Under the old rules, only jobs that were actually newly created or not lost because of stimulus money were counted. Now the administration plans to count all jobs for projects funded by stimulus money—even if that job already existed and the person was never in danger of losing the job.

The changes were made in a little noticed memo sent to federal agencies by OMB director Peter Orszag, according to a new report from ProPublica.

The OMB says the changes were made to clear up confusion about how to count the jobs. Employers were sometimes confused about how to account for jobs, resulting in inaccurate data. California, for instance, claimed that stimulus spending had saved 18,000 corrections department jobs—when only 5,000 were scheduled to be cut. Under the new system, all of those jobs could be counted as products of the stimulus.

Similarly, pay raises can count as stimulus jobs. Chrysler reported last year that a $53 million government contract to build 3,000 vehicles created no jobs because it used existing workers to fill the order. Under the new accounting, those jobs would count as being created by the stimulus plan.

Obviously, the government favors resolving confusion and ignorance in favor of a plan to make government spending look better. Some economists think the entire process of trying to count jobs saved or created by stimulus spending is ridiculous since we lack the proper methodological controls.

“I just think it’s a silly exercise” counting jobs, Harvard labor economist Lawrence Katz tells ProPublica.

The numbers are inherently inaccurate, he said, because we’ll never know how many jobs would have been created or lost without the stimulus. To do so, we’d need a control group, say giving stimulus money to North Carolina but withholding it from South Carolina.

“Obviously, that’s not something we can do,” Katz said. “We’ve only got one draw of history.”

The new methodology, however, will do more than just make the stimulus program look like it is creating more jobs than it actually is. It will also conceal an important cost of the stimulus—the economic distortion that comes from diverting labor away from projects favored by the market toward projects favored by the government. In the past, the government didn’t get credit for drawing jobs away from market based projects—limiting its incentives to do so. Now that it gets credit for those jobs, the distortive effects are likely to become greater.

The Business Insider
1/11/2010
By John Carney

The Treasury estimated net losses on its $700 billion bailout program at $68.5 billion for the fiscal year ended September 30, 2009.

The December report for the Troubled Asset Relief Program, or TARP, showed that the fiscal 2009 net loss included estimated losses of $30.4 billion for AIG and $30.4 billion for automakers, with $27.1 billion in losses from the Home Affordable Modification Program.

These were much larger than a $15 billion profit registered from the Capital Purchase Program for banks and $4.4 billion in profits from other bank investments, asset guarantee and lending programs.

A senior Treasury official said the bank investments will ultimately produce a positive return for taxpayers. But the department was not yet ready to update its estimate of the final taxpayer costs for the bailouts.

The official said the Treasury would update its cost estimates on a quarterly basis as the bailout program shifts its focus toward small business lending and housing relief in its final 10 months of operation.

The Treasury in November said TARP’s ultimate cost estimate had been reduced to about $141 billion from $341 billion earlier in the year. Further reductions in the final cost estimate could aid the Obama administration as it faces pressure to produce a new budget that starts to show deficit reductions.

1/11/2010

The Indiana Department of Revenue is listing tax-delinquent businesses in an online database in compliance with a new state law. The businesses listed have expired registered retail merchant certificates because they didn’t pay delinquent sales tax debts – meaning they’re operating illegally.

The new law requires the agency to post the names, addresses and county locations of more than 26,000 businesses with merchant certificates that have expired because of tax debts. The database launched Jan. 1.

By midday Tuesday, the online site had collected more than 300,000 visits, accounting for about two-thirds of traffic to the state’s Web site at that time, Indiana Department of Revenue spokeswoman Stephanie McFarland said.

About 25 businesses that learned – either through media coverage or their own searches – that they were in the database already have contacted the agency in hopes of resolving the issue, she said.

The public database is part of an effort to increase the collection of sales taxes. To a cash-challenged state, the $100 million owed by the businesses in the database would make a difference.

Creation of the database was part of the massive budget bill passed in a special legislative session last summer.

McFarland said the amounts owed range from a few hundred dollars to seven figures, some from as far back as 1968.

