Democratic leaders emerged Friday from a nearly three-hour meeting with Gov. Arnold Schwarzenegger claiming they are "very close" to a deal they believe could resolve almost half of California's gaping budget deficit.
"The areas of negotiations have significantly narrowed, and on those issues we're very close," said Senate President Pro Tem Darrell Steinberg, D-Sacramento.
Steinberg and Assembly Speaker Karen Bass, D-Los Angeles, talked via videophone to Schwarzenegger, who is vacationing in Idaho. Talks will continue over the weekend, with leaders hoping lawmakers can be called back to Sacramento by the end of next week to approve a final deal.
Schwarzenegger spokesman Aaron McLear said Democrats are "moving closer" to the governor's demands for deeper spending cuts and an economic stimulus package. "But we don't have any agreements," McLear said.
Democrats maneuvered past legislative Republicans last week in approving $18 billion in spending reductions and tax increases on a simple majority vote. The GOP has resisted tax hikes and claims that the Democratic plan illegally raised taxes without a two-thirds vote. Republicans have vowed to sue if Schwarzenegger goes along with the package.
Schwarzenegger's Department of Finance has estimated the budget deficit between now and June 30, 2010, at about $40 billion. Even if the Republican governor and Democrats agree on an $18 billion midyear package of solutions that survives legal challenge, they will need to dig even deeper to make the books balance. The governor by Jan. 9 is expected to release his proposals to close the entire gap.
Schwarzenegger balked at the Democratic plan and said he would veto it without additional measures to stimulate the state's economy. The ensuing talks have pitted Schwarzenegger and business interests who support him against Democrats and their constituencies in organized labor and pro-environment groups.
The governor wants a broader exemption from the state's environmental laws for highway projects and more flexibility to use private contractors and investors on public projects. He also wants deeper cuts to welfare grants and in-home supportive service payments, and elimination of two state holidays and overtime pay on holidays for state workers.
Bass said Democrats are trying to meet the governor's desire to stimulate private investment in public projects without hurting public employees by shifting their jobs to contractors.
The Democrats believe changes to state employee pay must be hashed out at the bargaining table between unions and the administration. "There's no question that state workers know that they're going to be part of the solution as well, but we also think it's very important to respect their ability to have a say in how that is done," Steinberg said.
Steinberg on Friday said he, Bass and Schwarzenegger also are reviewing the tax increase part of the plan, but continue to operate under the premise that raising taxes is politically possible only with a majority vote.
"It's the only game in town," Steinberg said.
Call Bee Capitol Bureau Chief Dan Smith, (916) 321-5249.
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