As we noted in today's AM Alert, the Legislative Analyst Office today released a report predicting that the budget gap will swell to $21 billion in 2010-2011.
Click here to read the report.
Kevin Yamamura sums up some of the assumptions in the fiscal report at sacbee.com. Click here to read that piece.
The string of lawsuits challenging special fund raids and bookkeeping gimmicks in the state's current budget has grown longer with a suit by beverage container recycling centers.
California's state government spends about $3 billion a year on "information technology" - the acquisition and operation of computer systems - but has been criticized for its chronic inability to get new systems operational at a predictable cost.
The most recent example is a statewide computer system for courts whose costs have multiplied without completion.
The Legislature's budget analyst, however, says that the state might be more successful if it changed its procurement system for computer equipment and software to allow what it calls "multi-stage procurement" that would divide large projects into stages and create competition among vendors, termed a "bake-off," for each stage. It cites Netflix, which rents movies, as a private sector example of how the system can make procurement more cost-effective.
"Complex systems integration projects should not follow a one-size, fits-all approach," the report from Legislative Analyst Mac Taylor's office says. "Instead, the unique characteristics of each project--its complexity, scope, size, and requirements--should help determine its procurement approach. As it reviews such projects, the Legislature should take into account various procurement options available to the state; their benefits, risks, and consequences; and the conditions under which one procurement approach would be more advantageous than another."
The full report is available here.
California's state budget crisis is so severe that the Pew Center on the States, a Washington-based policy think tank, is using it as an example of conditions that imperil other states.
Nine other states, the Pew report says, are facing "some of the same pressures that have pushed California toward economic disaster," adding that they also could see furloughs of public employees, severe cuts in education and reductions in the social welfare safety net.
"A challenging mix of economic, political and money-management factors have pushed California to the brink of insolvency. But while California often takes the spotlight, other states are facing hardships just as daunting," Susan Urahn, managing director of the Pew Center on the States, said in a statement accompanying the report. "Decisions these states make as they try to navigate the recession will play a role in how quickly the entire nation recovers."
The report was issued just two days after Gov. Arnold Schwarzenegger acknowledged that the state's current budget, enacted last July, is as much as $7 billion in the red already. He is expected to propose ways to close that gap and deal with the projected deficit in the 2010-11 budget no later than Jan. 10.
The other nine states threatened with California-style fiscal crisis, the Pew report said, are Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin. With California, they represent one-third of the nation's population and economic output.
The report identifies California's fiscal problems as loss of revenue, the relative size of its budget gap, high home mortgage foreclosure rates, legal obstacles to balancing the budget, and "poor money management practices."
Although the nine other states have some similar problems, several of them "already have responded aggressively to their budget crisis, although it is too soon to tell whether their actions will put them on solid fiscal footing."
The full report, titled "Beyond California: States in Fiscal Peril," actually looks at the finances of all 50 states but concentrates on California and the nine states deemed to be in most fiscal peril. The report is
available here.
A bill signed into law Wednesday not only restores $16.3 million this year in state funding to 94 domestic violence shelters throughout California -- it's sparked dueling accounts of how the situation arose.
Gov. Arnold Schwarzenegger, who signed the bill, offered his version of how funding for a service that has bipartisan support ended up slashed and then restored.
And Sen. Leland Yee, the San Francisco Democrat who first introduced the bill to restore funding, has his version. The governor gutted the funding in July with a line-item veto.
The governor proposed reducing or axing funding for domestic violence in his May revised general fund proposal. (Check out item 38 on page 5.) But the Legislature didn't go along with it.
The governor's Tuesday press release says the Legislature forced him to cut the money because lawmakers passed a budget that failed to close a $1 billion gap.
Yee's release says he's pleased the governor signed the bill restoring funds, but remains "dismayed" the governor cut the money in the first place.
The shelters' money will come from a one-time loan, with interest, from the state's Alternative and Renewable Fuel and Vehicle Technology Fund. It's to be repaid by June 30, 2013.