But it’s impossible to know from looking at the database which businesses are the biggest transgressors because the Department of Revenue by law is prohibited from publicly releasing amounts owed by individual taxpayers.

Indiana’s 7 percent sales tax is considered a “trust tax,” meaning businesses collect it directly from consumers and are expected to pass it on to the state.

“This money doesn’t come from the businesses’ pockets, and it’s not supposed to be used to fund their operations,” Revenue Commissioner John Eckart said in announcing the database. “They are to hold it in escrow, essentially, until it’s due to be paid to the state.”
Who is on the list?

What is apparent in looking at the new database is that some business names stand out for how often they’re listed.

One of them is Rent-a-Center Inc., based in Plano, Texas, which offers furniture, appliances, electronics and computers. Statewide, the rent-to-own company has 47 listings, including three in Allen County.

Rent-a-Center spokesman Xavier Dominicis said the company has some ongoing tax disputes with the state and is in the process of seeking removal from the database. He added that Rent-a-Center files close to 9,000 tax returns in thousands of jurisdictions.

“It’s not like it’s a ‘deadbeat’ issue,” Dominicis said. “There’s an issue where there’s a disagreement.”

If Rent-a-Center’s inclusion is legitimate, as the Department of Revenue says it is, the company isn’t the only one with multiple locations listed in the database.

Fiesta Salons Inc. has more than 90 locations in the state, including 11 in northeast Indiana, where sales taxes are owed, according to the state. A representative from the salon chain could not be reached for comment.

The list also includes many small and apparently home-based businesses, and even several Little League teams, such as the now-defunct Holy Cross Little League of Fort Wayne. A representative of the team could not be reached.
Other reasons

All retail businesses in Indiana must have a valid registered retail merchant certificate on file with the Department of Revenue. Operating without one can subject business owners to a Class B misdemeanor, punishable by a fine and/or jail time, the agency said.

Businesses can land on the database for reasons other than delinquent sales taxes; they might have closed and neglected to inform the agency.

That might explain the inclusion of a dollar theater at 6414 E. State Blvd. that closed about a year ago.

In those cases, the business owner just needs to provide proper documentation in order to be removed from the list, according to the Department of Revenue.

It’s not the first time the department has posted the names of tax scofflaws online. In 2004, another database listed taxpayers with tax warrants worth more than $1,000 that had been outstanding at least two years.

The law that created that database allowed it to be posted only until June 2006, the agency said.

The Journal Gazette
1/10/2010
By Angela Mapes Turner

The House passed the resolution by a vote of 75-23, with 45 of 48 Republicans and 30 of 52 Democrats voting in favor of it.

The Senate, which Republicans control by a 33-17 majority, is expected to give the tax cap resolution final passage, which will make it eligible to be on the November ballot.

House Minority Leader Brian Bosma, R-Indianapolis, said installing the caps in the constitution will make tax bills more predictable and provide permanent tax relief for property owners.

Opponents said the caps, which limit property taxes to 1 percent for homes, 2 percent for farm land and rental properties, and 3 percent for business properties, do not provide significant tax relief for homeowners. They also said the caps will hurt local governments’ financial abilities to deliver public services.

“We’re going to create a lot of problems for ourselves for years to come,” Rep. Scott Pelath, D-Michigan City, told his colleagues on the House floor. “I think there’s good evidence that not only will it not reduce property taxes in the long term, but all those people that are under the caps right now will probably be driven up to them.”

Reps. Ryan Dvorak, D-South Bend, and Craig Fry, D-Mishawaka, were the only other House members from northern Indiana to vote against the resolution.

House Speaker B. Patrick Bauer, D-South Bend, said in a written statement that Indiana residents have to decide if the tax caps “deserve permanent placement in our state’s highest document.”

The General Assembly made the caps law in 2008, but cementing those limits in the constitution will make them more difficult to change.

“Those groups that feel the caps are unfair will have the chance to convince the public that they will harm the ability of local government to provide critical services, such as police and fire protection,” Bauer said.

South Bend Tribune
1/11/2010
By Kevin Allen

CBS investigative correspondent Sharyl Attkisson reports that cameras spotted House Speaker Nancy Pelosi at the summit. She called the shots on who got to go. House Majority Leader Steny Hoyer, and embattled Chairman of the Tax Committee Charles Rangel were also there.

