state legislators will be looking for new jobs as soon as they try running for re-election. And as to Mr. Schwarzenegger, he can soon say “yes” to reprise his outrageous cameo role in “Around the World in 80 Days, Part Deux,” as long as Jackie Chan still wants to do it.