Capitol Alert

California's pot smokers -- at least some of them -- don't understand why Gov. Arnold Schwarzenegger can't put down his stogie and work with lawmakers to solve the budget crisis by taxing the state's most maligned cash crop.

The Marijuana Policy Project is running television commercials, "featuring an actual California marijuana consumer," to urge the governor and the Legislature to tax and regulate pot.

The speaker in the commercial is Nadine Herndon, 58, of Fair Oaks. She is a retired policy analyst for the state of California.

Here's her argument -- in the ad -- for why pot should be the sweet elixir to the state budget woes:

"Sacramento says huge cuts to schools, health care and police are inevitable due to California's budget crisis. Even our state parts could be closed. But the governor and legislature are ignoring millions of Californians who want to pay taxes.

"We're marijuana consumers. Instead of being treated like criminals for using a substance safer than alcohol, we want to pay our fair share. Taxes from California's marijuana industry could pay the salaries of 20,000 teachers. Isn't it time?"

Bruce Mirken, director of communications for the Marijuana Policy Project, complained in an e-mail today that too many California television stations -- including four in L.A. that flatly turned it down -- fear the pot ad is too smoking hot to run.

But Mirken said the spot is airing on KXTV News 10 and KOVR TV-13 in Sacramento, on KRON and KPIX in San Francisco and will run, beginning Saturday on KCBS in Los Angeles. It is also running on cable stations, on CNN, Headline News, MSNBC and CNBC, in Santa Barbara, San Diego, Bakersfield, Monterey, Fresno, Palm Springs and Palm Desert.

As purple populism goes, it wasn't much of a showing.

But two dozen protesters, egged on by the California Republican Party, radio personality Mark Williams and anti-tax crusader Lew Uhler, dressed themselves in purple T-shirts to march on the Capitol and offices of Assembly Speaker Karen Bass and Senate Pro Tem Darrell Steinberg.

Their message: They're fed up with the political clout of the purple-shirt wearing Service Employees International Union members and Democrats who are demanding new taxes to help alleviate California's budget crisis.

The SEIU, with 700,000 members in California, including in-home health care workers and others who stand to lose under proposed state budget cuts, has bankrolled a television advertising blitz on the budget. The union calls for a mix of new taxes and spending cuts to protect social services.

The GOP protesters charged that Democrats in the Legislature are under the political spell of the powerful union that frequently turns out hundreds of demonstrators in purple SEIU colors.

"They only listen to purple shirts," said Williams, accompanied by protesters in purple tees reading, "Will you listen now?"

"I even brought a bottle of pomegranate juice," he added. "Maybe they'll listen to me."

Or maybe not.

Asked to respond to the purple protest, Jim Zamora, spokesman for SEIU Local 1000, declined.

"We're not going to comment," Zamora said. "We're not listening to them."

California's share of the nation's publicly traded corporations, as determined by their market value, peaked a decade ago and has been sliding sharply in recent years, according to a new study by the Pacific Research Institute.

PRI, a conservative think tank based in San Francisco, created a California Enterprise Value Index, using data from Standard & Poor's, and found that even when the economy was hoping in 2006-07, California's business growth lagged that of the nation as a whole and since then, business value has dropped faster.

"The index is a barometer of the relative underperformance or overperformance of California's economy as a result of public policies and other factors," said Lawrence J. McQuillan, director of business and economic studies at PRI, adding that it reflects relative capital-debt inflows to the state, and the willingness of companies to have headquarters in California rather than other states.

"We created the index to help business leaders and lawmakers better understand California's current economic climate -- in particular, we hope that it would serve as a wake-up call to lawmakers," McQuillan added. "California has been steadily falling behind in economic performance relative to other states and sound policies are needed to bring a vibrant business climate back to the state."

The study found that in 1963, the typical California public company enterprise value (EV) was nearly 34 percent greater than the typical EV in America, but today, the typical California EV is nearly 30 percent less than America's typical EV. California's median EV has fallen $43.5 million in just the past two years.

The full PRI report is available here.

The California Redevelopment Association, which beat back one attempt by the governor and the Legislature to tap city redevelopment funds to balance the state budget, says a new and even bigger tax grab may be in the offing.

Earlier this year, Gov. Arnold Schwarzenegger and legislators agreed to indirectly shift $350 million in local redevelopment funds -- tax money collected on property in redevelopment projects -- into the state treasury.

The California Redevelopment Association challenged that shift and won a favorable court decision, but the most recent legislative versions of the budget retake the $350 million for multiple years, with a technical change that state officials say would make it legal.

The association, in an e-mail today to its members, warns that as Schwarzenegger and lawmakers struggle to close the budget deficit, a much bigger shift of redevelopment funds may be in the offiing.

"At this writing," the warning said, "the situation remains fluid in the state Capitol as state legislators and the governor look for anything to close the state's $26.3 billion budget deficit. (The figure may go higher.) The elements of a compromise keep changing, but the one constant in the proposals being advanced by Democrats is a taking of redevelopment funds. In the last week, the amount has varied from $700 million to $1.35 billion this year!

"As usual, bill language is not available to review, but as best we can determine, the latest proposal is an unprecedented $1.35 billion ... transfer for FY 2009-10 with payments due on May 10, 2010."

