Legislature Approves Budget After Cigarette Tax Increase, Spending Cuts Dropped

The Legislature this weekend approved a budget plan for fiscal year 2002-2003 in the closing hours of the legislative session, ending a two-month deadlock, the Los Angeles Times reports (Tamaki/Vogel, Los Angeles Times, 9/2). The $99 billion budget plan ends disagreement between Democrats and Republicans over how to cover the state's estimated $23.6 billion budget deficit, the Sacramento Bee reports (Hill, Sacramento Bee, 9/1). To reach an agreement, Democrats abandoned their calls for a $3-per-pack increase in cigarette taxes and approved $1.2 billion in spending cuts above reductions in the budget plan the Senate passed in June. Republicans backed off calls for $4 billion in spending cuts and approved $2.4 billion in new revenues (Los Angeles Times, 9/2). The budget plan borrows against future tobacco settlement revenue to cover the shortfall (Broder, New York Times, 9/2). In addition, the budget orders Gov. Gray Davis (D) to cut about $750 million from government operations (Coleman, AP/Orange County Register, 9/2). Democrats also agreed to cap spending in the next fiscal year to avoid exceeding revenues. As a result, state spending could be reduced by billions of dollars (Los Angeles Times, 9/2). Still, the budget does not change California's heavy reliance on income taxes and capital gains, leaving the state's finances "vulnerable to the vagaries of the stock market," the New York Times reports (New York Times, 9/2). Democrats said the budget plan would protect "vital services" such as trauma care and subsidized health insurance, while Republicans said they were pleased that it would not raise taxes (Sacramento Bee, 9/1). The budget now goes to Davis, who said he plans to sign it (AP/Orange County Register, 9/2).