CA Governor: Taxes, Cuts and Agriculture

CA Governor: Taxes, Cuts and Agriculture
By Kate Campbell
California Farm Bureau

Staring at a $25.4 billion state budget deficit, Gov. Jerry Brown presented a proposal last week for addressing the problem. If approved by the Legislature and if funding sources are placed on the ballot for voter approval, the fiscal strategy would be carried out during the next 18 months and include significant changes to government operation and the addition of $12 billion in taxes.

Brown’s budget proposes total spending of $127.4 billion for the 2011-12 fiscal year. Of this amount, proposed General Fund spending totals $84.6 billion.

Topping the list of changes that would have a direct impact on agriculture is the proposed elimination of funding for the land conservation program known as the Williamson Act, and greatly increased fees for water discharge permits. The California Department of Food and Agriculture also would see its budget reduced.

The governor’s proposal includes $12.5 billion in spending cuts, among them a reduction of $1.7 billion in the Medi-Cal program, $1.5 billion in cuts to the state welfare program, $1 billion in cuts for the University of California and state university systems, $750 million in the Department of Developmental Services, and $580 million in state operations and employee compensation.

Calling the proposal a “vast and historic” restructuring of government, the Department of Finance said the governor’s budget sets the goal of delivering public services more efficiently and effectively by returning many programs to local governments.

The state’s K-12 education program was the only major budget item that remained essentially unchanged.

Both the local government realignment proposal and the level of K-12 funding depend on the Legislature adopting, and the voters approving, the $12 billion in taxes.

John Gamper, California Farm Bureau Federation director of taxation and land use, pointed out that the 0.25 percent personal income tax surcharge and the reduction in the dependent exemption credit, adopted in February 2009, both expired on Dec. 31. A 1 percent increase in the state sales and use tax, as well as the 0.65 percent increase in the Vehicle License Fee, will sunset on June 30.

Gamper said the governor’s budget is “based on the hope that California voters will reverse their strong stance against new taxes, evidenced in the past two elections, and that the Legislature will vote for the tax increases. Even with a vote of the people, a tax increase still requires a two-thirds vote of the Legislature.”

The governor also proposed to repeal the California Community Redevelopment Law and to repeal the Enterprise Zone tax benefits for businesses that locate in specified economically depressed areas.

The repeal of the redevelopment law, which is often used to take private property by eminent domain to combat perceived urban blight, also is key to the governor’s desire to shift many state responsibilities to local governments.

Some items in the budget proposal important to farmers and ranchers include:

* Elimination of the $10 million General Fund appropriation for Williamson Act subventions in the current fiscal year and no funding in 2011-12. The governor suggested that increased property taxes due to the repeal of the redevelopment law could help counties continue the program on their own. Gamper said that most rural counties don’t have redevelopment agencies, however.
* Elimination of General Fund support for the State Water Resources Control Board of $12.8 million, with a corresponding increase in the Waste Discharge Permit Fund and Water Rights Fund, along with a statutory proposal to allow the board to assess a fee for basin planning activities.
* Reduction of General Fund support for the Department of Food and Agriculture by $15 million in 2011-12 and $30 million per year thereafter. In the current budget year, CDFA has had $95.8 million in General Fund support.

The budget proposal states that the new secretary of food and agriculture, Karen Ross, will convene a group of agricultural leaders to identify proposed cuts and alternative sources of revenue for CDFA programs.

* Elimination of General Fund support for the Network of California Fairs, for a permanent decrease of $32 million in the Fairs and Expositions Fund.

The governor’s budget would also:

* Eliminate funding for the Department of Forestry and Fire Protection’s fourth firefighter per engine requirement that was adopted in 2003. This would save $3.6 million in the current fiscal year and $30.7 million in 2011-12.
* Require CDF to revise the definition of State Responsibility Areas, with the goal of transferring fire protection services in the most highly populated areas to local jurisdictions and save the state General Fund about $250 million per year.

The proposal includes new tax enforcement provisions that would cost $220 million over the currently budgeted amount and provide a limited tax amnesty program that allows tax shelter cases in audit and protest to settle without penalties. And $40 million would be spent during current and future budget years to implement the Financial Institutions Records Matching program that would allow the state Franchise Tax Board to access bank records of delinquent taxpayers.

(Kate Campbell is an assistant editor of Ag Alert. She may be contacted at [email protected].)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.


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