California Republicans draw line on taxes

SAN FRANCISCO (Reuters) - While measures that would raise taxes to help fill California's $24.3 billion budget gap may pass the state legislature's budget conference committee, they will be dead on arrival with Republicans in the full legislature, a top GOP lawmaker said on Tuesday.

The warning came on the heels of Standard & Poor's placing $67.1 billion worth of California's debt on alert for a possible ratings cut because the state may run out of cash by the end of July.

The conference committee will accomplish little by passing tax proposals because the legislature's Republican minority is of one mind with Republican Gov. Arnold Schwarzenegger that only deep spending cuts can balance the state's books, said state Senate Republican Leader Dennis Hollingsworth.

"We have to cut to bring spending in line with revenues," said Hollingsworth, who recently rose to his leadership position because his predecessor angered fellow Republicans by backing tax increases earlier this year to help balance the state's books.

Those increases, along with spending cuts, failed to keep the state's budget in balance because California's revenues fell more than expected as recession tightened its grip on the state's economy and propelled its unemployment rate into double-digits.

Schwarzenegger has proposed a plan to balance the state's books for its fiscal year starting in July with sharply reduced spending and by eliminating a number of programs that Democrats who control the state legislature are rallying to defend.

They are mulling a number of tax proposals to limit spending cuts, but Republican lawmakers will not go along with them and will block spending plans on the state Senate and Assembly floors that include tax increases, Hollingsworth said.

Republican opposition to tax increases is "non-negotiable," Hollingsworth told Reuters in a telephone interview.

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Republicans have enough votes to prevent Democrats from passing budgets on their own, making them pivotal players in developing budget negotiations.

Republicans on the budget conference committee warned Democrat colleagues on Monday that the nips and tucks to spending they plan for a variety of program would be of little value in tackling the state's massive budget gap.

"This meeting is not headed in that direction," Republican Assemblyman Roger Niello said.

Democrats should heed the warning, Hollingsworth said, noting that Republicans, including Schwarzenegger, are unified against taxes in contrast to earlier this year.

"If you talk to any members of our caucus, including the three who voted for tax increases in February, you'll find they're opposed to any new taxes," said Hollingsworth.

Opposition stiffened after last month's defeat of budget-related ballot measures. One would have extended recent tax increases.

The Obama administration may also be emboldening California's Republicans. The White House on Tuesday dashed hopes the U.S. government would help ease California's budget crisis, saying the state will have to solve its shortfall on its own.

"We'll continue to monitor the challenges that they have, but this budgetary problem unfortunately is one that they're going to have to solve," White House spokesman Robert Gibbs told a briefing.

Hollingsworth expected that kind of response: "If I were a taxpayer in another state I wouldn't want to see my tax dollars going to fuel California's fiscal irresponsibility."

(Additional reporting by David Alexander and Lisa Lambert in Washington)