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California passes tax measure, Governor Brown says

By Jim Christie

SAN FRANCISCO (Reuters) - California Governor Jerry Brown declared victory for his tax measure to protect school spending, saying the state had defeated cynics who believe government could do no good.

Brown's Proposition 30 led 52 percent to 48 percent with 66 percent of precincts reporting, according to California's Secretary of State.

"We have a vote of the people, I think the only place in America where a state actually said 'Let's raise our taxes for our kids, for our schools, for our California dream,'" Brown said at a rally in the state capital of Sacramento late on Tuesday night. "I want to thank you for helping me get it."

Polls leading up to Election Day had shown support for the measure slipping to just under 50 percent. The 74-year-old Democrat, who campaigned for office in 2010 vowing to tackle the state government's messy finances, began campaigning aggressively in the last few weeks of the campaign.

Proposition 30 will raise the state sales tax by a quarter-cent for four years and increase income tax rates for individuals who earn more than $250,000 a year for seven years.

Brown, a fixture of California politics, and fellow Democrats who control the legislature opted to put the tax measure to voters after failing to win support from Republican lawmakers for tax increases.

They also passed a budget which depended on passage of Proposition 30. Failure would have triggered $6 billion in cuts aimed mainly at education spending, including $5.4 billion in cuts to schools and community colleges.

The prospect of spending cuts to education programs, including to California's two university systems, likely weighed heavily on voters, said Steven Frates, director of research at Pepperdine University's Davenport Institute: "The tactic of saying schools would be hit was clearly a factor."

Despite California's persistent budget problems - answered by state leaders mainly with deep spending cuts - its voters have been reluctant to endorse tax increases.

Brown had to chip away at their historic resistance while beating back a rival tax measure, Proposition 38, that stole some votes by promising new revenue for schools.

"It drained off supporters and confused people," said Larry Gerston, a political scientist at San Jose State University.

But Proposition 38 never caught on with voters, who rejected it 73 percent to 27 percent, with about half votes counted.

Labor, with Brown's help, also defeated Proposition 32, which would have stopped unions from using automatically deducted dues for political purposes, after an expensive campaign. Prop 32 supporters collected $60.5 million while unions and allies gathered $75.1 million to stop it.

The campaign for Brown's Proposition 30 raised more than $69 million, and faced a $53 million 'no' campaign.

A third tax measure whose campaign was largely funded by billionaire hedge fund manager Tom Steyer posted an easy victory.

Proposition 39 would change how out-of-state corporations calculate their California tax liability to raise about $1 billion a year. Half the of the revenue would be slated for alternative energy and energy projects for five years.

(Reporting By Jim Christie, editing by Peter Henderson and Claudia Parsons)

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