State officials justify the shift, whatever amount it may be, by the interaction of redevelopment law and Proposition 98, the state's school finance law. The former allows cities to retain incremental taxes generated by redevelopment projects while the latter requires the state to compensate schools for any shortfalls in local property taxes. That means, state officials say, that the state bduget must give schools an additional $2 billion each year because cities are keeping redevelopment property taxes.

By forcing redevelopment agencies to transfer some of their property taxes to schools, the state then is able to reduce its aid to schools by the same amount through a device known as the Educational Revenue Augmentation Fund.

Redevelopment agencies are vowing to renew their legal challenge to any shift, regardless of the amount.

Meg Whitman's gubernatorial campaign has chosen Sarah Pompei, a former deputy communications director for the California Republican Party, as its new press secretary.

Pompei most recently was the press secretary for Nebraska Sen. Mike Johanns and communications director for his senatorial campaign. She previously worked as deputy press secretary for presidential candidate Mitt Romney. A native of Santa Monica, she is a graduate of UC Berkeley.

"Sarah has top-notch campaign experience in some of the most competitive races in the country," said Whitman's communications director Tucker Bounds.

"Our campaign couldn't ask for a more effective communicator to have on board," he added.

Media Matters for America, a liberal news media watchdog, is castigating MSNBC for interviewing former Congressman Tom Campbell about California's budget crisis without identifying him as a Republican.

"During a discussion about the California budget crisis on the July 8 edition of MSNBC's Morning Meeting, host Dylan Ratigan interviewed former Rep. Tom Campbell (R-CA), but at no point disclosed that Campbell is a Republican," Media Matters said in a report. "Ratigan introduced Campbell as "a former California state budget director" and 'currently an economics and law professor at Chapman University,' and also stated that Campbell has 'the best budget familiarity.' During the segment, on-screen text also stated that Campbell is 'considering running for governor of California;' indeed, Campbell is currently seeking the Republican gubernatorial nomination."

Media Matters describes itself as an organization aimed at rooting out conservative bias in the media. Its full report on the Campbell interview is accessible here.

Texas may be replacing California as a national model of economic growth and governance, a new article in the British magazine The Economist suggests. But, the article says, both states could learn from the successes and failures of the other.

"The truth is that both states could learn from each other," the article concludes. "Texas still lacks California's great universities and lags in terms of culture. California could adopt not just Texas's leaner state, but also its more bipartisan approach to politics and its more welcoming attitude towards Mexico.

"There is no perfect model of government: it is America's genius to have 50 public-policy laboratories competing to find out what works best--just as it is the relentless competition of clever new firms from Portland to Pittsburgh that will pull the country out of its current gloom. But, to give Texas some credit and serve as a warning to Mr. Schwarzenegger's heir, at this moment America's two most futuristic states look a lot more like equals than ever before."

The full article is available here.

Slapping Gov. Arnold Schwarzenegger, the California Teachers Association launched a million-dollar television advertising campaign today to fight the governor's proposal to suspend Proposition 98 in solving the state's fiscal mess.

The 30-second spot, to be aired statewide, accuses Schwarzenegger of reneging on a 2004 deal in which education groups agreed to suspend the school-funding initiative temporarily.

The ad begins with a televised image of Schwarzenegger and a narrator saying, "We'll never forget."

"He said he was sorry," the ad says. "He said never again. But since then, $12 billion more in education cuts. And now Schwarzenegger says he'll break the minimum guarantee to our schools again. Summer schools, already canceled. Class sizes, on the rise. Art and music, eliminated. Tell the governor, 'We haven't forgotten. Protect our schools and put our kids first.'"

The TV spot is running on broadcast and cable channels in all major media markets -- Los Angeles, San Francisco, San Diego, Sacramento and Fresno, said Becky Zoglman, CTA spokeswoman.

Aaron McLear, Schwarzenegger spokesman, said the governor does not base public policy on TV advertising.

"Regardless of how many ads are run against the governor, he is standing strong for a balanced budget that makes the necessary cuts to live within our means," McLear said.

Schwarzenegger's office is seeking suspension of Proposition 98 this year to help close a $26.3 billion budget hole that is growing by about $25 million per day. The move would lower by $1.4 billion the base from which future school funding is calculated.

Under state law, suspension requires the funding base to be restored eventually, but school groups worry that billions could be lost before the state economy improves and restoration occurred.

School funding is an obvious target in solving a massive shortfall because elementary schools, middle schools, high schools and community colleges consume about 40 percent of general fund revenue.

Camille Anderson, a spokeswoman for Schwarzenegger, said that the governor is willing to consider any alternative budget cuts proposed by the Legislature that would eliminate the need to suspend Proposition 98.

Senate President Pro Tem Darrell Steinberg said Wednesday that budget talks have stalled this week because legislative leaders are waiting on Gov. Arnold Schwarzenegger's Department of Finance to resolve questions about the state's education funding requirement.

While much attention focused on Assembly Speaker Karen Bass' abrupt exit Monday from Big 5 talks, Steinberg said leaders were instead waiting on the governor.

