California compromise: the wrenching effort to forge a budget deal put a spotlight on the political impasse at the statehouse.

• Author: Weintraub, Daniel

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After years of bitter partisan battles over taxes, spending and the condition of the state's finances, the California Legislature in February adopted a compromise plan aimed at eliminating most of a $42 billion gap between revenues and expenditures through June 2010.

The plan was supported unanimously by Democrats and by just enough Republicans--three in each house--to attain the two-thirds majorities needed to enact a budget in California. Republican Governor Arnold Schwarzenegger, who had been calling for such a grand compromise since last summer, signed the plan into law after rejecting nearly $1 billion in spending with his line-item veto.

California's experience is important on several fronts. It shows that bipartisan agreements are possible even in the most polarized political environment. It demonstrates that determined lawmakers can set aside ideology and parochial interests and cast tough votes, in some cases putting their careers in jeopardy. But it also shows just how difficult all of that can be amidst what may be the deepest recession since the Great Depression.

Although the budget approved in February was officially early--it covered the remainder of this fiscal year and all of the next--it felt very late to many Californians, because the state has been grappling with budget shortfalls for most of this decade.

The plan includes about $12.5 billion in new taxes, $15 billion in spending cuts and $5 billion in borrowing. It was linked to the federal stimulus plan and to a series of ballot measures that voters will weigh in a special election.

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"Californians got a chance to see a Legislature that put the state's interest ahead of the interest of any individual," Senate President Pro Tern Darrell Steinberg told reporters after the vote. "If we can solve a $42 billion budget deficit, we can solve anything in this state."

TAX HIKES, DEEP CUTS

The package increases a variety of taxes. It hikes income tax rates, already the highest in the nation, by 0.25 percent. It lowers an income tax credit for children and dependents from $300 to $100. It raises the sales tax by 1 cent on the dollar, putting it close to 10 percent in some counties. And it nearly doubles the state's car tax, from 0.65 percent of the value of a vehicle to 1.15 percent, adding about $100 a year to the cost of registering a $20,000 car.

The car tax increase was especially telling because that levy was the emotional...