A coalition of representatives for local governments and the transportation and public transit sectors has submitted an initiative to the Attorney General's office that seeks to block the state from borrowing or redirecting local government funds.
The proposed initiative, the "Local Taxpayer, Public Safety, and
Transportation Protection Act of 2010," would ban the state from taking, borrowing or redirecting gas tax and Highway User Tax (HUTA) funds, other public transit funds and funding used for public safety and emergency response services.
The July budget revision included a plan to borrow $2 billion from local governments, with the stipulation that the funds would be paid back with interest by 2013. A proposal to shift about $1 billion in local gas tax revenue for state use was rejected by the Assembly in the final hours of the July budget vote-a-thon.
Proponents of the proposed initiative slammed lawmakers for using "loopholes in the law" and "legally questionable tactics" to secure the funds.
"These raids are having a significant and negative impact on the vital services that all Californians rely upon, including layoffs of local police and firefighters, delayed 911 emergency response times, and cuts to health care, parks, libraries, public transit and road safety maintenance and community improvements," League of California Cities Executive Director Chris McKenzie said in a statement.
The coalition has asked the Attorney General to prepare a title and summary for two similar initiatives. If the group decides to go forward with gathering signatures to qualify the measure for the 2010 ballot, it will choose one of the two measures, according to a press release.
In related news, a redevelopment group filed a lawsuit today to block the state's plan to shift $2.05 billion from local redevelopment funds over the next two years. The Bee's Loretta Kalb has the scoop on the lawsuit here.
Back in special session, the state Senate approved a bill Wednesday that would restore $16.3 million in funding to 94 domestic violence shelters throughout California.
Republican senators held up the bill during the Legislature's final session last month because they were peeved some proposals they wanted had not been fulfilled.
Gov. Arnold Schwarzenegger cut the funding as a line-item budget veto, arguing that the Legislature had not cut enough overall.
The bill that restores funding goes to the governor for his signature. The bill transfers money from the Renewable Fuel and Technology Fund to the General Fund as a loan.
Sen. Leland Yee, D-San Francisco, was the bill's original author. His name was removed during the end of the session, though, after he generated some ill will among fellow Democrats for not voting for budget cuts his colleagues felt they were forced to approve.
Sen. Elaine Alquist, D-Santa Clara, is listed as the author now.
On the floor, Yee, said he was just glad the bill was passed. But he got in a dig by arguing for the Legislature to allow for "diversity" of opinion. "We're not in the Stone Age," he said. "We don't beat people down."
Just three months into the fiscal year, the state's total general fund revenues are already $1.1 billion below estimates made in the recently amended budget, Controller John Chiang said today.
Chiang delivered the grim news in his monthly report covering California's cash balance, receipts and disbursements in September. He urged lawmakers to prepare for more tough decisions.
"Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10 weeks old," Chiang said in a statement.
"While there are encouraging signs that California's economy is preparing for a comeback, the recession continues to drag state revenues down," Chiang added."I urge lawmakers and the governor to prepare for more difficult decisions ahead."
The state's three largest sources of revenue all came in below estimates in September.
When adjusted to account for payments made in September that were previously delayed or issued as registered warrants in July and August, personal income tax revenues for the month were down $934 million, 17.3 percent below estimates, and corporate taxes were down $183 million, 10.5 percent below estimates.
The state's sales tax revenues were down $99.8 million, 4.5 percent below the amended forecast.
The state began the fiscal year with an $11.9 billion cash deficit in the general fund, which grew to $16.2 billion by Sept. 30.
The deficit is being covered with a combination of $7.3 billion of internal borrowing from special funds and $8.8 billion in short-term revenue anticipation notes, Chiang said.
Former Democratic Gov. Gray Davis joined Republican predecessors Pete Wilson and George Deukmejian in filing a friend-of-the-court brief Wednesday supporting Gov. Arnold Schwarzenegger's line-item vetoes of $489 million in state spending this summer.
