Rapid Action Alert #4

CALIFORNIA BUDGET CRISIS UPDATE:
What You Can Do

The Governor's May 14 revision of the budget left the state facing huge cuts in Health and Human Services as well as other programs. Since the state may not run a deficit, there were $23.6 billion in spending cuts that eliminated or severely reduced many vital social programs especially in health services for lower-income people. Following the "May revise" as it is called both the Senate and Assembly budget subcommittees reviewed the governor's proposals. Although there were differences in particular items, both houses refused to accept such draconian measures that would hurt the most vulnerable residents of our state.

Recent polls show that while there are varying levels of voter support for cutting spending to balance the state budget, voters overwhelmingly oppose cuts to most specific services including education, health care, mental health, and child care. The most recent poll found that 85 percent of voters believe welfare spending should remain stable or even be increased during this recession. Only 12 percent of voters thought it should be cut. The Senate and Assembly budget subcommittees concurred.

Thursday May 30 both the Senate and Assembly passed the budge in deficit form automatically sending it to Conference Committee. There the fate of all programs, not just social services, will ultimately be decided. No revenue generation other than those proposed by the governor was included in either budget sent to the Conference Committee, but such opportunities do exist. The most comprehensive measure to generate income for the state is SB 1255 (Burton-San Francisco) that would raise the upper-level tax rates for the wealthiest 2 percent of California tax payers. The revenue generated from the proposed increase would provide $3.1 billion in additional funds for 2002-03; $3.2 billion in 2003-04, and $3.5 billion in 2004-05.

The tax would increase from 9.3 to 10 percent for individuals with taxable incomes (after deductions) of $130,000 per year for individuals and $260,000 for couples. An 11 percent tax would apply to individuals earning over $260,000 and couples making more than $520,000 in taxable earnings. SB 1255 would also establish the alternative minimum tax for incomes between $100,000 and the other levels at 8.5%. Top tax rates have exceeded the current levels for 33 years ­ nearly half the amount of time the state has required a personal income tax. Governor Ronald Reagan increased top rates in 1967 and 1971, and Governor Pete Wilson increased the rates to 10 and 11 percent in 1991. The average income for people in the top income levels is $1,341,700.

What could California "buy" for an addition $3.1 billion in the coming year? According to the California Budget Project, Health Access, and other advocacy groups, many of the proposed cuts in health care and social services could be retained at 2002 funding levels with income from this proposed tax rate increase. While the Governor's budget as well as those of the Senate and Assembly preserved the basic funding for CalWORKS, the federally-mandated welfare to work program, cuts were proposed in case management staffing for eligibility and support were slashed. These programs and others would benefit enormously from reinstatement of budget funds at the 2002 level. Some of the items that could be retained include:
Medi-Cal "optional" benefits such as dental, psychological, rehabilitation therapy, and certain medical supplies for adults.
Restoring semi-annual rather than annual dental care for children.
Current eligibility for Medi-Cal coverage to two-parent households now targeted for elimination regardless of need.
Children's mental health support and treatment programs.
Adequate county-level staffing for all eligibility assessments and case management including CalWORKS; food stamps; foster care and adoption services; child protective services, and others to assure decent service provision for recipients.
Emergency shelter and housing assistance and programs for the homeless.
State funding for local libraries.
Juvenile crime prevention.

At the federal level, last year's tax cuts will provide substantial savings to high-income earners far exceeding the increased state taxes they would pay if SB 1255 were enacted. The top 1 percent of California taxpayers will receive a federal cut of $51,717 while the proposed state tax on that population would increase their tax bill by $7,674 after taking into account the deductibility to state income taxes for federal tax purposes.

The California Council of Churches believes that the state budget is a collective public instrument vitally important in addressing the issues of our society. To achieve the goal of fairness for all members of our society, fair taxation that ensures all citizens assume an equitable tax in accordance with their ability to pay. It is only fair that the wealthiest Californians be part of the solution to the state's fiscal crisis and that the burden not fall entirely on the shoulders of those with greatest needs.

SB 1255 ACTIONS
To express strong support for SB 1255 (Burton-San Francisco) as an element within the upcoming budget, please address members of the Budget Conference Committee. These members will include three from each house for a total of six. Assemblymember Oropeza is Chair of the Assembly Budget committee, and Senator Steve Peace is Chair of the Senate Budget Committee. The members are:

Assembly:
Jenny Oropeza (D-Long Beach) (916) 319-2055. FAX: (916) 319-2155. Email: assemblymember.oropeza@assembly.ca.gov. District office: (310) 518-3324
Bill Campbell (R-Irvine) (916) 319-2071, FAX: (916) 319-2171. Email: None. District office: (714) 998-0980
Darrell Steinberg (D-Sacramento) (916) 2009. FAX: (916) 319-2109. Email: None. District office: (916) 324-4676

Senate
Steve Peace (D-El Cajon) (916) 445-6767. FAX: (916) 327-3522. Email: senator.peace@sen.ca.gov. District office: (619) 463-0243
Dick Ackerman (R-Irvine) (916) 445-4264. FAX: (916) 445-9754. Email: senator.ackerman@sen.ca.gov. District office (714) 573-1853
Wesley Chesbro (D-Arcata) (916) 445-3375. FAX: (196) 323-6958. Email: senator.chesbro@sen.ca.gov. District office ((707)576-2771 or (707) 445-6508

A sample letter for the Budget Conference Committee:

Assemblymember _____ Senator __________
California State Assembly California State Senate
PO Box 942849 PO Box 942848
Sacramento, CA 94249-0001 Sacramento, CA 94248-0001

Dear__________

I am writing to you as a member of the Budget Conference Committee. I ask you to support the principles of Senator John Burton's bill, SB 1255 that would reinstate the 10 percent and 11 percent tax rates for high-income Californians. In this difficult budget year, I believe that the only way to close the budget gap is to focus on fair and balanced solutions to the crisis. This includes revenue increases not just cuts to basic human services to close the gap.

As you are well aware, raising the top income tax bracket has been used to bridge prior deficits, most recently during the administration of former Governor Pete Wilson. The state's top rate has exceeded the current maximum for nearly half the time we have had a personal income tax.

Only 2.4 percent of California taxpayers would be affected by the proposed increase with those in the highest one percent of households with average incomes of $1,341,700 paying more than 95 percent of the amount. While only a small number of Californians would be affected by the increase, the state would benefit enormously increasing the General fund revenues by over $3 billion in this coming year alone. The tax payments by the wealthiest citizens would be more than offset by the federal deductions they would receive for that payment and by the federal tax cuts afforded to the wealthiest citizens nationally.

As a member of the California Council of Churches, I believe that justice, fairness, and equity must be principles that are incorporated within our state's budget. During difficult economic times, it is only right that all citizens must participate in finding a solution to our crisis. Those among us with the fewest resources will suffer from cutbacks in essential services, and those with resources therefore must bear some of the burden as well.

As you work on the Budget Conference Committee to creating a balanced budget, please incorporate Senator John Burton's tax restoration program as part of your solution.

Thank you.

Sincerely,