MADELEINE BRAND, host:

This is Day to Day. I'm Madeleine Brand.

ALEX CHADWICK, host:

I'm Alex Chadwick. The economic slowdown hurts state governments, too. Some were in shape before the current crisis. They have a little something set aside.

BRAND: But not California. This week, California lawmakers met in special session to deal with a full-blown budget crisis. John Myers of member station KQED has more.

JOHN MYERS: California state lawmakers spent all summer trying to resolved a huge budget shortfall. That process resulted in the latest budget deal in state history. On Thursday, Governor Arnold Schwarzenegger said that deal, just six weeks old, has already come unraveled.

(Soundbite of press conference, November 5, 2008)

Governor ARNOLD SCHWARZENEGGER (Republican, California): A protected current year shortfall of $11.2 billion caused by the stock market, by the real estate meltdown and the higher unemployment.

MYERS: Those problems are requiring new solutions, including taxes. In fact, Schwarzenegger's suggestions would allow the hand of government to creep even deeper into the wallets of taxpayers. The governor's plan would raise the state portion of the sales tax by one and a half percent for three years, and it would require a sale tax to be paid for all kinds of services now tax-free - amusement-park tickets, trips to the veterinarian, vehicle repairs, even a sales tax for a round of golf. That's a dramatic about-face for a governor who once famously complained, government doesn't have a revenue problem; it has a spending problem.

Gov. SCHWARZENEGGER: It just so happened this year that it actually has switched, that because of this tremendous drop in revenues, it is now a revenue problem.

MYERS: The list of revenue solutions the governor is proposing also includes an extra nickel in taxes on every alcoholic drink sold and a new tax on oil pumped out of the ground in California, something Schwarzenegger has opposed for years. The governor may have embraced taxes as a necessary evil, but his fellow Republicans have not. Schwarzenegger told reporters he thinks a few Republicans will vote for a tax increase now that the election is over and politics can be put aside. The trouble is Republicans say their stance isn't political; it's philosophical. Republican Roger Niello is the vice chairman of the Assembly Budget Committee.

Assemblyman ROGER NIELLO (Republican, California State Assembly; Vice Chairman, Assembly Budget Committee): Once we start putting a burden on the productive economy as unproductive as it has become, we're just going to make things worse and we are going to make even more difficult to balance the budget in the future.

MYERS: The governor's budget solution also calls for another major cut in state spending, $4.5 billion, with more than half that amount from public schools.

Mr. DAVID SANCHEZ (President, California Teachers Association): I have no idea how our districts are going to be able to implement that kind of a cut, I just don't

MYERS: David Sanchez is president of the California Teachers Association. He says schools have already spent some of the money the governor now wants back.

Mr. SANCHEZ: We've planned on programs that were going to carry us throughout the year. We've already hired a number of teachers we need. And yet now, districts are going to have go back and to look in the possibility of getting rid of some of those programs or doing something to trim off even more from the bone.

Unidentified Woman: (Unintelligible).

MYERS: As the clerk of the assembly called the roll at the beginning of the special session, some lawmakers were already packing moving boxes. Twenty-four state assembly members, more than one-fourth of the chamber, are turned out of office in just three weeks. If they can't fix this very large hole in California's revenues, the process will almost surely begin again in December with new legislators and the same problem. For NPR News, I'm John Myers.

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