The California Chamber of Commerce, the California Taxpayers Association and the California Business Roundtable also signed the amicus brief.
Schwarzenegger used his line-item veto authority to cut the funds out of the July budget revision, which he said was necessary because the Legislature failed to pass the entire deal he negotiated with legislative leaders behind closed doors. Lawmakers left the budget slightly in the red, and Schwarzenegger adjusted their plan with cuts and cost shifts to help build a $500 million reserve.
Social service groups and Democratic leaders filed suit this summer against the governor's veto cuts to programs serving AIDS patients, disabled residents and children. The petitioners in the case believe Schwarzenegger's vetoes were illegal because the July plan was a budget revision, rather than the series of expenditures already approved in the February budget. As such, they believe spending cuts are not subject to further reductions through veto under the constitution.
Davis, whom voters recalled in 2003, has sided with the Republican governor who replaced him rather than his fellow Democrats. The brief filed Wednesday suggests that if the suit is validated, legislators could "scheme" to alter the state budget through bills that escape the governor's line-item veto authority.
"Under the guise of a fiscal crisis, petitioners, intervenors and amici have invented a theory out of whole cloth to deprive governors of the authority that has been conferred on them by the California Constitution since 1922. Neutering a governor during a fiscal crisis is irresponsible, particularly when such action is not supported by logic, reason or law."
It appears that Republican Assemblyman Anthony Adams, denounced by anti-tax conservatives for voting for a state budget that included billions of dollars in new taxes, will face a recall election.
Adams, who hails from Hesperia in the eastern suburbs of Los Angeles, was one of six Republican lawmakers who voted for the budget in February, including boosts in income, sales and automobile taxes.
Recall organizers have turned in nearly 35,000 signatures on recall petitions. Adams acknowledges that a recall is likely to qualify for the ballot. "Our expectation is that it ultimately qualifies," he told the Riverside Press-Enterprise.
The newspaper's Sacramento correspondent, Jim Miller, has the full story here.
Attorneys representing Gov. Arnold Schwarzenegger -- in this case, lawyers in Attorney General Jerry Brown's office -- responded Monday to a legal challenge filed by Democratic legislative leaders and social service advocates over the governor's July line-item vetoes. In essence, they dispute what counts as "appropriations" under the state constitution and suggest that the advocates' position would allow lawmakers to undermine the governor's constitutional veto powers with semantic games.
The legal filing is here.
Word circulated through the Capitol today that Assembly and Senate staffers don't get to take Columbus Day, which falls this year on Oct. 12, as a paid holiday.
SBX3 8, passed with the February budget package, strips Columbus Day and Lincoln's Birthday from the schedule of paid days off for state workers. The statutory change doesn't apply to legislative employees, but the holiday calendar for Capitol staffers was changed so it would be "consistent with the state workers' holidays," said Alicia Trost, a spokesperson for Senate President Pro Tem Darrell Steinberg.
"It's done in parallel with the state basically. They're not getting that holiday, so we're not recognizing that day as a holiday either," echoed Assembly Rules Committee Chief Administrative Officer Jon Waldie.
Staffers weren't officially notified of the lost holiday until today, when the Assembly and Senate Rules committees sent out memos designating Oct. 12 a "regular work day."
Could the missed holiday unleash a Capitol-wide "case of the Mondays" that chips away at staff morale?
Trost said she thinks Senate employees "will understand the big picture of being consistent with state employees."
"And they can always take their furlough day that day, if they've already made plans," she added.
No such luck on that front for employees of the Assembly, which hasn't issued staff furloughs.
Related: Check out The State Worker blog for more on a contract dispute set off by the lost holiday.
