State budget could mean tax increase for shoppers

The Associated Press
Wednesday July 25, 2001

SACRAMENTO — If you are a California farmer, you could save thousands of dollars on a new tractor and the diesel fuel to run it. 

If you are a parent, your child’s school may see an average of $8,000 more per classroom and more parents will qualify for health care assistance. And shoppers: Prepare to pay more sales taxes at the cash register starting in January. 

All of these changes are part of a $101 billion state budget that Gov. Gray Davis is scheduled to sign this week, three weeks after it was supposed to go into effect. 

Despite the handful of targeted tax breaks – many of which were part of a last-minute deal to persuade Republicans to vote for the overdue budget – the 2001-02 spending plan is being called a lean plan without any new across-the-board relief for taxpayers. 

“This year revenues are down so it really is a ’status-quo’ budget with some modest enhancements,” said Jean Ross, executive director of the California Budget Project. Both chambers of the Legislature approved the budget last week after a three-week, partisan standoff over an automatically triggered sales tax increase. 




The budget includes about an 8 percent increase in K-12 education spending that translates to more than $7,000 per pupil. 

When averaged, the increase means $8,000 more for a 22-student classroom. The budget includes spending boosts for teacher and administrator training and after-school and remedial programs. 

“These are the kinds of things that people will realize locally as the result of this year’s budget,” said education secretary Kerry Mazzoni. 

About $200 million will be funneled into low-performing schools, which primarily contain the state’s poorest children. Plus, $40 million is earmarked to help balance urban and rural school funding. Students at the state’s universities and state and community colleges will not face an increase in tuition and fees this budget year. 



Farmers and ranchers, part of the state’s largest industry, will see long-sought tax relief on farm machinery, parts and diesel fuel. The change means a farmer could save roughly $2,000 on the purchase of a new mid-powered, $40,000 tractor. 

The legislation also includes a sales tax exemption for diesel fuel used for agriculture, which experts say will save farmers and ranchers thousands of dollars. 


Tax Relief 


A sagging economy and surplus sapped by the costs of the statewide energy crisis mean this budget includes no new across-the-board tax cuts. 

The budget, however, includes millions in tax breaks enacted last year, when unexpected revenues from income  

and capital gains taxes streamed into the state treasury. They include a 67.5 percent cut in the vehicle registration fee, a day-care credit for some parents, and an income tax credit for credentialed teachers. 


Sales Taxes  


The budget includes about $2 billion in rainy day funds – likely too small a cushion to prevent a quarter-cent sales tax increase starting in January.  

The hike would translate to about $50 more in sales tax on a $20,000 car and about 5 cents on a compact disc. Government officials estimate it will cost a family of four an average of $120 per year. 




Some projects planned to ease commuter woes could be delayed. The budget includes a Davis proposal to postpone a plan to direct gasoline sales tax revenues exclusively to transportation – instead using them to help pad the general fund in the face of dwindling revenues. 

However, voters will decide this budget year whether to require that gasoline tax revenues be used for roads, highways and transit projects beginning in the 2003-04 budget year. 


The budget injects more money into the state’s cash-strapped trauma centers and expands Healthy Families, one of the state’s health care programs for the poor. The new budget allows parents who make 250 percent of the federal poverty level to qualify for the program. 


The budget includes $75 million in tax credits to help low-income senior citizens pay rent and property taxes. 


On the Net: Find the California Budget Project at http://www.cbp.org/ and more budget analysis at www.lao.ca.gov. The California Farm Bureau Federation’s Web site is http://www.cfbf.com/.