Controller John Chiang has blocked pay for lawmakers, putting state budget negotiations into uncharted territory and upping the pressure on legislative leaders to strike a deal.

Chiang rejected his own party's spending plan as insufficient to satisfy a voter-approved law requiring timely budgets.

In doing so, the Democratic controller exercised unprecedented authority Tuesday, establishing a new role for his office under propositions 25 and 58 to determine whether a legislative budget is balanced.

"I think it was pretty clear ... that (voters) wanted a balanced budget," Chiang said Tuesday in an interview.

With a $9.6 billion deficit still lingering, lawmakers greeted the decision with everything from anger to nonchalance.

Assemblyman Mike Gatto, D-Los Angeles, had one of the most fervent responses, saying in a statement that Chiang "just wants to sit there and beat up on the unpopular kids."

"I now have to explain to my wife and daughter that we won't be able to pay the bills because a politician chose to grandstand at our expense," Gatto said. "California has officially degenerated into a Banana Republic, with one branch of government withholding the pay of another."

Under Chiang's decision, lawmakers are losing a combined $48,603.50 each day – which totaled $340,224 over the course of the last week.

For most lawmakers, it represents about $260 per day in salary and $142 in tax-free travel and living expenses.

Several Republicans took pleasure in noting that legislative Democrats spearheaded last year's fight for Proposition 25, which not only included the pay provision but reduced the budget-vote threshold from two-thirds to a majority.

And the four Senate Republicans targeted by Brown for a budget vote appear to have ample resources to survive a pay drought, according to statements of economic interest they filed for calendar year 2010:

• Sen. Tom Berryhill, R-Oakdale, listed income of "over $100,000," the highest category available, in each of four separate businesses, including three farming operations.

• Sen. Anthony Cannella, R-Ceres, showed income of more than $100,000 in salary from a Modesto civil engineering firm.

• Sen. Tom Harman, R-Huntington Beach, showed income of between $10,000 and $100,000 in each of two real estate trusts.

• Sen. Bill Emmerson, R-Hemet, an orthodontist, disclosed stock holdings in 35 companies, most valued between $10,000 and $100,000. He valued his Exxon-Mobil Corp. holdings between $100,000 and $1 million.

Still, Berryhill said, "I think this is going to put pressure on all of us to get something done."

The controller's office determined the Democratic budget spent $89.75 billion but provided only $87.9 billion in revenue, leaving a $1.85 billion imbalance. Chiang predicated his decision largely on finding that Democrats underfunded schools by $1.3 billion.

"It doesn't solve the problem, but it lights a fire under the legislators," said Jack Pitney, a professor of government at Claremont McKenna College. "They're going to act with more dispatch than they would otherwise."

Brown, after meeting with Assembly Democrats for more than two hours, said that he would be "sharing some very specific ideas tomorrow with both chambers."

Asked if that would be an alternative budget, he said, "There will be several alternatives that I will present."

Brown last week laid the pay decision at Chiang's feet, but he likely forced the pay issue with his swift veto and language attacking the Democratic plan's credibility.

The Democratic governor is still vying for the required two GOP votes in each house to temporarily extend taxes on sales and vehicles and call a fall election on taxes, long-term changes to pensions and state spending. Brown has nine days left in the fiscal year.

It has been a week since Democratic lawmakers sent a majority-vote budget to Brown that they believe met the constitutional deadline and should have maintained their paychecks.

Lawmakers approved more than $14 billion in cuts, fund shifts and borrowing in March, concentrating reductions in higher education and the state safety net. An influx of higher revenues also helped reduce the once-$26.6 billion state deficit this spring.

But the state still faced a $9.6 billion gap as of May. Brown wanted to bridge that difference with a tax election, as well as extensions in sales and vehicle taxes until voters could decide.

When the governor was unable to secure the necessary GOP votes for the tax extensions before the June 15 deadline, Democratic lawmakers cobbled together an alternative plan that relied heavily on questionable maneuvers.

Despite his ruling, Chiang ignored some dubious items in the Democratic budget. He said he did not have authority to rule on a $1.2 billion sale of state buildings, a $1 billion taking of First 5 funds or a complicated quarter-cent local sales tax hike worth $900 million, all of which are under litigation or risk legal action.

Chiang acknowledged that lawmakers could get paid if they kept those maneuvers but corrected seven other items that drew lesser criticism until Tuesday.

"We didn't look at the efficacy and honesty of those budget proposals; we did the math," Chiang said. "I don't get to address the honesty of the budget solutions."

Chiang said Democrats funded K-12 schools and community colleges with $1.3 billion less than they are owed under Proposition 98, another voter-approved budget law prescribing how much the state must spend on education. Chiang also determined the Democratic budget would not achieve $163 million in purported education savings.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, called the decision "a terrible precedent."

Though politically popular, Steinberg said, "handing any part of the executive branch the power to determine whether or not a budget is of sufficient quality to warrant the legislative branch getting paid is a dangerous precedent."

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Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548. Bee Capitol Bureau Chief Dan Smith, Paresh Dave, David Siders and Jim Sanders contributed to this report.

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