Senate Republicans and Schwarzenegger blocked a stopgap $3.3 billion education cut last month, changing the budget picture overnight after June 30. On July 1, Schwarzenegger said because the cut was no longer available as an option, the budget deficit had grown to $26.3 billion, and he asked lawmakers to suspend the state's Proposition 98 guarantee for schools by $3 billion. The latter move is politically difficult in light of California's powerful education groups.

"The administration is essentially preparing another July Revise, a second July revise," Steinberg said. "... A week later, they are still trying to figure out the impact on Prop. 98 and on education. I can only speak for myself, I'm ready to get down there and engage in a hard but fruitful negotiation around the remaining issues, but we can't do it until the administration tells us their version of the budget."

Department of Finance Director Mike Genest said Wednesday that his office was standing by its $26.3 billion deficit estimate from July 1. He said he has no plans to issue another budget proposal.

Schwarzenegger spokesman Aaron McLear said of Steinberg's comment, "This is simply another excuse for the Legislature's unwillingness to make the necessary cuts to balance our budget."

The Department of Finance did present legislative aides Wednesday with two new school funding scenarios that take into account lower tax revenues for June. Genest said, however, that the two scenarios do not change the overall $26.3 billion deficit estimate, nor do they change the slate of budget solutions the governor has proposed. Under each scenario, the state would still have to suspend Proposition 98. The main 2009-10 budget difference, he said, is that it would lower the reserve from $1.1 billion to $600 million.

That leaves three different education scenarios -- the July 1 budget proposal the governor issued, as well as two new ones based on lower June revenue assumptions. One of the new scenarios takes into account a legal interpretation by the nonpartisan Legislative Analyst's Office that the state can actually reassign 2008-09 K-14 education spending after the fiscal year closed, while the other new scenario ignores that interpretation.

In all three scenarios, the state would pay schools the same General Fund amount in 2009-10: $34.5 billion. That is the lowest the state can pay schools without violating the federal stimulus act.

Finance spokesman H.D. Palmer said the department presented the scenarios "without prejudice."

The biggest difference between the governor's July 1 proposal and the two new scenarios is that the new scenarios eliminate a $10 billion multi-year payment the state would owe to schools. School groups believe that money is owed to them, regardless of the state's Proposition 98 interpretation, but the Department of Finance has drawn up scenarios in which that would not be the case.

Assembly Speaker Karen Bass, D-Los Angeles, said her aides are analyzing Finance's numbers. Recently, she has cited a $22 billion deficit figure -- $4 billion less than Schwarzenegger and his Department of Finance use. Bass said she got the number from Legislative Analyst Mac Taylor on Monday, but she warned that it is subject to change.

Another day dawns in California without a balanced budget. And the sun sets in the west.

The Assembly Judiciary Committee is considering something this morning you don't see every day: a bill that even trial lawyers can love.

Senate Bill 367, by Democratic Sen. Gloria Negrete McLeod and Republican Sen. Tom Harman, would make clear that businesses offering discounts to furloughed employees of either public or private employers are not violating the state's Unruh Civil Rights Act.

It seems a San Diego attorney had cited the statute to threaten discrimination lawsuits against businesses cutting prices for furloughed state workers.

The bill has the Consumer Attorneys of California behind it. It also draws nods from the California Chamber of Commerce and the California Retailers.

For more details, check out Jon Ortiz's report on Sacbee.com.

The Assembly Judiciary Committee is also scheduled to hear Senate Bill 54 by Democratic Sen. Mark Leno, who says his measure would clarify state law regarding same-sex couples who have married -- or plan to do so -- outside California.

Tonight, family and friends of two American journalists -- Sacramento native Laura Ling and Euna Lee hold a vigil on the Capitol's west steps.

Ling and Lee were sentenced last month in North Korea to 12 years of so-called labor reform.

The two were on assignment for cable television network Current TV when they were detained March 17. They were later convicted of illegal entry and engaging in "hostile acts."

Leading the vigil is Ling's sister Lisa Ling, who reported on Sacramento's homeless population last spring for "The Oprah Winfrey Show."

Other vigils take place in San Francisco, Phoenix, Washington and Paris. Read more about the vigils -- and about the two journalists -- here.

GOV2010: San Francisco Mayor Gavin Newsom addresses the Pacific Palisades Democratic Club tonight at the Santa Monica Unitarian Church, while former U.S. Rep. Tom Campbell talks to the Association for Corporate Growth at the Fremont Hills Country Club in Los Altos.

FUNDRAISER: Jim Beall for Assembly 2010 and Jim Beall for Senate 2012 host an 8 a.m. breakfast at the Pyramid Alehouse in Sacramento. Tickets, $1,000.

Folsom attorney Andrew Pugno, who parlayed his activism for California's gay marriage ban into a run for the Assembly, is picking up some fast cash for his efforts.

Pugno's campaign has announced he has taken in $250,000 in donations between June 8, when he began raising money, and the June 30 campaign reporting deadline. But $100,000 of the total was money Pugno donated himself.

He is seeking the 5th Assembly District seat that will be vacated when Republican Roger Niello is termed out next year.

Kamala Harris set off her campaign for attorney general last year with a certain up-and-comer buzz in Democratic Party circles.

