California Budget Crisis Diaries: More taxes to save the state

California Budget Crisis

An increase in income taxes, the finance director announces his parting and the state is a little closer to stimulus funds for education. Here’s a recap of what’s going on in Sacramento.

Income tax increase: California wage earners will soon notice a little less money in their paychecks.

Starting Monday, employers in the cash-strapped state are required to withhold 10 percent more in state income taxes to help ease the budget problems.

It’s part of a plan to artificially inflate state revenue by $1.7 billion through next June.

Brenda Voet, a spokeswoman for the state Franchise Tax Board, says it’s technically not a tax increase since workers will get their money back after April 15.

A single wage earner making $51,000 a year with no dependents will get about $4 less per week.

Finance director leaves: The state’s finance director announced Monday that he will step down from his position.

According to Bloomberg, Michael C. Genest will step down once a replacement is found. The news source cites Genest’s spokesperson, H.D. Palmer, who said the director informed Gov. Arnold Schwarzenegger about the possible leave a month ago. Bloomberg cites the difficulty Genest has had to endure during the course of his term:

“The departure comes as Schwarzenegger, a Republican who can’t seek re-election because of term limits, girds for his last political struggle over the state’s $85 billion budget. As tax revenue continues to slide, California is expected to incur a deficit of at least $7 billion for the year that begins in July, according to Treasurer Bill Lockyer.

‘Mike Genest’s tenure has been one of the most challenging fiscal times in modern California history,’ Palmer said. ‘He has served the governor, the public and the Legislature extremely well.’

The decision to step down will leave Schwarzenegger without a key official during the last year that he will have to help prevent the recurring budget crunches he vowed to fix when he first ran for office in 2003. In September, a Schwarzenegger-appointed panel recommended overhauls to stabilize California’s revenue collections, though it came under fire from representatives of labor and business.”

Genest became the finance director in Dec. 2005 but joined the Finance Department in 2003 as a deputy director.

Closer to the top: California is one step closer to qualifying for President Obama’s education stimulus, “Race to the Top,” after a senate committee passed a crucial bill.

Senate Bill X5-1 was approved 5-0 by the Senate Education Committee on Monday. The bill will increase transparency on schools and instructors, remove the cap of charter schools and allow students to attend schools out of their districts.

“Our work to fulfill our promise of a quality public education for every child in California has just begun,” said Sen. Gloria Romero (D-East Los Angeles), who authored the bill. “I refuse to

be grounded by the status quo. ‘Can’t’ is no longer an option.”

Schwarzenegger released a statement displaying how pleased he is with the committee.

“The California legislature now holds the key to helping unlock hundreds of millions of federal education dollars for California’s school children, and I applaud Senator Romero and the Senate Education Committee for moving us one step closer to ensuring California is highly competitive in this national funding competition,” Schwarzenegger said.

The bill will now move to the Senate Appropriates Committee.

“Race to the Top,” funds are funds allocated to education within Obama’s American Recovery and Reinvestment Act. More than $4 billion are up for grabs to state governments who prove they have reformed their education systems.

Associated Press writer Judy Lin contributed to this report. Hoa Quach is the SDNN political editor. Follow her on Twitter.

Tags: american recovery and reinvestment act, arra, brenda voet, california budget, california businesses, california charter schools, california deficit, california education, california franchise tax board, california schools, California taxes, federal stimulus, gloria romero, h.d. palmer, michael genest, President Obama, race to the stop, Schwarzenegger, SDNN, senate education committee

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