California Governor Arnold Schwarzenegger unveiled a plan on Thursday for a combination of deep cuts in services and revenue increases to solve state's budget shortfall which has reached 11.2 billion dollars.
This action plan was designed to "get our budget back on track, invigorate our economy and generate jobs for the state's unemployed," Schwarzenegger said.
Schwarzenegger's proposal calls for a temporary increase in the state sales tax, from 5 percent to 6.5 percent, which will generate additional sales tax revenues of 3.219 billion dollars in2008-09 and 6.606 billion dollars in 2009-10 for the General Fund.
The governor also called for additional revenue increases including broadening the sales and use tax to include certain services, imposing an oil severance tax upon any oil producer that extracts oil from the earth or water in this state and increasing the alcohol excise tax by five cents a drink.
The plan also includes cuts of 2.5 billion dollars from schools and community colleges, cancellation of dental insurance for poor adults on the state's MediCal program and reduction in subsidies to the aged, blind and disabled. California's welfare subsidies would also be reduced.
The action "must be taken up as quickly as possible in order to prevent a cash crisis that will jeopardize vital state services" and to wipe out a budget shortfall that is expected to swell to more than 24 billion dollars by the middle of 2010, he said.
"In the six weeks since I signed our last budget the mortgage crisis has deepened, unemployment has increased and the stock market has lost almost 20 percent of its value," Schwarzenegger said. "We have drastic problems that require drastic and immediate action -- we must stop the bleeding right now."
Schwarzenegger on Thursday opened an emergency session of the sitting Legislature to deal with the budget shortfall. Lawmakers will have until the end of the month to take action.
Source: Xinhua
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