They were joined by 17 colleagues: Democrats: Waxman, Miller, Markey, Gordon, Levin, Blumenauer, DeGette, Inslee, Ryan, Butterfield, Cleaver, Giffords, and Republicans: Barton, Upton, Moore Capito, Sullivan, Blackburn and Sensenbrenner.

That’s not the half of it. But finding out more was a bit like trying to get the keys to Ft. Knox. Many referred us to Speaker Pelosi who wouldn’t agree to an interview. Her office said it “will comply with disclosure requirements” but wouldn’t give us cost estimates or even tell us where they all stayed.

Senator Inhofe (R-OK) is one of the few who provided us any detail. He attended the summit on his own for just a few hours, to give an “opposing view.”

“They’re going because it’s the biggest party of the year,” Sen. Inhofe said. “The worst thing that happened there is they ran out of caviar.”

Our investigation found that the congressional delegation was so large, it needed three military jets: two 737’s and a Gulfstream Five — up to 64 passengers — traveling in luxurious comfort.

Add senators and staff, most of whom flew commercial, and we counted at least 101 Congress-related attendees. All for a summit that failed to deliver a global climate deal.

As a perk, some took spouses, since they could snag an open seat on a military jet or share a room at no extra cost to taxpayers. Rep. Gabrielle Giffords (D-AZ) was there with her husband. Rep. Shelley Moore Capito (R-WV) was also there with her husband. Rep. Ed Markey (D-MA) took his wife, as did Rep. Jim Sensenbrenner (R-WI). Congressman Barton — a climate change skeptic — even brought along his daughter.

Until required filings are made in the coming weeks, we can only figure bits and pieces of the cost to you.

# Three military jets at $9,900 per hour – $168,000 just in flight time.
# Dozens flew commercial at up to $2,000 each.
# 321 hotel nights booked – the bulk at Copenhagen’s five-star Marriott.
# Meals add tens of thousands more.

Steve Ellis of Taxpayers for Common Sense, wasn’t against a U.S. presence. But he said, “Every penny counts. Congress should be shaking the couch cushions looking for change, rather than spending cash for everybody to go to Copenhagen.”

Nobody we asked would defend the super-sized Congressional presence on camera. One Democrat said it showed the world the U.S. is serious about climate change.

And all those attendees who went to the summit rather than hooking up by teleconference? They produced enough climate-stunting carbon dioxide to fill 10,000 Olympic swimming pools.

Which means even if Congress didn’t get a global agreement – they left an indelible footprint all the same.

1/11/2010
By Sharyl Attkisson

State Representative Trent Van Haaften says Hoosiers should oppose the property tax cap. None of the amendments passed. A final vote on the proposal is expected to take place as soon as next week.

WCSI Radio
01/08/2010

“The House and Senate plan to put together the final health care reform bill behind closed doors according to an agreement by top Democrats,” House Speaker Nanci Pelosi said today at the White House.

The White House is on board with that, too, reports CBS News political correspondent Chip Reid. Press Secretary Robert Gibbs stressed today that “the president wants to get a bill to his desk as quickly as possible.”

Special Report: Health Care Reform

During the campaign, though, candidate Obama regularly promised something different – to broadcast all such negotiations on C-SPAN, putting the entire process of pounding out health care reform out in the open. (That promise applied to the now-completed processing of forging House and Senate bills, too.)

Back when Republicans controlled Congress and George W. Bush was in the White House, it was Democrats who angrily complained about secret backroom deals.

Now the roles are reversed.

“The negotiations are obviously being done in secret and the American people really just want to know what they are trying to hide,” said Rep. Tom Price, R-Ga.

Even with no cameras and no Republicans in the room it will be a tall order for the House and Senate to resolve their differences – especially on abortion coverage and how to pay for health reform

Even so, top Democrats in both houses say they hope to have the final bill ready for the president’s signature in time for his State of the Union address – less than four weeks from now.

