The Legislature adjourned the Eighth Extraordinary Session last week. The remaining legislation on the Governor’s desk (AB X8 6 and AB X8 9) contains the transportation tax swap package. The Governor has sent a letter to legislative leaders expressing his plan to veto the measures as the special session expires this evening. Could there be a record-breaking ninth extraordinary session coming our way? Copy of letter below:

March 15, 2010

Dear Senator Steinberg, Senator Hollingsworth, Speaker Pérez and Mr. Garrick,

Thank you for talking with me today about the urgent need for legislative action on our projected $20 billion budget deficit and California’s 12.5 percent unemployment rate. As I mentioned when we spoke, it has been nine weeks since I called a special session of the Legislature and, while the Legislature has sent bills to my desk that address $200 million of the shortfall, that amount represents merely 1 percent of the projected deficit. California is still spending approximately $600 million more per month than we have in revenue. The two-month delay in dealing with the budget shortfall will require up to $2.2 billion in deeper spending cuts. In addition, the legislature has failed to take meaningful steps to stimulate job creation. Californians don’t have months to wait for action by the Legislature.

I asked you to exchange the sales tax for an excise tax on gasoline in a way that lowered costs for consumers by $1 billion and preserved General Fund dollars to avoid major cuts to vital programs. Instead you are sending me a bill that provides no tax relief to consumers at the pump and raises taxes on commuter rail services. I cannot sign this flawed legislation as written.

I asked you to send me legislation that protects homeowners from being taxed on “short sales” when they are forced to sell their home for less than they owe on their mortgage. Instead you are sending me a bill that uses these homeowners as leverage to increase tax penalties for businesses. Send me a clean bill that protects homeowners from this tax immediately, and I will sign it.

I asked you to send me a bill that prevents California from being the only state in the country trying to tax billions of dollars in federal stimulus funding for renewable development. Without this federal tax conformity, billions of dollars and thousands of jobs slated to start this year will be lost. Instead, you are tying this simple tax conformity bill to the same increase in penalties holding up tax relief for homeowners. Send me a clean bill that exempts federal stimulus dollars from being taxed, and I will sign it.

I asked for bills that we know will stimulate the economy and job creation:

• Extension of the very successful $10,000 tax credit for first-time homebuyers purchasing new homes. California is ground zero for the housing meltdown, and our economic recovery is greatly impacted by construction and sales supporting the housing industry. Build and sell more houses and put Californians back to work. More home sales equal more jobs and more tax revenues – it is that simple. We need this tax credit passed and signed into law in time for the spring and summer home-buying season. • Exempting the purchase of “clean tech” manufacturing equipment from state sales taxes. California has done a great job of attracting clean tech businesses to want to locate here. But we are at a serious disadvantage in landing those deals because we are one of the only states that applies sales tax to the purchase of manufacturing equipment. Companies right now are waiting to decide whether to locate in California based upon whether this bill reaches my desk. Time is short, and we cannot afford to give jobs away to Arizona, Washington or any other state. This program will pay for itself several times over with the benefits of hundreds – even thousands – of new jobs created here instead of other states. • A $3,000 hiring tax credit. My legislation would pay $3,000 per worker for new hires this year. That equals almost half the cost of the payroll tax for a year. Companies that are just starting to recover enough to begin hiring again need this extra help to add new employees sooner rather than later. My bill will borrow excess funds from the State Disability Insurance fund for this program and for training or retraining employees as well, again giving struggling employers a little help if they hire now.

As I have said to each of you, I am more than willing to consider job creation bills from either side of the aisle. It has been my hope that leaders of both parties would sit down and strategize on how to move these job creation bills quickly. I believe you are committed to getting the job done and I am pleased that you have shared with me your willingness to work together this week towards that end. Californians cannot wait any longer, and I urge you to take action on these bills this week.

Sincerely,

Arnold Schwarzenegger