Governor Brown spells out next goals for California in State of the State address

SACRAMENTO, Calif. - Cheering a California rebound, Gov. Jerry Brown says voter-approved tax increases have put the state on sound financial footing but warns lawmakers that they must be tight-fisted with the government purse strings.

The Democratic governor delivered his third State of the State address Thursday since reclaiming the governor's office. He did so just months after voters approved his Proposition 30, which raised sales and income taxes temporarily.

His speech was filled with the rhetorical gems and historical references that are hallmarks of his addresses, but it did not break new ground.

The main topics Brown addressed -- reform of K-12 education funding, the need for the higher education systems to hold down costs, promotion of high-speed rail and water tunnels under the delta -- have been addressed previously, including in his budget proposal.

Brown mostly used his speech to congratulate voters and lawmakers for having an optimistic vision of California. The state, he said, "has once again confounded our critics."

Brown and other lawmakers are free to move beyond the budget and focus on policy issues in 2013 after persuading voters in November to pass his tax initiative, Proposition 30, which raised the state sales tax by a quarter-cent for four years and income taxes on the wealthy for seven years, is expected to generate an estimated $6 billion a year. Brown says if his budget proposal is adopted, California's deficit will be eliminated, although significant debt remains.

"We have promises to keep and those most important one is the one we made to the people if Proposition 30 passed, that we would guard jealously the money temporarily made available," Brown added.

Brown expects the tax increase to net $5 billion to $7 billion each year. The initiative notes individuals who make $250,000 a year or below will find no change in their tax rate of 9.35 percent, while those who make between $250,000 to $300,000 will see a tax rate increase to 10.3 percent. Those who make $300,000 to $500,000 will now have an 11.3 percent tax rate, and those who make $500,000 or more, a 12.3% tax rate. This is on top of the computed tax for each individual.

"I would say it's a pretty big 'ouch' for people in those brackets," said certified public accountant Jeanne Shannon with the San Diego Tax & Accounting Center. "Plus there are a lot of federal law changes that took place that will affect more of 2013."

Shannon said after the law passed, her wealthier clients began to call.

"(They asked) whether they should move, whether or not it's too their benefit. Is it for their benefit? It depends where they move too," Shannon said.

It's no surprise that those in the highest tax brackets are considering a move out of state.

"They're going to have to do what they feel is necessary for their family," said taxpayer Lise Knutson. "Even if it means (they are) moving out of state."

Seven states currently have no income tax at the individual level -- Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

However, more often than not, the property taxes are much higher.

It's a trade-off that Knutson understands.

"San Diego has a plethora of wealthy people," she added. "If they want to go, then they are going to go."

Republican lawmakers said Democrats should devote even more money to education.

Brown has proposed restoring some funding to schools while avoiding further cuts to already hard hit social service programs. In addition to streamlining education spending, he also is seeking to divert more money to poor students and those who are learning English.

The Brown administration also is awaiting the results of an environmental impact report due this spring on his proposal to build a massive, 35-mile twin-tunnel system to carry water from the Sacramento-San Joaquin River Delta south to farms and cities.

It includes plans for more than 100,000 acres of flood plain and tidal marsh habitat restoration. The entire project would cost $23 billion, with the $14 billion construction cost coming from water users who also would pay for its maintenance.

Brown has also indicated that he wants lawmakers to overhaul the California Environmental Quality Act, a complex set of environmental regulations that has been blamed for slowing development and economic growth because of the logistical hoops businesses must jump through to comply.

Fewer regulations could ease work on some of the governor's other major goals, including the water plan and high-speed rail.

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