CBS News
1/05/2010
By Chip Reid

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

‘Officially Recused’

Geithner was “officially recused from matters dealing with specific companies” at the New York Fed after his nomination for Treasury Secretary on Nov. 24, 2008, and “began to insulate himself weeks earlier in anticipation of his nomination,” said Meg Reilly, a Treasury spokeswoman. Geithner, who was tapped by President Barack Obama, took the Treasury job January, 2009. Mark Herr, a spokesman for New York-based AIG, declined to comment.

Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.

The e-mail exchanges between AIG and the New York Fed over the insurer’s disclosure of the transactions show that the regulator pressed the company to keep details out of the public eye. Issa’s comments add to criticism from Republican lawmakers, including Senator Chuck Grassley of Iowa and Representative Roy Blunt of Missouri, who wrote letters in the past two months demanding information from Geithner, 48, about the costs of the AIG bailout.

E-mail ‘Troubling’

Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said the e-mail exchanges were “troubling” and that he supports holding congressional hearings to review them.

AIG’s Dec. 24, 2008, filing was challenged privately by the U.S. Securities and Exchange Commission, which polices the adequacy of disclosures by publicly traded firms. The agency said in a letter to then-CEO Edward Liddy six days later that AIG should provide a Schedule A, which lists collateral postings for the swaps and names the bank counterparties that purchased them from the company. The Schedule A was disclosed about five months later in a filing.

Securities Lawyers

“Our position has always been that if AIG’s securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do,” Thomas Baxter, general counsel for the New York Fed, said in a statement. He said it was appropriate for the New York Fed, as party to deals outlined in the filings, “to provide comments on a number of issues, including disclosures, with the understanding that the final decision rested with AIG’s securities counsel.”

Kathleen Shannon, an AIG deputy general counsel, wrote to the insurer’s executives in a March 12, 2009, e-mail about the conflicting demands from the New York Fed and SEC.

“In order to make only the disclosure that the Fed wants us to make,” Shannon wrote, “we need to have a reasonable basis for believing and arguing to the SEC that the information we are seeking to protect is not already publicly available.”

Deutsche Bank

Under pressure from lawmakers, AIG disclosed the names of the counterparties, which included Deutsche Bank AG and Merrill Lynch & Co., on March 15. The disclosure said AIG made more than $27 billion in payments without identifying the securities tied to the swaps or listing the value of individual purchases by each bank, details the Fed wanted to keep out, according to the March 12 e-mail from AIG’s Shannon.

Earlier that month, Fed Vice Chairman Donald Kohn testified to Congress that disclosure of the counterparties would harm AIG’s ability to do business. The insurer agreed to turn over a stake of almost 80 percent in connection to its bailout.

The e-mails span five months starting in November 2008 and include requests from the New York Fed to withhold documents and delay disclosures. The correspondence includes e-mails between AIG’s Shannon and attorneys at the New York Fed and its law firm, Davis Polk & Wardwell LLP. Tom Orewyler, a spokesman for Davis Polk in New York, declined to comment as did Shannon.

According to Shannon’s e-mails obtained by Issa, the New York Fed suggested that AIG refrain in a filing from mentioning so-called synthetic collateralized debt obligations, which bundled derivative contracts rather than actual loans.

‘No Mention of the Synthetics’

The filing “reflects your client’s desire that there be no mention of the synthetics in connection with this transaction,” Shannon wrote to Davis Polk on Dec. 2, 2008. “They will not be mentioned at all.”

AIG had about $9.8 billion of swaps protecting the synthetic holdings as of September 2008, the company said on Dec. 10, 2008. Goldman Sachs said in a press release last month that it was among banks that had losses on synthetic CDOs.

As part of a bailout that swelled to $182.3 billion, AIG and the Fed created Maiden Lane III, a taxpayer-funded facility designed to remove mortgage-linked swaps from the insurer’s books. Shannon told the New York Fed on Nov. 24, 2008, that AIG executives wanted to publicly disclose details about Maiden Lane the next day.

“Do you think it might be feasible to hold off on the Maiden Lane III 8K and press release until next week?” Brett Phillips, a New York Fed lawyer wrote in an e-mail that day. “The thinking is that the Maiden Lane III closing will be a less transparent event, and it might be better to narrow the gap between AIG’s announcement and the New York Fed’s publication of term sheet summaries.”

