RENEE MONTAGNE, host:
Here in California, there's political gridlock over the state's massive budget. It's now a month late, and the state is facing a shortfall of some $15 billion. That's led to Governor Arnold Schwarzenegger telling thousands of state workers that their paychecks will be cut, and he's now thinking of the once unthinkable: a tax increase. John Myers of member-station KQED has more.
JOHN MYERS: Arnold Schwarzenegger has always said he opposed new taxes. But in August, 2006, seeking a second term as governor, Schwarzenegger's penchant for hype may have gotten the best of him.
Governor ARNOLD SCHWARZENEGGER (Republican, California): I've said it before, and I will say it again: I will not raise taxes on the people of California -period.
MYERS: You can probably guess what comes next. Now facing the largest deficit of his tenure and having already used massive borrowing in years past, Governor Schwarzenegger is signaling a willingness to raise taxes.
In a private meeting with legislators last weekend, Schwarzenegger suggested a temporary, one-percent increase in the state sales tax in exchange for reforms to the annual state budget process.
That would add about five and a half billion dollars a year to government revenues. On Wednesday, Schwarzenegger tried to depict the proposal as nothing more than brainstorming.
Gov. SCHWARZENEGGER: We have all kinds of different discussions, and I just tried to move the process forward and tried to bring both of the parties together and have a responsible budget.
MYERS: The legislature's majority Democrats think Schwarzenegger is finally coming around to what they've been saying all year. Democrat Don Perata is the president pro tem of the California State Senate.
State Senator DON PERATA (Democrat, California): The fact that the governor now has said we cannot balance this budget, we cannot get through the next three or four years without at least a temporary tax, I think is a step in the right direction.
MYERS: But California is one of only three states where a supermajority vote in the legislature is needed on the budget, and the sales tax idea has landed with a resounding thud among the governor's fellow Republicans, some of whom have to get on board with any new budget.
State Senator DAVE COGDILL (Republican, California): This is no time to raise taxes, given the economic situation that this state finds itself in.
MYERS: State Senate Minority Leader Dave Cogdill says his colleagues prefer more spending cuts beyond the seven to $8 billion in cuts to education and social services already on the bargaining table.
The budget stalemate has also placed the charismatic governor on the wrong side of state workers. With fears California could run out of cash if the impasse lasts much longer, Schwarzenegger has laid off 10,000 temporary workers and has ordered the paychecks of almost 200,000 permanent workers be cut back to minimum wage.
Unidentified Group: We can't survive on 6.55. We can't survive on 6.55.
MYERS: That's leading to protests and legal action by the union representing state employees, like this protest at the Department of Motor Vehicles offices in Oakland. Michelle Freeman(ph) is a DMV worker whose hours have already been scaled back.
Ms. MICHELLE FREEMAN (Department of Motor Vehicles, California): It's not even like this was a discussion. This is our lives. This is somebody in your pocket, taking money out of your pocket, taking food out of your mouth and the roof over your head. It's serious.
MYERS: Schwarzenegger acknowledged that pain at a news conference last week and apologized to state employees, but the pay cut may never happen. The state's controller has vowed to not reduce the paychecks of workers. Aides to Schwarzenegger say he may ask the courts to intervene.
Meantime, millions of dollars owed to vendors doing business with the state can't be sent out, and next week, California is likely to begin the expensive process of borrowing money at high interest rates from Wall Street. For NPR News, I'm John Myers in Sacramento.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.