Here we are, once again, in an extended California State budget battle. The down economy has left the state with lot's of tough choices to make. The problem is, tough choices are not made well by groups.

Enter the leader. Arnold Schwarzenegger has proposed a few compromises to the state representatives in order to end the stalemate. He has proposed a boost to the state's sales tax of 1%, and he suggests building a "rainy day" fund into the budget that will require the state to save when money is flush to prepare for down economic years--like this one.

Sounds reasonable. Gives both the Republicans and the Democrats something. However, California politics are rarely reasonable. While the Republicans would love to set up a funding mechanism requiring California to be fiscally responsible and save, they are standing firm against raising any taxes, even one cent to the sales tax. Democrats wouldn't mind raising taxes to pay for the vital services the state provides, but politically, they disdain adopting a proposal from a Republican governor, and will probably not approve of the budget in it's entirety.

Why not increase the sales tax by one cent? Republicans do not want to set the precedent that if money is short, the state can just charge more to it's people. They worry the high sales tax will drive customers to Nevada, Arizona, or Oregon, which will result in business relocation. Many people also believe that if taxes are increased, rather than shoring up the budget to pay for already funded allocations, the extra funds will be used to pay for new initiatives. Hence, Schwarzenegger's rainy day fund.

Meanwhile, the Dems may be most afraid that the rainy day fund will limit their ability to use for funds for necessary social programs. Certainly, they are concerned by any cuts to the budget for education, welfare, or health programs. (Schwarzenegger has actually increased his suggested allocation to education, now funding to the Prop 98 required level.)

Maybe the budget can be fixed more. Schwarzeneggar's proposal, although it may not be fully adopted, looks like it takes an important step towards resolving the problem.

For more information on the latest proposal from the Governor, see http://gov.ca.gov/index.php?/fact-sheet/10443/.