‘Guided By Your Counsel’

“Given the significance of the transaction, AIG would be best served by filing tomorrow,” Shannon wrote. “We will of course be guided by your counsel.” The document outlining the Maiden Lane agreement was posted on Dec. 2, 2008.

In at least one instance, AIG pushed for documents to be disclosed and then released the information.

“We believe that the agreements listed in the index (i.e., the Master Investment and Credit Agreement and the Shortfall Agreement) do not need to be filed,” Peter Bazos, a Davis Polk lawyer wrote on Nov. 25, 2008. “Please let us know your thoughts in this regard.”

AIG’s Shannon replied that “the better practice and better disclosure in this complex area is to file the agreements currently rather than to delay.” The agreements were included in the Dec. 2 filing.

More details of the negotiations over swaps payments emerged in November 2009 when Neil Barofsky, the special inspector in charge of policing the Troubled Asset Relief Program, assessed the Fed’s role in the bailout.

‘Entitled to Know’

“Federal Reserve officials provided AIG’s counterparties with tens of billions of dollars they likely would have not otherwise received,” Barofsky wrote in a Nov. 17 report. “The default position, whenever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with government funds.”

The New York Fed may eventually recoup its loan to Maiden Lane III, the vehicle that obtained CDOs from the banks after paying to cancel the swaps, Barofsky wrote. According to a New York Fed report, the value of securities and cash held in Maiden Lane III climbed 4.5 percent to $23.5 billion in the three months ended Sept. 30.

AIG’s first rescue was an $85 billion credit line from the New York Fed in September 2008. The bailout was expanded three times and is valued at $182.3 billion. That includes a $60 billion Fed credit line, an investment of as much as $69.8 billion from the Treasury and up to $52.5 billion for Maiden Lane facilities to buy mortgage-linked assets owned or backed by the company.

By Hugh Son

The built-in “marriage penalty” in both House and Senate healthcare bills has received scant attention. But for scores of low-income and middle-income couples, it could mean a hike of $2,000 or more in annual insurance premiums the moment they say “I do.”

The disparity comes about in part because subsidies for purchasing health insurance under the plan from congressional Democrats are pegged to federal poverty guidelines. That has the effect of limiting subsidies for married couples with a combined income, compared to if the individuals are single.

People who get their health insurance through an employer wouldn’t be affected. Only people that buy subsidized insurance through new exchanges set up by the legislation stand to be impacted. About 17 million people would receive such subsidies in 2016 under the House plan, the Congressional Budget Office estimates.

The bills cap the annual amount people making less than 400% of the federal poverty level must pay for health insurance premiums, ranging from 1.5% of income for the poorest to 11% at the top end, under the House plan.

For an unmarried couple with income of $25,000 each, combined premiums would be capped at $3,076 per year, under the House bill. If the couple gets married, with a combined income of $50,000, their annual premium cap jumps to $5,160 — a “penalty” of $2,084. Those figures were included in a memo prepared by House Republican staff.

The disparity is slightly smaller in the Senate version of health-care legislation, chiefly because premium subsidies in the House bill are more targeted towards low-wage earners.

Under the Senate bill, a couple with $50,000 combined income would pay $3,450 in annual premiums if unmarried, and $5,100 if married — a difference of $1,650.

Republicans say the effect on married couples whose combined income makes them ineligible for subsidies is even greater — up to $5,000 or more — but that is more difficult to measure because it includes assumptions about the price of insurance policies.

Democratic staff who helped to write the bill confirmed the existence of the penalty, but said it cannot be remedied without creating other inequities.

For instance, they said making the subsidies neutral towards marriage would lead to a married couple with only one bread-winner getting a more generous subsidy than a single parent at the same income-level.

“The Finance Committee, along with other committees in the Senate, took pains to craft the most equitable overall structure possible, and that’s what we have here,” said a Democratic Senate Finance Committee aide.

If the bill passes in its current form, it would be far from the first example of federal and social benefits creating incentives to remain single. Under current law, marriage can have a negative impact on a person’s ability to claim the earned income tax credit and welfare benefits including food stamps.

