Calif. Dems try to pass budget without GOP votes

SACRAMENTO, Calif. (AP) -- Democrats were trying to break a weekslong impasse over California's multibillion-dollar deficit by making an end run around Republicans, offering a complicated mix of revenue cuts and increases that they said would raise billions without requiring two-thirds majority typically needed to raise taxes.

Meanwhile, a state panel that oversees loans for public works raised another alarm in the state's budget crisis by voting to stop financing nearly all infrastructure projects in California, halting nearly $4 billion in loans for everything from freeway interchanges and carpool lanes to classrooms.

Treasurer Bill Lockyer, the board chairman, had warned the Legislature last week that the unprecedented halt in funding would be necessary if lawmakers did not immediately address a $14 billion deficit in the fiscal year that ends in June. The hole is forecast to grow to $42 billion over the next 18 months.

Lockyer estimated previously that the frozen projects could cost California 200,000 jobs in every part of the state. Officials were still calculating the effect of Wednesday's decision.

The Democratic proposal would address $18 billion of the state's shortfall over the next 18 months through a scheme that would cut some taxes and raise others, as well as slash more than $7 billion in spending on health, education and prisons.

Democratic legislative leaders had planned to vote Wednesday night on the plan, but said they were forced to delay their sessions because of difficulties involved in drafting the legislation.

Assembly Speaker Karen Bass, D-Los Angeles, said she believes the plan could pass without the two-thirds majority typically needed to raise taxes because it would not change the amount of tax coming into the state's overall budget.

The proposal they made Wednesday would eliminate an 18-cent-a-gallon excise tax on gas and a fluctuating sales tax on gas, replacing them with a 39-cent-per-gallon fee. Democrats also were seeking to raise the state sales tax by 3/4 of a cent, tax oil produced in California, add a 2.5 percent surcharge on state income taxes and force independent contractors to pay taxes upfront.

Jon Coupal, president of the anti-tax Howard Jarvis Taxpayers Association, said his group stands ready to challenge the Democrats' plan should it pass, and Assembly Minority Leader Mike Villines, R-Clovis, said his party would consider joining in a lawsuit.

Coupal said taxpayers would recognize it as "a ploy" to raise taxes.

Republican and Democratic lawmakers have been locked in a stalemate over how to deal with the deficit since Republican Gov. Arnold Schwarzenegger first called them back into a special session on Nov. 5. Republican opposition to any tax increase has been the main sticking point; three GOP votes are needed in each house to get a two-thirds majority.

Talks broke down with Schwarzenegger last week after he blamed Republicans for coming to meetings unprepared. Republicans responded with their own plan Tuesday, calling for deeper cuts to education and social service programs than Democrats propose.

Senate Minority Leader Dave Cogdill, R-Modesto, said Wednesday that the decision to freeze public works financing "doesn't make the case for raising taxes."

The three-member Pooled Money Investment Board voted 3-0 Wednesday not to lend money for an estimated 2,000 infrastructure projects statewide through June, saying the state's finances are so grim that California can no longer afford to fund them.

The value of those projects overall totals $16.2 billion. They include work on highways, parks, schools, levees, hospitals and more.

"We don't have the money to loan, so we're stopping the projects," Lockyer said.

California is expected to run out of operating cash in February, creating another drain on the pooled fund that makes loans available for construction projects.

Schwarzenegger said he was sad that California would lose thousands of jobs and halt projects when he and other leaders have been championing infrastructure investment as a way to boost the state's economy.

"It's terrible the kind of pain that the Legislature is causing to the people of California," Schwarzenegger said. "They were sent to Sacramento to solve problems, not create them."

The projects affected include $727 million in repairs and new classrooms for California schools, including some emergency repairs; levee safety improvements in four counties; and interchanges and carpool lanes on several California highways. Many of those projects have other revenue sources and it was unclear whether some may be able to go on without state aid at least temporarily.

The board agreed to meet again in early January to possibly provide about $500 million to keep the neediest projects going.

State finance officials said California hasn't been able to borrow money for months, partly because of the tight credit market but mostly because elected leaders have not been able to address the fiscal mess.

California has the lowest credit rating of any state in the nation and already faces another potential downgrade by Standard & Poor's.

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Associated Press Writers Juliet Williams and Samantha Young also contributed to this story.

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