Barack Obama summoned Harris as his stand-in at the state Democratic convention. She made his California campaign pitch to delegates to counter a fellow named Bill Clinton, who was there raising the roof on behalf of candidate Hillary Clinton.

But what Harris didn't have was money. At the end of last year, the San Francisco District Attorney had but $117,000 in her attorney general's campaign account. That was well short of the $700,000 and $650,000, respectively, that Assemblyman Ted Lieu, D-Torrance, and Assembly Majority leader Alberto Torrico, D-Newark, had hoarded in legislative accounts for potential A.G. runs.

Neither Torrico nor Lieu has released his latest fundraising totals, but Harris appears to have significantly outstripped them in the race for cash since the first of the year.

Today team Harris announced she has raked in $1.2 million in donations between the start of the year and the June 30 quarterly filing deadline.

Harris got the maximum $6,500 donation from fellow Obama campaign alum Kevin Johnson, who happens to be the mayor of Sacramento, and also took in the max from Esprit Clothing co-founder Susie Tompkins Buell, the former presidential fundraising rainmaker for Hillary Clinton.

Harris is also drawing key support from the entertainment community, including donations from Oscar-winner actor Sean Pean of "Milk," television star Eric Dane of "Grey's Anatomy," Warner Brothers executive producer Charles Lorre, former Paramount Pictures CEO Sherry Lansing and Jo Schuman, producer of the musical revue, "Beach Blanket Babylon."

Torrico, meanwhile, is drawing strong support from Indian tribes and police and firefighter unions. Since January, he received $6,500 each from the Viejas tribal government, the Lytton Rancheria and the Paskenta Band of Nomaki Indians, plus $6,500 each from the San Jose Police Officers PAC, the Deputy Sheriffs Association of Alameda County and Fremont Professional Firefighters PAC, as well as $5,800 from the California Professional Firefighters Association.

Lieu has taken in max donations from the Pechanga Band of Mission Indians and the Asian Americans for Good Government PAC. He is also drawing significant contributions from health industry interests, including the Emergency Medical PAC of the American College of Emergency Physicians, Anthem Blue Cross and Central Health MSO Inc.

Former Los Angeles City Attorney Rocky Delgadillo, who raised $5 million in an unsuccessful primary run against Jerry Brown in 2006, also hasn't released fundraising totals for the 2010 race. But state records show Delgadillo took in $373,000 in contributions of $5,000 or more since January, including $6,500 each from the Pala Band of Mission Indians and the Paskenta tribe and a max donation from homebuilder Eli Broad.

With budget talks breaking down this week and the big June 30 marker having come and gone, the question on a lot of minds is where the next pressure points lie.

Mike Zapler at the Mercury News laid out scenarios today, and there wasn't a lot of good news for anyone hoping for a quick resolution.

Some thought that the next pressure point would be this Friday, the final date banks said they would accept IOUs as cash for customers. But there hasn't been a flurry of talks this week, and Assembly Speaker Karen Bass walked away from negotiations as a form of protest against the governor's position. So it doesn't appear that Friday looms very large as a deadline.

Department of Finance Director Mike Genest said last week the state would lose an opportunity to retroactively cut $1 billion in CSU and UC for 2008-09 after July, making July 31 another potential pressure point.

The Fitch Ratings downgrade release on Monday laid out a long summer scenario, noting that the state can get by on IOUs through September. That means California will have enough cash to make its constitutionally-required priority payments while satisfying its non-priority demands with IOUs. If legislative leaders don't feel like the world will collapse with the current IOU scenario, it could become a typical budget year in which negotiations drag on for weeks.

Dan Schnur, director of the Unruh Institute of Politics at the University of Southern California, said the Capitol atmosphere doesn't feel as desperate as it did when the state last issued IOUs in 1992. At that time, Schnur was working for former Gov. Pete Wilson.

"Back in my day, when the state issued IOUs in the early '90s, it rained hell down on the state Capitol," he said. "There was nonstop media coverage and public outcry which resulted in significant pressure for the relevant players to get back to work. In the absence of that same attention, the negotiators don't feel the same pressure."

There is at least one notable difference between then and now -- California paid state employees then with IOUs, a practice that courts have since banned.

Schnur said he also thought that major news events overtook budget coverage in the last month. Pop singer Michael Jackson died June 25. Republican vice presidential candidate Sarah Palin announced she would step down as Alaska governor on July 3.

"Compared to Michael Jackson and Sarah Palin, the state paying its bills with IOUs just isn't that exciting," he said. "On one hand, it's a little too facile (a point), but on the other hand, there really was a lot more competition for news and media coverage."

Of course, the state lasted two months with IOUs in 1992, and we're still only a week into them this year.

Schnur also noted that after lawmakers nearly reached a deal in the run-up to June 30, it was natural this week for negotiators to retrench and take a step back.

Former Schwarzenegger communications director Rob Stutzman said he thought the impasse would continue for a while. Schwarzenegger seems resolute in his demand for permanent changes, and "at this point, he'd be crazy not to be. He'd look bad by not signing those bills at the end of the fiscal year unless he gets a grander deal in the end."

