In an era of term limits, Senate President Pro Tem Darrell Steinberg is now the veteran budget negotiator among the four legislative leaders. Besides the concerns of the Senate Democratic caucus he leads, Steinberg must also consider impacts on state workers who live in his district.

The Sacramento Democrat spoke with three reporters on a variety of issues last week after touring a middle school and job-training facility in North Sacramento.

What follows is part of the conversation on pensions and the Democratic proposal to raise income and vehicle taxes in exchange for decreasing sales taxes.

>Gov. Arnold Schwarzenegger says pension changes must be part of any budget he signs. You say you want him to negotiate with unions. Do you consider pension changes off the table until the unions finish negotiating?

I do think they should be bargained first. Neither (Assembly Speaker John A. Pérez) nor I have drawn any lines in the sand when it comes to a whole variety of reform ideas, but I do think they should be bargained first. The governor and the remaining unions, SEIU, have certainly been at the table now for a number of weeks. … And I don't hear anybody saying, "Absolutely no," to what the governor has asked in those areas. So finish the contracts, and if they include pension reform, we'll ratify the contracts.

>Can you respond to the Legislative Analyst's Office conclusion that your plan increases middle-class taxes?

We disagree. No. 1, we ask a different question from what the LAO asked. The LAO asks, will taxes be lower after next year's 1-cent tax cut goes into effect as a result of our plan? I ask a different question. If you compare what people are paying today, and we implement our tax reform proposal, will people across income levels pay lower taxes? And we believe the answer is yes. …

We stand by our concept. And we're ready to engage in all of the tweaking and amending and changing that is necessary to make it go from, you know, a very solid, credible proposal to one that members are ready to vote for.

>By making that argument, are you saying the current higher level of taxation is more appropriate for the state than the lower level of taxation scheduled for next July?

Yes, I am saying that. … If we're going to have an argument, let's look at what people are paying right now and let's see how this will change.

>But the other side would say that voters last May said they did not want to extend the current higher level of taxes beyond next year by rejecting Proposition 1A.

Then that gets to a different argument, because I don't think voters rejected 1A because of the taxes. The Democratic constituencies opposed it because it had a rainy-day fund and what they considered a spending cap.

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