Gov. Arnold Schwarzenegger and Commission on the 21st Century Economy Chair Gerald Parsky on their way to release the tax panel's report. Credit: Hector Amezcua/Sacramento Bee
The Commission on the 21st Century Economy released its recommendations for changing the state's tax structure today.
Senate President Pro Tem Darrell Steinberg and Assembly Speaker Karen Bass issued statements saying each would direct their house's committee overseeing tax issues to hold hearings on the changes proposed in the report.
As expected, Gov. Arnold Schwarzenegger called a special session for legislators to consider the proposals.
Read the report here. Click here to read Kevin Yamamura's story on the release of the proposal.
After the jump, see a roundup of reactions from legislators and stakeholder groups.
Investors have snatched up all $8.8 billion worth of revenue anticipation notes up for sale this week, the state Treasurer's Office reported today.
The short-term securities were sold to pay back a $1.5 billion loan from JP Morgan Chase and to raise cash for the rest of the fiscal year.
The $9.23 billion in total orders surpassed the amount up for sale by $430 million, according to the report. The state netted $6.64 billion, or 75 percent of all notes sold, in orders from retail investors, breaking the record for retail sales in a municipal bond or note deal, the report said.
Because of the high demand from retail investors, the state was able to set the yield for the notes, which mature in May and June, at the low end of the range originally projected, saving taxpayers an estimated $15.5 million in interest payments.
"Investors clearly know a good deal when they see one, and California taxpayers will benefit as a result. We have a lot of work to do to fix our structural budget defects. But in the short term, this successful sale will help restore the state's fiscal equilibrium," Treasurer Bill Lockyer said in a statement.
So, just how broke is state government?
Well, the venerable Peter Detwiler, staff director of the state Senate's Local Government Committee, sauntered over to the equally venerable State Library recently to borrow a copy of historian (and former state librarian) Kevin Starr's new tome on California history, titled "Golden Dreams."
Only the State Library doesn't have a copy of the book, because budget cuts mean there's no dough to buy new books. Resourceful folks that they are, staffers arranged to borrow the book for Detwiler from the Sacramento Central Library.
So what we have here is the State Library borrowing a book on state history from a local library for a guy who works on local governments for a state agency.
Or as Detwiler put it: "Not only is the state government borrowing local revenues under Proposition 1A, we're also borrowing their library books."
Gov. Arnold Schwarzenegger signed a bill today that will prevent more than 600,000 California children from losing health insurance provided through the Healthy Families program.
"I'm proud to say that amidst the toughest of times and the most difficult choices we have found an innovative way to protect the health of our most precious resource, our children," Schwarzenegger said during a ceremony to mark the bill's signing.
Administrators for the program, which provides low-cost insurance to children whose families are not eligible for MediCal because they are not poor enough, had announced plans to begin cutting coverage for current enrollees to cope with $178 million in cuts, including $50 million by Schwarzenegger's own veto pen, made during the July budget revision.
The bill, AB 1422, bolsters funding for the program by replacing an existing tax on Medical managed care providers that was set to expire with a new, lower fee. The measure also authorized the state board that operates the program to cut operating costs by increasing co-pays and program premiums.
The last-minute legislative fix and an $81 million grant from the First 5 Commission, collected enough cash to keep kids on the rolls. The funding fixes have also allowed the program to lift a freeze on new enrollments and begin processing the more than 80,000 applications that have accumulated on a waiting list established in July.
Schwarzenegger lauded the bill as a solution that called for "shared responsibility between government, health plans and the working families that are enrolled in the program."
Senate President Pro Tem Darrell Steinberg hailed the legislation as "finally, something great to celebrate in California."
"We always talk about kids being our highest priority, but here is proof that in a very difficult time, a very difficult year, that we mean it," he said.
The Bee's Steve Wiegand and Phillip Reese will be online in just a few minutes to answer readers' questions and take comments on "Going Broke," a three-part series looking at how California's financial crisis came to be.
The Q-and-A starts at noon. Click here to join the forum.