For now, leaders are meeting sporadically, and Schwarzenegger and Bass are battling for media attention. Bass on Monday skipped Big 5 but held a well-attended press conference to bash the governor's stance on budget talks, while her office produced a video attacking Schwarzenegger and her spokeswoman sent a memo suggesting the governor's press secretary made sexist criticisms.

Schwarzenegger held a press conference Monday to promote his changes to In-Home Supportive Services and held a similar event Wednesday to talk about reducing welfare rolls.

J.F.K. had the space race. Today, San Francisco Mayor and wannabe governor Gavin Newsom is hyping the "Great Electrical Vehicle Race."

In a speech for Gas 2.0 media, a blogosphere outfit promoting alternative fuel technologies, Newsom pitched a plan to make his city the nation's "epicenter" for electric cars.

More Rex Babin cartoons

Tired of IOUs, a budget mess without resolution, 'Big 5' meetings the Assembly speaker can no longer stand and a new state bond rating that can barely get you sprung from jail?

At least we know that some lawmakers have other pressing interests to tend to today.

The Senate Local Government Committee will take up Assembly Bill 307 by Paul Cook, R-Yucca Valley. The bill will make it a misdemeanor offense for any registered sex offender whose victim was under 16 years of age to go to work in an ice cream truck.

In the Assembly, the appropriations committee will address the issue of cross-border used tire trafficking. It will hear Senate Bill 167 by Denise Ducheny, D-San Diego. The bill would update the California Tire Recycling Act to "require a five year plan to include...the development of projects...in the California-Mexico border region, including education, infrastructure, mitigation, clean-up, prevention, reuse, and recycling projects that will address the movement of used tires from California to Mexico that are eventually disposed of in California."

And once they lay all that rubber to an environmentally sustainable rest, maybe they can get back to the budget.

To that end, the governor at noon will roll out Health and Human Services Secretary Kim Belshe and Department of Social Services Director John Wagner to pitch Schwarzenegger's plan for overhauling the state's welfare program.

That should move things along.

California Highway Patrol officers cited fifteen protesters, most of them in wheelchairs, for blocking the hallway outside Gov. Arnold Schwarzenegger's Capitol office Tuesday in protest of proposed cuts to health and social service programs.

The demonstrators were cited for trespassing and failure to disperse after they refused to leave when the building closed about 6:45 p.m. They were allowed to leave the Capitol without being taken to jail.

The protest, called People's Day of Reckoning, began about 1 p.m. Organizers said the event drew about 120 people at its height, but had dwindled to about 30 people before the arrests were made.

California Highway Patrol Capt. Bob Ghiglieri said the demonstration was peaceful, public safety was not endangered.

The protest was organized by a coalition that included various Independent Living Centers, disability-rights groups, health-care advocates, in-home support service providers, and the state council of Service Employees International Union, which represents health care workers. Bail for those arrested will be paid by SEIU, Local 6434, said organizer Evan LeVang.

"Without this service," I'd be in a nursing home or an institution," Nick Feldman, a wheelchair-bound, 33-year-old Berkeley resident said of in-home support services for frail Californians that are targeted for budget cuts.

Some demonstrators carried signs with slogans such as "No More Cuts" and "Tax Big Oil." Nearly 20 of the protesters parked their wheelchairs in a giant semicircle to help block the first-floor hallway.

The protesters' wrath was aimed largely at Schwarzenegger, who has opposed increasing taxes and has proposed deeper cuts to the state's safety net than Democrats have supported thus far.

The governor's office offered to meet with representatives of the group, but organizers demanded to speak to the governor.

"We've become accustomed to organized protests for tax increases, which is exactly what this is," said Aaron McLear, Schwarzenegger's spokesman. "The governor understands how difficult these cuts are, but he simply will not accept a further increase in taxes."

Several Democratic legislators addressed the protesters, including Sen. Gil Cedillo, Los Angeles; and Assembly members Noreen Evans, Santa Rosa; John Perez, Los Angeles; Nancy Skinner, Berkeley; Manuel Perez, Coachella; and Jim Beall, San Jose.

"God be with you," Skinner told the group.

"Continue fighting the good fight - and know that you have friends in the state Legislature," Manuel Perez added.

The Franchise Tax Board announced today it will accept state IOUs for payment of state personal income tax and corporate tax bills.

Because the warrants are not redeemable until Oct. 2, the FTB will not cash them immediately, but will consider the tax liability paid when the IOU is submitted.

Lawmakers, meanwhile, are considering an urgency bill to allow registered warrants to be used for any state obligation. Current law allows taxpayers to use IOUs for tax liabilities.

Republican Alan Nakanishi, who served in the state Assembly for three terms, has officially declared his candidacy for the state Board of Equalization next year, seeking to succeed termed-out incumbent Bill Leonard.

Former Assemblywoman Barbara Alby and Sen. George Runner, R-Lancaster, also will seek the GOP nomination.

There are only four elected members fo the board, which oversees sales and property taxes, and the 2nd District Nakanishi wants to represent spreads over an immense swath of inland California from San Bernardino County on the south to Siskiyou County on the north. It has virtually equal Democratic and Republican voter registration but is generally considered to be one of two Republican seats on the board.

