A State Without a Budget: Day 53½ - ¡HASTA LA VISTA, ARNOLD!

EXTRA Political Diary

Stephen Moore in  the Wall Street Journal

August 22, 2008 6:47 p.m. -- Some things never change in the Golden State. Seven weeks into the fiscal year, California still has no budget and faces a Pacific Ocean-sized $15 billion deficit. On Wednesday, Governor Arnold Schwarzenegger offered a "compromise" plan that kicks the legs out from his own party with a big new sales tax increase. "It's time to put ideology aside," he insisted.

Now he faces a revolt from Republicans in the legislature who think this is precisely the time to be ideological. "Any tax increase plan won't pass with Republican votes -- absolutely not," a defiant Mike Villines, minority leader of the state assembly, told me shortly after the governor's scheme was announced. Mr. Schwarzenegger wants to raise the sales tax by one percentage point, which in jurisdictions like Los Angeles would raise the total sales levy to 10% -- one of the highest in the nation. "It will hurt the state and hurt people on fixed incomes," Mr. Villines protests.

He and his colleagues offer their own solution. First, no new taxes in a state that already has nearly the highest income and sales tax burden in the country. Second, a "hard" budget cap that limits spending increases to the rate of inflation plus population growth. Under Governor Arnold, in contrast, the budget has grown 40% in just four years.

Mr. Villines' Republican lawmakers face a stacked deck in the Democratic liberal majority, their own GOP governor, and the California media. Assembly Republicans walked out of a meeting with the governor earlier this week when he started talking new taxes, but Democrats desperately wanted an income tax increase, so Mr. Schwarzenegger views a sales tax hike as a down-the-middle "compromise."

This may be a war California conservatives can win for once in their tax-and-spend state. "There's a silent majority in California against yet another tax increase," Mr. Villines asserts. With gas prices, food prices, unemployment and mortgage foreclosures all rising in the Golden State, he may be right.