DEMOCRATS HOPE ARNOLD MAY RAISE TAXES.

Byline: David M. Drucker  Sacramento Bureau

SACRAMENTO - Some Democrats have temporarily abandoned a long-standing demand for higher taxes as part of a state budget solution, waiting to see if Gov. Arnold Schwarzenegger backs off his no-taxes pledge.

They believe there is a chance Schwarzenegger might eventually prefer to raise taxes - and will get fellow Republicans to go along with that - rather than cut spending on health and welfare services as he proposed in January to close a projected $17 billion deficit.

The administration dismissed any speculation Monday that he might cave in.

``The governor continues to be fundamentally opposed to tax increases,'' said H.D. Palmer, a spokesman for Schwarzenegger's finance department.

``Raising taxes doesn't address the fundamental issue: California has been spending money at an unsustainable rate, and we need to bring that spending in line with revenues.''

Regarding the governor, Assembly Majority Whip Lloyd Levine, D-Van Nuys, speculated, ``What he's coming to realize is what a lot of these programs that he wants to cut actually do and what they mean to people. And, he's having to adjust his thinking based on that.''

The Legislature will soon begin hearings to uncover the inefficiency Schwarzenegger has said plagues many taxpayer-funded programs. And Democrats who run the committees say they will see what they uncover before proposing a tax increase.

Despite Schwarzenegger's recall campaign promise to clamp down on spending and not raise taxes except in an emergency, Democrats say he is shaping up as a moderate Republican who might break that resolution.

As evidence, they point to his bipartisan deal-making that put Propositions 57 and 58 on the ballot and the bipartisan campaign he led to win voters' approval of both measures last Tuesday.

His bipartisan approach to governing, combined with his high job-approval rating, has led some Democrats to believe he possesses the political clout to convince Republicans to support tax increases - if he chooses to use it.

``If we can follow the negotiating model that led to Props 57 and 58, we'll all do well in the budget,'' said Assembly Budget Committee Chairman Darrell Steinberg, D-Sacramento.

Propositions 57 and 58, the $15 billion deficit-financing bond and constitutional spending limit that comprised Schwarzenegger's recovery plan, passed with overwhelming voter support. But they were on the ballot partly because the governor in December compromised with Democrats on the final form of Proposition 58.

Some Republican legislators question whether the Democratic-led hearings will put all spending-reduction options on the table. GOP lawmakers also wonder if Democrats are making this move to shed the image of being tax raisers - especially if they think Schwarzenegger might relieve them of that burden.

David M. Drucker, [phone]

david.drucker(at)dailybulletin.com