Plan Includes No New Taxes, Repays Debt, Invests in Education, Transportation

(June 29, 2006) Legislative leaders and Governor Arnold Schwarzenegger reached agreement this week on a $131 billion spending plan for California.

The budget uses higher-than-expected revenues from the state’s strengthening economy to repay debts, invest in education and transportation and move California closer to resolving the structural budget deficit - all without raising taxes.

For the first time in six years, the Legislature adopted the budget before the end of the fiscal year.

Bipartisan Effort

“I commend Governor Schwarzenegger and the Legislature for coming together in a bipartisan fashion and quickly completing a responsible state budget for next year that will continue the progress California has made in improving our state’s fiscal health and economic strength,” said California Chamber President Allan Zaremberg.

“This budget contains no new taxes that would depress economic growth; continues to pay down the state’s debt, including using some one-time revenues to pre-pay additional debt; and restrains the growth of new ongoing spending, while investing heavily in education for California’s children and future workforce,” Zaremberg said.

“Under Governor Schwarzenegger’s leadership and continued policies of reform and fiscal restraint, California’s strong economy has produced nearly 600,000 new jobs and $20 billion in additional revenues for the state. This increased revenue has allowed the state to provide essential services and increased investment for Californians, including record spending on education.

“We must continue to improve our state’s fiscal situation by continuing to hold the line on new taxes and increases in ongoing spending, by paying down debt and ultimately closing the structural deficit. These policies - reflected in this budget - will allow our already resurgent state economy to continue to grow, employing Californians and providing our state with the revenue needed to fund our government and essential programs.”

Highlights

Among other features, the newly adopted budget:

• commits gasoline tax revenues to transportation, as required by Chamber-supported and voter-approved Proposition 42 and repays money borrowed from the Proposition 42 transportation fund during the state’s fiscal crisis;
   
• increases funding for schools, as required by Proposition 98;
  
  
• boosts the budget reserve and repays state debt early;
  
  
• increases funding for law enforcement and to enhance the state’s ability to deal with emergencies, such as the avian flu.

Staff Contact: Dominic DiMare