Nakanishi was a Lodi city councilman before being elected to the Assembly in 2002. "The current budget problems demonstrate the continued need for strong pro-taxpayer elected officials at every level of government," said Nakanishi. "The Board of Equalization should provide California taxpayers a fair and impartial venue in which to seek relief from unfair government taxation. I am running for Board of Equalization to fight on behalf of taxpayers and bring balance to our tax system."

The California budget follies will get an activist dose of fatalism today.

Organizations representing health and social service recipients and providers will rally at 11:45 a.m. under the Capitol Rotunda. The organizers' not-so-understated press release for the event bills it as the "People's Day of Reckoning: The State Budget is Killing Me!"

They assert that Gov. Arnold Schwarzenegger's "cuts-only budget will cause unprecedented and unnecessary human suffering."

Superintendent of Public Instruction Jack O'Connell and Proposition 98 author John Mockler plan a joint press appearance to explain why suspending the school spending guarantee is a bad idea.

There is that small matter about California paying its bills without any cash on hand.

Last week, state Controller John Chiang sponsored successful legislation that he said could save the state tens of millions of dollars on its new IOUs. Today, GOP Assemblyman Joel Anderson of Alpine will push legislation to require the state to accept the registered warrants as payment for payroll taxes, motor vehicle fees or anything else owed the state.

The Assembly Committee on Higher Education will hold a hearing on a bill by Alberto Torrico, D-Newark, to impose a 9.9 percent oil and gas severance tax and direct proceeds to the California Higher Education Fund.

Meanwhile, the Assembly Committee on Local Government will take up a bill by Sen. Lois Wolk, D-Davis, to give California counties the chance to take in more money for bureaucratic processing by raising paperwork costs or copying fees for everything from tax liens to court papers.

As lawmakers grapple to elevate California's fiscal health from grave to guarded, the Assembly Health Committee will take up a critical matter of pomegranate juice - and whether it's properly labeled.

The New York Times Magazine took a tour of the left coast, including a conversational jaunt with Gov. Arnold Schwarzenegger and some rhetorical tanning time with likely gubernatorial contenders Jerry Brown, Gavin Newsom, Meg Whitman, Steve Poizner and Tom Campbell.

The magazine's July 5 story, featuring Newsom as the cover boy with the text, "The Gavinator?!?!, asks in its headline: "Who can possibly govern California?"

In the lengthy piece, writer Mark Leibovich offers some pointed observations on the present governor and his potential replacements.

On Schwarzenegger:

- Schwarzenegger reclined deeply in his chair, lighted an eight-inch cigar and declared himself "perfectly fine," despite the fiscal debacle and personal heartsickness all around him. "Someone else might walk out of here every day depressed, but I don't walk out of here depressed," Schwarzenegger said. Whatever happens, "I will sit down in my Jacuzzi tonight," he said. "I'm going to lay back with a stogie."

On Brown:

- An unlikely grown-up in the field, Jerry Brown recently dubbed himself the Apostle of Common Sense...Brown credited Schwarzenegger with "making the job of governor bigger"...I asked Brown if he added size to the governor's office during his two terms..."I don't know he said. I added some...dimension to the job." "Dementia," (wife) Anne (Gust) said, laughing. "No, dimension," Jerry clarified.

On Newsom:

- There is indeed about Newsom something of that quintessential California type, the overgrown and hyperactive child. Immensely gifted but flawed, he is a jumble of self-regard, self-confidence and self-immolation - potential greatness and a potential train wreck in the same metrosexual package."

On Whitman:

- Whitman is probably the early leader in the "Why this Place is Such a Mess" campaign. The state is "bleeding jobs," she says. It is "effectively bankrupt."...Whitman's campaign message is "A New California." ("Thank God for West Virginia and Mississippi" didn't test well, apparently.)

On Poizner:

- Poizner faces many obstacles. For starters, he is the state's insurance commissioner, which is hardly an electoral launching pad. He also looks like a state insurance commissioner (bookish, with a beakish nose) and is little known, and his name sounds like "poison."

On Campbell:

- Of the three Republicans, Campbell is by far the most socially liberal - he calls himself libertarian - and the only one who opposed Proposition 8. His positioning on social and fiscal issues probably aligns him most closely with many of the potential voters and donors from Silicon Valley whom Whitman and Poizner are competing for.

If anyone takes seriously the internal campaign memos being circulated by the gubernatorial teams for Republicans Meg Whitman and Steve Poizner, they might conclude that neither of these Silicon Valley titans has a chance of victory.

At least, that is the point that each side is trying to drive home about the other.

According to a memo today by Whitman campaign consultants Henry Gomez and Jeff Randle, Poizner is simply going nowhere in this race.

"There are several early indications that Steve Poizner's candidacy is not viable," the team Whitman memo reads. "In a span of a single-campaign reporting period, Steve Poizner, the race's early entrant, has gone from being the whispered frontrunner to a candidate who is struggling to keep valuable endorsements, articulate a message and raise the resources necessary to compete."

On June 30, Poizner's campaign manager Jim Bognet sent his team a missive that declared that "Whitman's campaign clearly lacks confidence in its candidate.

"Her handlers go to great lengths to shield her from press interviews," Bognet writes. "...If a candidate can't handle some basic questions from the Bakersfield Californian, then they are going to have a very tough time going toe-to-toe with Jerry Brown. It's just that simple."