In any progressive system of taxes or benefits, there are trade-offs between how well-targeted a subsidy is and how equitable it is, said Stacy Dickert-Conlin, an economics professor at Michigan State University.

“You might like to have it be progressive, equitable and marriage-neutral. But you have to decide what your goals are, because you can’t accomplish all three,” she said.

The marriage penalty in the health bill has not been a major focus of attack by Republican opponents of the bill, who are focusing on larger themes such as new taxes in the bill and growth in government spending.

But it has caught the attention of some conservative groups, who claim that the prospect of reduced subsidies will dissuade people from tying the knot.

“This seems to not only penalize the married, but also those who would have the most to gain from marriage — the poor,” said Jenny Tyree, an analyst at the Colorado-based Focus on the Family.

Ms. Dickert-Conlin said that isn’t borne out by research in the area.

“Most of the literature says that people do not make decisions about whether or not to get married based on” government benefits, she said.

“You might see bigger effects on the timing — someone choosing to get married in January, instead of December,” she said.

The Wall Street Journal
1/06/2010
By Martin Vaughan

He also laid out ambitious reforms for the final year of his term — almost certain to include months of budget battle.

Schwarzenegger on Friday will present his plan to close a budget hole that reflects the problems of the boom and bust California economy. The U.S. economic engine faces deteriorating finances as it tries to balance its budget and preserve social safety nets in tough times.

The outgoing Republican governor, stopped by term limits from seeking reelection in November, called for tax reform, protection for higher education spending — and more money from the federal government.

“We no longer can ignore what is owed to us, or what we are forced to spend on federal mandates,” Schwarzenegger told the combined state Assembly and Senate, which must support any budget plan by a two-thirds majority — a bar that has forced months of acrimonious debate in previous years.

Democratic State Controller John Chiang said lawmakers have little time to lose if California’s government is to avoid the same kind of cash shortages that last year forced it to hand out IOUs to pay its bills.

“They’re certainly a year older and I hope a year wiser,” Chiang told Reuters.

State Treasurer Bill Lockyer, also a Democrat, described Schwarzenegger’s speech as “essentially the same” as other set pieces by the governor — middle of the road and long on optimism, such as the promise to safeguard education.

“It’s a little hard to square with the fiscal realities,” he said, adding that others had tried for years to claw back money from the federal government and the governor might rely too much on such help in the budget plan he releases this week.

Meanwhile, the state needs to sell bonds in coming months to avoid shutting down infrastructure projects, Lockyer said.

Schwarzenegger put the budget hole at $19.9 billion over 18 months, about a billion less than a recent report from the state’s budget watchdog. He blamed the federal government for possible increases because of new healthcare costs.

A new national healthcare policy would be a ‘disaster’ for California, he said.

Schwarzenegger called for overhauls including changing the state’s tax and pension systems and allowing for private prisons, red flags to powerful unions and their allies.

Schwarzenegger’s jobs plan is part of a five-point package that also includes tax credits for first-time home buyers and lower sales taxes for green technology, and measures to limit lawsuits against businesses and make it harder for environmental regulations to block big construction projects.

The unemployment rate in California, which ranks as the world’s eighth-largest economy, currently hovers above 12 percent, significantly above the national average.

BATTLE LINES BEFORE BUDGET

Republicans and Democrats began establishing battle lines immediately after the speech.

Republican lawmakers cheered Schwarzenegger’s call for pension reform and private prisons to cut the state costs. “We don’t have a choice … The budgetary problems are so severe,” said Republican Assemblyman Roger Niello.

“Taxes are not option this time,” Niello added, noting that he agrees with Schwarzenegger that California’s tax system must be changed so it has a broader base for revenues from personal income taxes, the state’s main source of revenue.

Alberto Torrico, the Assembly’s Democrat majority leader, said overhauling California pensions with a two benefit tiers for existing employees and retirees and future ones as Schwarzenegger proposes was not viable.

“A two-tier system where you have haves and have-nots is not going to work,” said Torrico, who also was bracing for a fight over the spending plan.

“It’s going to be an ugly budget,” he said.

Reuters
1/06/2010