Missed today's installment? Click here to read about the role the initiative process plays in the budget mess.
The California Alliance of Child and Family Services filed a lawsuit in federal court on Friday to stop a 10 percent cut to the rates paid to group homes that care for foster children.
The lawsuit argues that the rate reduction violates the federal Child Welfare Act, which requires states cover the cost of providing adequate care for foster children in order to obtain federal matching funds.
The foster care rate cut, part of the July budget revision agreement, was estimated to save the state $26.6 million.
Read the complaint here">
Today is day two of The Bee's three-day series on the causes of California's continuing fiscal crisis. Read Steve Wiegand's piece on the state's spending practices here.
Wiegand also takes a look at the perennial roadblock for enacting spending limits -- voters.
Missed part one? Click here to read the first installment of the series.
Image: A graph showing General Fund expenditures per $100 in personal income. Credit: Mitchell Brooks/Sacramento Bee.
The California Department of Social Services announced today that about 130,000 people now enrolled in In-Home Supportive Services will lose some or all assistance starting Nov. 1.
About 97,000 people will lose some aid now provided by the program, which gives low-income adults who are over 65, blind or disabled assistance with tasks like cleaning, doing laundry, grocery shopping and personal care. About 36,000 people will be dropped from the program entirely. Seniors and the disabled will be cut from the program based on already existing evaluations of how well they function.
The service reduction is part of changes the department is making after the most recent budget cuts. The governor's office had estimated that the state could have saved up to $82.1 million through next June by cutting back the program's services, though a two-month delay in implementing the changes was estimated to cut into those savings by about $16 million.
California received $213 million less in tax revenues last month than the state projected for August when leaders enacted the budget revision, equal to 3.6 percent of the month's revenues, according to new Department of Finance numbers released Wednesday.
It remains too early to determine what California's revenue trend is for 2009-10 and whether the state will be forced to revisit its budget plan before Gov. Arnold Schwarzenegger releases his annual proposal in January. Legislative leaders and Schwarzenegger hope they can avoid a repeat of last fall's budget reopening, which was triggered by a worldwide economic slump.
July and August are not as significant for state revenues as September, when the state receives major payments from quarterly income tax filers and corporations. This month could prove to be more of a bellwether.
Finance already has projected that California will face a $7.5 billion deficit in 2010-11 because a number of one-time budget solutions will not be available. Many budget observers assume the state will face a deeper hole because it will have problems selling parts of the State Compensation Insurance Fund and will be prevented by courts from taking redevelopment money.
Any revenue shortfall in 2009-10 would have to be dealt with in addition to those problems, either later this fiscal year or in the next fiscal year.
After the first two months of the 2009-10 fiscal year, California is $144 million off the pace projected in the budget plan, equal to about 1.3 percent of total general fund revenues. Department of Finance spokesman H.D. Palmer said $109 million of the shortfall is due to an undercollection of insurance tax payments in August due to a timing peculiarity -- money that Finance believes has been made up for already in higher September payments.
The state's personal-income tax revenues were 3.1 percent below the governor's May projections, while sales and use taxes were down 6.9 percent and vehicle license fees were down 22.5 percent. Corporate taxes were up 14 percent.
Those numbers are obscured by the fact that the budget revision anticipated those collections would be down and attempted to compensate for them with an additional $3 billion overall in cuts that are not factored into the category comparisons.
California will go to the financial markets next week with $8.8 billion in notes to tide it through the rest of the current fiscal year, the state treasurer's office announced today.
Tom Dresslar, spokesman for Treasurer Bill Lockyer, said the Revenue Anticipation Notes, or RANs, are expected to sell quickly. "There is a pent-up demand for California paper right now," he said.
California routinely borrows money through RANs to help match incoming revenues with payment demands. After legislators and Gov. Arnold Schwarzenegger re-balanced the state budget in late July, state Controller John Chiang projected the state would need to issue $10.5 billion worth of RANs.
