From Assemblymember Villines
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Vol.1 Issue 6
November 2008

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Wall Street Journal
Top California GOP Legislator Holds the Line on Taxes
NOVEMBER 20, 2008
By JIM CARLTON

SACRAMENTO, Calif. -- Gov. Arnold Schwarzenegger and the Democrats who dominate the California legislature agree the state needs to raise taxes to help stave off billions in budgetary red ink. But the governor faces a roadblock in his own party, Republican Assemblyman Mike Villines.

Mr. Villines (pronounced Vuh-LINES) is leader of the state Assembly's Republican caucus, which, with just 32 of the legislature's 80 members, has little power to set the agenda. Political observers here like to joke that the Republican caucus, along with its counterpart in the Democratic-led state Senate, holds real sway only two times a year -- when the state's budget is being set and during the legislative softball game.

The game was called off this year amid a tanking economy. But Republican lawmakers were able to flex their muscle in preventing Gov. Schwarzenegger and the Democrats from using higher taxes to help close a $15.2 billion deficit in the current year's budget, which passed in September after a nearly three-month delay. The Republicans have disproportionate power over tax bills, because California is one of a few states requiring that budgets pass by a supermajority.

Gov. Schwarzenegger on Nov. 6 called a special session of the legislature to deal with a new deficit that some experts say could balloon to $24 billion by 2010. Again, the Republican minority stands in the way of increasing taxes to solve the problem. "I tell my members, 'We're the only line holding back taxes,'" Mr. Villines says. "If we fall, the floodgates will open."

California's taxation tussles have been a regular feature for decades. California is inordinately dependent on personal-income taxes, making its revenue highly susceptible to economic swings. In downturns, Democratic lawmakers usually fall on the side of raising taxes to offset deficits, while Republicans push for spending cuts. Most recently, legislators settled on a budget that relied heavily on cuts and accounting moves, including $7 billion in cuts to higher education, social programs and other state services.

But state revenues are falling faster than anyone predicted, forcing lawmakers to revisit the budget quandary months earlier than they normally would have. Gov. Schwarzenegger has generally opposed raising taxes. But like California's Republican governors before him, he has found himself resorting to higher taxes in lean times. In calling the special session, the governor asked the legislature to consider his proposal to raise the state sales tax temporarily to 6.5% from 5%, along with more spending cuts.

Mr. Villines opposes that sales-tax increase or any other tax boost. His reasoning is that higher taxes will weaken the economy further, because people will have less money to spend on goods and other services. The problem, he says, is spending. As an example, he cites the states' public schools, which keep getting more money each year, even as enrollment is declining in K-12 grades. "There is not a revenue problem in California," he says. "There is a spending problem."

Mr. Villines's views are crucial because he has emerged as perhaps the most influential Republican legislator. Unlike his counterpart in the state Senate, who is leaving office at the end of the year due to term limits, Mr. Villines has two more years in office. He also controls a much bigger caucus than the Senate's, and was re-elected minority leader by a unanimous vote. "What keeps us together is the knowledge that, if we are not together, we will not be able to push our agenda," says Roger Niello, a Republican legislator from Sacramento.

Mr. Villines, a 41-year-old former public-relations executive from a conservative Fresno district, can be dramatic about making his opinions known. He strode into a meeting with Gov. Schwarzenegger and other statehouse leaders on Nov. 10 and handed them copies of a book entitled "The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let It Happen."

"We have a lot in common," Gov. Schwarzenegger said of Mr. Villines through a spokesman.

Karen Bass, the Democratic Assembly speaker, said, "He is a very respectful, pleasant man. We disagree, but we are not disagreeable."

Write to Jim Carlton at jim.carlton@wsj.com 

http://online.wsj.com/article_email/SB122714695635043403-lMyQjAxMDI4MjI3MDEyNDA2Wj.html

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