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Gov. Davis proposes $104.7 billion budget

The Associated Press
Thursday January 11, 2001

SACRAMENTO — Gov. Gray Davis on Wednesday proposed a $104.7 billion state budget he said would tackle California’s electricity crisis, beef up teacher training and offer shoppers a three-day sales tax suspension. 

Under Davis’ proposal, at least part of the sales tax would be suspended for the last weekend in August this year to let consumers save up to 8 1/4 percent on clothes and computer equipment. 

Davis said it would “help parents as they prepare to send their children back to school” and increase sales overall. 

Other key items in the spending plan include $1 billion to ease the state’s power shortage, $100 million to begin phasing in a six-week addition to the middle school academic year and $335 million to start a three-year, $875 million effort to improve training of reading and math teachers and school principals. 

“We are winning the battle to improve student performance and student possibilities,” Davis said. Lawmakers will consider Davis’ proposals along with their own as they work on a new state budget for the fiscal year that starts July 1. 

The governor’s plan would raise overall state support for elementary and secondary schools to $33.5 billion, up $2.1 billion from this fiscal year and $1.9 billion over the minimum spending level required by Proposition 98 of 1988. 

Per-pupil spending would jump to $7,174, up from $6,695 this year. 

Besides the teacher training and middle-school extension money, the proposed education spending includes: 

• $30 million to help middle schools and high schools attract and keep algebra teachers. 

• $20 million to help set up 10 new high-tech high schools that would emphasize science, math and engineering. 

• $20 million for computer software to help teachers and principals analyze students’ test results to determine their strengths and weaknesses. 

Higher-education funding includes $300 million to help community colleges prepare students to transfer to four-year schools and $160.4 million in construction funding for a new University of California campus near Merced. There would be no increase in student fees. 

The $1 billion to tackle the state’s electricity shortage would be used to increase energy efficiency, reduce consumption and increase electricity supplies. 

Davis wouldn’t specify how he planned to use that money, but aides have said about $250 million would provide rebates of up to $200 per product to consumers who buy more energy-efficient home appliances. 

Davis’ proposed environmental spending includes $150 million to protect beaches from pollution and buy wildlife habitat and wetlands, $100 million to replace up to 6,000 diesel engines with cleaner-running motors and $50 million for grants of up to $6,500 to encourage the purchase of battery-powered and other zero-emission vehicles. 

The proposed sales-tax holiday would save consumers at least $27 million by eliminating the state portion of the sales tax on clothing items or shoes worth up to $200 and computer equipment costing up to $1,000. 

The savings would be greater, another $12 million to $15 million, if local governments agreed to suspend their share of the sales tax during the three-day period. 

The tax ranges from 7 to 8 1/4 percent of the purchase price depending on the county. The state’s share is 4 3/4 percent. 

Eight other states have similar sales tax holidays. 

Assembly Minority Leader Bill Campbell, R-Villa Park, praised the tax holiday idea but said that it should be made permanent. Gage said the administration wanted to see how it worked before extending the program. 

Pat Leary, a lobbyist for the California State Association of Counties, said Davis should agree to reimburse local governments for any sales taxes they lose instead of putting them in the position of having to decide whether to approve a tax suspension and lose revenue. 

“We have a lot of local governments who aren’t doing as well as the state and can’t afford to lose the money,” she said. 

Davis’ plan also includes $110.8 million in tax breaks for businesses, mainly by expanding and extending a tax credit for certain types of industries that buy new equipment and increasing the capital gains exclusion for small business stock held for more than five years. 

Campbell said the governor should also have recommended that lawmakers extend a one-year, quarter percent sales tax cut that took effect Jan. 1. 

“I think, given the prosperity, the surplus we have, he should have made it permanent,” Campbell said. 

Davis said he was willing to consider additional tax cuts if revised budget projections in May show that revenue is up more than anticipated. 

“My highest priority this year is to continue to make progress in education and resolve the energy challenge,” he said. “If I feel confident that we have made enough progress on both fronts then tax cuts, health care and others would compete for additional money.” 

In health care, Davis proposed funneling the $468 million the state expects from the 1998 tobacco settlement agreement to a fund that would be used solely for anti-tobacco, cancer research and treatment and other health care programs. 

Davis proposed to spend $74.4 million of the tobacco funds to expand insurance coverage for children through the Healthy Families program. The governor’s budget plan also includes $201.5 to cover uninsured parents of children enrolled in Medi-Cal or Healthy Families. 

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On the Net: 

The governor’s Web site: www.governor.ca.gov 

The Department of Finance: www.dof.ca.gov