But a bill approved last week by the Legislature would defer state payments of $1.7 billion to higher education and some other programs, lessening the need to borrow from the private markets.
Dresslar said the state will use $1.5 billion of the new notes to repay J.P. Morgan for a loan the financial firm provided in August to help the state finance IOUs it issued between July 2 and Sept. 4.
UPDATE: Late Tuesday afternoon, Senate President Darrell Steinberg decided to give the Assembly more time to develop a more far-reaching, cost-cutting prison plan than it adopted on Aug. 31.
Steinberg earlier in the day said the Senate might take up the Assembly bill as early as today but later backed away after consulting with Assembly Speaker Karen Bass, although he declined to discuss specifics of their conversation.
"I'm not sure when I'm going to take it up," Steinberg said of the Assembly's current prison package, "because I still hold out hope that the Assembly will pass the other important pieces of the overall package."
An hour earlier, Steinberg had indicated he was ready to take up the Assembly plan, implying that he had abandoned hopes that the Assembly would move closer to the Senate-passed version, which Gov. Arnold Schwarzenegger also supports.
The Senate-passed plan is aimed at saving $1.2 billion in the current budget by reducing the inmate population by some 27,000 inmates. The Assembly balked, however, because of stiff opposition from law enforcement groups and removed several features, including a commission to overhaul the state's criminal sentencing laws.
The Assembly version would reduce inmates by about 17,000 and save less than a billion dollars. Steinberg had criticized his fellow Democrats in the Assembly for backing away, calling it "just another example of a culture of failure" and missing a "once-in-a-lifetime opportunity" to get a law-and-order Republican governor to sign sweeping sentencing and prison changes
"I'm in no hurry to take up what they passed yesterday," Steinberg said last week after the Assermbly action. Today, howewver, Steinberg said that adjourning the 2009 session without accepting the Assembly plan would pass up $350 million in budget savings as the state continues to flirt with deficits. And then an hour later, he changed course again, saying he woudl give the Assembly more time to act.
The state controller's office announced this afternoon it sent out its last IOU -- at least for now.
Hallye Jordan, spokeswoman for Controller John Chiang, said the lucky (?) recipient of the formally titled "registered warrant" was Yellow Cab of Sacramento. Jordan said the warrant was issued for an account with the cab company by an unidentified state agency.
The good news is that the IOU can be redeemed starting Friday.
California was forced to start paying vendors, counties and others with rubber checks in July, because of a severe cash flow shortage. The issuance marked only the second time since the Great Depression that warrants were used. (The other time was 1991.)
The IOUs totaled 449,241, worth $2,601,894,756.26.
Not including tip.
A bill to restore funding to the Healthy Families children's insurance program was approved by the Assembly this afternoon 62-5.
AB 1422 would fill the more than $100 million funding shortfall faced by the program by raising premiums and co-pays for some families and replacing an existing fee on managed care providers that contract with Medi-Cal set to expire with a new, lower tax. The bill was passed by the Senate earlier this week and now goes to Gov. Arnold Schwarzenegger's desk.
Schwarzenegger issued a statement shortly after the vote saying he would sign the bill and calling its passage a "great victory for California's kids."
"I am very pleased that all parties came together including the Legislature, the health plan industry, children's health advocates, the First Five Commission and others to find a shared solution to fund this important program that ensures not one child will lose their health care coverage -- without any new general fund dollars," he said in the statement. "Everyone was forced to make very difficult but necessary decisions to balance our budget, and these are the kinds of solutions we should be looking for in this tough economy."
Once signed into law, the additional funding will allow the board that runs the program to cancel plans to disenroll an estimated 600,000 children because of insufficient operating funds.
Read Susan Ferriss' story on the bill here.
This post was updated at 4:35 p.m. to include Schwarzenegger's statement. It was also updated at 10 a.m. Friday to reflect the final vote on the bill; some Assembly members changed their vote after the initial call, a practice that is permitted during the floor session as long as the switch does not change the final outcome of the vote.
