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PRESS RELEASE FROM AMERICANS FOR TAX REFORM
Contact: John Kartch ( jkartch@atr.org or 202-785-0266)

09/23/02

Gray Davis v. California Business: Round Two
Facing massive budget deficits, California Gov. signs short-sighted paid family leave law.

WASHINGTON - California just temporarily resolved its two-month long budget shortfall standoff, using tax increases and accounting tricks to close a $26 billion deficit for this year. Similar deficits are projected for future years, and all parties acknowledge that spending restraint is the only viable long-term solution. Yet, instead of addressing spending, Governor Gray Davis just signed into law new regulations that will drain both public and private budgets alike.

The bill, SB 1661, will provide six weeks of paid leave to 13 million of California's 16 million workers in the event of childbirth or a sick family member. The program will be run from the state disability insurance fund, and will be funded by a payroll "contribution" (i.e. tax) on all California workers.

"California, once the Mecca of entrepreneurship and venture investment, is suddenly leading the race to become the nation's least-friendly state to business and employment," said taxpayer advocate Grover Norquist, who heads Americans for Tax Reform (ATR) in Washington. "Make no mistake: They may look nice on paper, but these new regulations will increase employment costs for businesses, encourage further expansions of paid leave, and will ultimately bankrupt California's disability insurance system. All these costs will fall on California's taxpayers, who will foot the bill for a bail-out of the system."

State officials claim the average amount assessed to each worker will be $26 per year, to fund a program that will pay up to $728 per week to each recipient. As this benefit becomes available, more and more people will opt to take paid leave, overburdening the whole system and sending it to likely insolvency.

Additionally, such benefit expansions often lay the groundwork for future expansions. Unpaid family and medical leave was passed nationwide under President Clinton in 1993, with exemptions for small business. Since then, attempts have been made to provide paid leave, and apply it to small businesses as well. The same is likely for California.

"California is already in a fiscal mess because of Gray Davis' profligate spending and mismanagement," continued Norquist. "Now he has placed a ticking time bomb in the state budget for future administrations to deal with."

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Americans for Tax Reform is a non-partisan coalition of taxpayers and taxpayer groups who oppose any and all federal and state tax increases.  For more information, or to arrange an interview with Mr. Norquist please contact John Kartch at (202)785-0266 or by email at jkartch@atr.org.