A safe bet is that each camp is firing up the already converted and mapping out a political business plan for would-be donors and new recruits.

In Whitman's case, her team touts her contributions haul of $6.5 million (on top of $4 million from her own checkbook), support of big name pols from former Gov. Pete Wilson to former GOP nominee John McCain and backing of prominent fundraisers from John Chambers of Cisco Systems to Carol Bartz of Yahoo.

Team Poizner touts a "grass roots strategy" with support from nine former California Republican Party chairmen and members of local party committees "who influence the outcome of Republican primaries." Poizner, who has pumped $4.2 million of his own money into his campaign, has also raised another $1.2 million.

Despite each camp's claims that its rival is drowning politically, there will be millions of reasons - er, dollars - to ensure that each will be more than buoyant for considerable time to come.

Assembly Speaker Karen Bass boycotted this morning's Big 5 meeting because she said Gov. Arnold Schwarzenegger is pushing items "unrelated" to the budget and that negotiations should focus on solving the $26.3 billion deficit.

The Republican governor and legislative leaders are still discussing various permanent changes to state health and welfare programs that would tighten eligibility and Schwarzenegger believes would combat waste and fraud.

Democrats and labor unions insist that the governor is overstating the extent to which the state can save money from such changes, such as fingerprinting In-Home Supportive Services recipients and providers. But Schwarzenegger believes that such changes can bring in real cash, as much as $400 million to $500 million in IHSS alone -- and $2 billion in 2009-10 for all of his various changes to state programs.

Bass boycotted this morning's meeting on grounds that Schwarzenegger is demanding these changes in exchange for agreeing to fewer cuts. She said these reforms are "unrelated" to the $26.3 billion deficit and that leaders should instead work on other solutions that would bridge that gap, with a promise to consider the permanent program reforms later. She also warned she may not attend the afternoon Big 5 meeting.

"I don't believe any of the reforms he's talking about could even be instituted that quickly," she said.

Bass also said Schwarzenegger has demanded a "long shopping list" of 15-16 reform proposals unrelated to the budget, but Schwarzenegger spokesman Aaron McLear said that the governor has made his ideas public and that the changes would result in a direct budgetary savings.

Bass said one of the new ideas was to create a "massive new computer system" to manage the state's public assistance programs. Schwarzenegger has proposed consolidating enrollment information for the state's welfare-to-work, Food Stamp and Medi-Cal recipients, according to a white paper his office released last week.

Democratic Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Senate Republican Leader Dennis Hollingsworth, R-Murrieta, had a more positive spin on the morning's Big 5 negotiations. Steinberg said "we're trying to work through the various issues, and it's difficult obviously because the economy and the situation is so difficult." Hollingsworth said, "I think there's progress slowly being made."

But Bass said she believes talks have gotten worse, not better. And she publicly blasted the governor for comments he made in Sunday's New York Times Magazine, in which he said he explained why he doesn't go home depressed by budget woes.

"Someone else might walk out of here every day depressed, but I don't walk out of here depressed," Schwarzenegger told the Times. Whatever happens, "I will sit down in my Jacuzzi tonight," he said. "I'm going to lay back with a stogie."

"He said he's happy to just go home and sit in his Jacuzzi every night," Bass said Monday. "I'm very, very concerned about this. He doesn't seem to be concerned that people are getting IOUs, and all he has to do is go out and blame the Legislature."

The governor responded that he comes from a sports background, where he learned that he "can sometimes tune out (pain) through meditation or other forms, so you can go and have a few hours of relaxation," he said. "But at the same time, I have to say I've had a lot of sleepless nights about our budget and about what that means when we cut certain programs, and about the people behind the dollar figures when we make those cuts."

Schwarzenegger seems to be rethinking his proposal to suspend Proposition 98's guarantee for education funding, mentioning today that budget aides are researching whether $3 billion suspension is viable.

"We are right now having that discussion because that's a very, very complicated issue," Schwarzenegger said. "There are very, very few people that know what happens. Do we need to suspend it, can we do it without suspension, what does that mean with the kind of revenues we anticipate? So I think the four legislative leaders and their staff, including our staff ... everyone is working on this and trying to figure out what those numbers mean."

Democratic Assembly Speaker Karen Bass, D-Los Angeles, emphasized that "suspending 98 is unacceptable."

Senate leaders have decided to resume policy committee meetings today, despite a move last week to suspend them while lawmakers deal with state's ongoing fiscal calamity.

Both houses have a full docket of bills heading toward Friday's deadline for policy committees to report non-fiscal bills to the floor.

According to a memo to the press from Senate spokeswoman Alicia Trost, the upper house intends to vote today to extend the deadline by one week.

Gov. Arnold Schwarzenegger and legislative leaders remained at an impasse after meeting Sunday night for nearly three hours, but they plan to resume Monday at 9 a.m.

Part of the talks focused on "reform" measures Schwarzenegger has demanded be part of a budget agreement in exchange for keeping the state's welfare and Healthy Families programs in some form. The governor specifically wants stricter security measures for the state's In-Home Supportive Services program, such as requiring providers to undergo fingerprinting and background checks. He also has asked for reducing state employee pensions for new hires.