Senate President Pro Tem Darrell Steinberg has sent a letter asking Gov. Arnold Schwarzenegger to consider reducing the number of furlough days for state workers. He also plans to push legislation calling for unspecified budget cuts to offset the cost of one furlough day a month.
Check out the letter here.
Read more, including responses from the governor's office and SEIU Local 1000 at The State Worker blog.
Gov. Arnold Schwarzenegger told U.S. Sen. Dianne Feinstein this week that he will continue furloughing 1,415 Department of Social Services employees who review Social Security disability applications.
Feinstein asked the governor last week to stop furloughing those workers because she said their absences could cause processing slowdowns and delay $15 million in payments to 53,000 Californians. She said furloughing those workers would provide no budgetary savings because the federal government pays for their salaries.
But Schwarzenegger said in a letter that the furloughs should have minimal impact on disability payments because workers are able to bank their furlough days and use them in lieu of vacation through June 2012. He appeared to acknowledge some slowdown, saying that "processing time remains within one day of its pre-furlough length." However, he asserted that California's processing time is below the national average.
Enrollment in California;s 110 community colleges hit 2.9 million during the 2008-09 school year, state Chancellor Jack Scott announced today, a 4.9 percent increase from th previous year.
The enrollment pressure comes as the community colleges absorb their share of state budget cuts, and Scott said it means students now registering will see reduced course offerings.Enrollment is up nearly 16 percent over the last four years, or approximately 400,000 students.
The enrollment increase was 2-1/2 times the increase assumed in the 2008-09 state budget. Scott said community colleges have seen an $840 million cut in their appropriations over the last two budgets. Community colleges are financed by a combination of property taxes and state appropriations.
The recent increase in enrollments for 2008/09 was well beyond the two percent growth funding the colleges received from the state budget. Additionally, the California Community Colleges sustained $840 million in state funding cuts for the 2008/09 and 2009/10 academic years combined.
Inspired by last weekend's Great California Garage Sale, late-night host Conan O'Brien has decided to auction props used on the show to raise some cash for California. Items up for sale included a pencil sharpener bust of President Obama and a set of wax figures of Tom Cruise and "The Fonz."
Hat tip to KQED's John Myers for pointing out the video on his Twitter feed.
After another round of heated debate, a slimmed-down version of the Senate-passed prisons cuts bill squeaked by in the Assembly. The bill, which you can read here, was approved 41-35.
The Assembly's version of the bill lacks several key and controversial components included in the Senate's plan. Senate President Pro Tem Darrell Steinberg, D-Sacramento, issued a statement saying the Assembly, "took a good first step today but it's not a complete package."
"In the coming weeks, I look forward to working with Speaker Karen Bass and Governor Arnold Schwarzenegger on further reforms that will strengthen our criminal justice system," he said.
Read more on the bill from The Bee's Jim Sanders here.
Photo: Assembly Speaker Karen Bass, D-Los Angeles, and Assemblyman Alberto Torrico, D-Newark, listen as lawmakers debate the corrections cuts plan Monday afternoon. (Hector Amezcua/Sacramento Bee)
The Great California Garage Sale netted more than $1.6 million over the weekend, according to the Department of General Services Web site. The bulk of that cash -- $1.2 million --came from car sales, but "warehouse items," ranging from BlackBerries to bobblehead figurines, raked in $398,000.
At least 5,000 shoppers flocked to the sale Friday to snatch up the best deals. Missed the action? Check out this video by The Bee's Hector Amezcua:
The ghost of Willie Horton has haunted the debate over the plan to cut prison costs by reducing the inmate population and relying more heavily on parole.
Now, the case of Jaycee Lee Dugard, who was rescued this week after being kept in captivity by a convicted rapist for 18 years, is expected to spark a fresh round of attacks from critics of the plan.
