from Kevin J Pedrotti, Legislative Advocate for the Golden State Builders Exchanges
Budget Fixes Sent to Governor
California’s mid-year budget drama finally wrapped this week, as the legislature and Governor reached a deal that allowed for the passage of a controversial gas tax swap in exchange for two “jobs” tax credit bills aimed at homebuyers and “green” technology manufacturing.
The Democrat crafted gas tax swap, as was reported on a couple of weeks back, is similar in nature to the one proposed by the Governor in his January budget proposal however the current version provides for ongoing funding for transit programs and does not allow for a 5 cent reduction in cost at the pump for consumers. Democrats did include a fix to the proposal this week that would continue the state’s exemption of off-road diesel fuels. All-told, the proposal is scheduled to save the state $1.1 billion.
The “jobs” package agreed on this week consisted of two proposals. They are:
• Homebuyer Tax Credit: First time homebuyers may take a tax credit up to $10k for the purchase of existing homes and other qualified homebuyers to purchase new homes. The credit begins May 1 and provides a $200 million pool of money to be split between first-time homebuyers and buyers of new homes. To utilize the credit, homes must be purchased or in contract before December 31 of this year.
• Green Technology Manufacturing Exemption: Allows “green” technology manufacturing companies to apply to the State Treasurer for an exemption of sales tax on purchases of manufacturing equipment to be used in the manufacturing process in California. The exemption applies to equipment for alternative transportation technologies (electric vehicles, high-speed rail) as well as for companies working on renewable energy and other clean technology projects. The credit was passed with a 2/3rds urgency clause, meaning it may take effect immediately. The credit sunsets in 2020.
As part of the compromise, the legislature also passed yesterday a cash resources bill that allows the legislature to identify “future cuts” in the 2010-11 budget, thus freeing up resources for the current year. The Governor had vetoed a similar measure two weeks ago.
With the Governor’s signature of these and previous measures related to the mid-term budget, the state has now solved roughly $5 billion of California’s projected $20 billion deficit. If revenues continue to come in above estimates and additional federal dollars and assistance continue to find their way into the state’s coffers, it is possible California’s deficit could be cut in half (~$10 billion) heading in to the 2010-11 summer budget series.
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