Democratic Assembly Speaker Karen Bass, D-Los Angeles, seemed particularly incensed by those measures. Bass left the governor's office first, said she was "very discouraged" by the evening's discussion. She explained that she's willing to work on proposals restricting access to welfare programs, but she said those talks should come after leaders hammer out an overall plan to bridge the state's $26.3 billion deficit.

"I just am discouraged that I don't think the governor wants to close," she said. "...I think they are very valid things to talk about, but I think what we need to do now is we need to deal with the deficit. And major areas of public policy or major restructuring issues should be dealt with after we close the deficit."

"Last week he blew off $3 billion," she said. "We're spending $25 million a day. We need to solve that first, and then we can talk about restructuring government."

Assembly Republican Leader Sam Blakeslee, R-San Luis Obispo, had a different take. He said leaders had "a wide-ranging discussion, some progress was made, a thorough review of various reform options were analyzed. I was heartened by the cooperative approach by all the participants."

The leaders also discussed Schwarzenegger's proposed suspension of the state's education funding guarantee, Proposition 98. The governor has asked that lawmakers agree to fund schools at about $3 billion less than the constitutional guarantee in 2009-10, and school groups are gearing up to lobby heavily against that plan.

Bass said she does not want to entertain that suspension of Proposition 98, while Democratic Senate President Pro Tem Darrell Steinberg called it a "bad idea."

In a negotiating shift from the past two years, Schwarzenegger has aligned himself with Senate Republicans this time. The governor backed their opposition last week of a stopgap plan to avert IOUs, and he has teamed up with them again on the full budget package. The governor spent about 20 minutes before the Big 5 alone with Senate Republican Leader Dennis Hollingsworth, R-Murrieta, and the two remained in his cigar tent long after the other leaders left Sunday night.

Negotiations over the state budget continue today, with Gov. Arnold Schwarzenegger continuing to push his case that social service programs need to be overhauled to increase efficiency and reduce fraud.

As the Big 5 look for common ground to close what the governor says is a $26.3 billion shortfall, Schwarzenegger will meet with a group of district attorneys to talk about fraud in the In-Home Supportive Services program.

Requiring in-home workers and their clients to be fingerprinted is on the governor's list of demands issued to legislative Democrats.

But the budget's not the only game in town.

Schwarzenegger will not sign any non-budget bills and Senate policy committees will not meet until there is fiscal resolution, but Assembly policy committees plan to forge ahead.

And the bills are many.

This afternoon, the Assembly Revenue and Taxation Committee considers Assembly Bill 847, which would impose a tax on adult entertainment operations and set up an impact fund "to ameliorate the secondary effects of adult entertainment venues."

The measure, by Democratic Assemblywoman Mary Salas of Chula Vista, would ultimately require a two-thirds vote of the Legislature.

Then there's Senate Bill 54. Sen. Mark Leno, D-San Francisco, says the measure would clarify state law regarding same-sex couples who have married -- or plan to do so -- outside California.

Sponsored by Equality California, SB 54 would recognize same-sex couples as being married if they tied the knot outside California before Proposition 8 went into effect.

The measure would also give same-sex couples who married elsewhere after Prop. 8 went into effect the same rights as heterosexual couples, except for the designation of "marriage."

The bill is set to come up before the Assembly Judiciary Committee on Thursday.

In other non-budget news, Santa Barbara City Councilman Das Williams is formally announcing his candidacy for the 35th Assembly District today.

The seat is now held by termed-out Assemblyman Pedro Nava of Santa Barbara.

Nava, of course, is running (in a crowded field) for attorney general.

Alert readers will also remember that Nava's wife, Susan Jordan of the California Coastal Protection Network, filed paperwork last January to run for his seat.

All three are Democrats. Republican Mike Stoker, a former Santa Barbara County supervisor, is also making a run at the seat.

California's such an easy target these days that even The Gray Lady is drawing a bead on the eighth-largest economy in the world.

The New York Times is running a piece Sunday in its magazine on our fair state, titled "On the coast of crazy." The teaser uses words like "cataclysm" and "fiasco." It doesn't stop there:

California always seems to produce more spectacle than anywhere else in the country, and that goes for its meltdowns too. Calamity is just part of the equation here, as if God gave California so much glamour and grandeur and great weather that he had to throw in some apocalyptic menace to provide a little balance. Earthquakes, say. Or Sacramento.

The reporter: Mark Leibovich of the Times' Washington bureau. He wrote 8,300 words. That's really long.

New York. That would be the state where Senate Republicans staged a coup in early June.

Ever since, there haven't been many signs that Republicans and Democrats, tied 31-31, are close to settling the bitter struggle over who controls the chamber.

Lucky for New York its fiscal year is already three months old -- and its legislators didn't have to cough up a two-thirds majority to pass a budget.

Before we forget: Happy Independence Day! We leave you with a few fun facts about the Fourth of July, courtesy of the U.S. Census Bureau:

One in four: The chance that the hot dogs and pork sausages you're eating at a barbecue this weekend started life somewhere in Iowa.

Three in four: The chance that the head lettuce in your salad or on your burger came from California.

Pretty much a sure thing: The chance that the ketchup you're eating came from California.

Proof the state produces more than mere spectacle...