Phillip Garrido, who is charged along with his wife Nancy with kidnapping Dugard when she was 11 years old, was able to conceal her and two daughters he fathered with her, despite being a registered sex offender subject to home visits and monitoring by a parole officer.
Sen. Tom Harman, R-Huntington Beach, lashed out at the prisons plan in this piece by The Bee's Sam Stanton:
"This demonstrates the problems that we're going to have if we release thousands of prisoners into our local communities," said Harman, who is running for Attorney General and voted against the plan. "Here was a prisoner who was a very great danger to the community. The parole people knew it, he was supposedly being checked three times a month, and still he was able to perpetrate this crime that lasted over 18 years."
Senate President Pro Tem Darrell Steinberg shot back, saying Garrido would not have been released early under the Senate-passed plan and highlighting a provision that would lower the caseload for parole officers from about 70 to 45 parolees.
"The parole reforms passed by the Senate increase parole agents' ability to more effectively monitor this kind of sex offender," Senate President Pro Tem Darrell Steinberg said in a statement. "Our resources must be marshaled to crack down on offenders like Phillip Garrido. He is the poster child for the need to reduce parole officer caseloads and increase parolee monitoring like the Senate voted to do last week."
The Assembly is expected to vote on a pared-down version of the Senate-passed prisons bill on Monday.
Photo: A file photo of Jaycee Lee Dugard as a young girl.
As reported in today's Bee, legislation aimed at preventing hundreds of thousands of children from losing health care coverage provided by the Healthy Families program appears to be on track for approval.
Members of the Managed Risk Medical Insurance Board, which runs the low-cost insurance program for low-income children and teens whose families aren't poor enough to qualify for MediCal, decided yesterday to put off plans to begin cutting coverage as they continue efforts to raise cash and keep kids on the rolls.
Ginny Puddefoot, MRMIB deputy director for health policy legislation, said program officials found they had sufficient funds to wait one more month before beginning the disenrollment process.
"The board is still hopeful that the efforts of the governor's office, legislative leaders, health plans and children's advocates will be successful in identifying alternative funding, therefore allowing the board to make a finding of sufficient funding and avoid disenrollment," she said.
The board also continued to chip away at a $112 million funding shortfall yesterday, passing several structural changes to the program. Approved changes included slight increases in co-pays and subscriber premiums.
But even with the estimated $12 million in savings approved yesterday and an $81.4 million funding pledge from the First 5 Commission, Healthy Families officials say the program faces a lingering $100 million state funding gap. The program's operating budget was slashed by $178 million in the recent budget revision, and in late July administrators announced they would have to begin cutting coverage because of insufficient operating funds.
AB 1422, a gut-and-amend bill that passed through Senate Appropriations yesterday and is headed to the Senate floor for a vote, could fill that gap by replacing an existing tax on insurance companies that manage Medi-Cal set to expire with a new, lower fee to raise money for Heathy Families. Several Republicans on Senate Appropriations voted for the bill and no industry opposition has been filed.
The board had planned to notify the first wave of subscribers to lose coverage, those whose one-year anniversary in the program falls in October, next week. If the board is unable to find another solution to fix the program's cash shortage, subscribers set to lose coverage will be given 30 days' notice of disenrollment starting Oct. 1.
Here are the changes approved by the board:
*This change requires legislative approval and would be enacted by AB 1422. AB 1422 also gives MRMIB the authority to enact these changes in the coming months, instead of waiting until the next fiscal year.
This post was updated to correctly describe eligibility for the Healthy Families program.
The state Supreme Court today rejected, without comment, a lawsuit filed by Charles Young, former chancellor of UCLA, challenging the constitutional requirement that new taxes obtain a two-thirds legislative vote.
Here's a roundup of some stories you might have missed today:
Democratic Assemblywoman Noreen Evans isn't wasting any time launching her bid to replace Sen. Pat Wiggins, who announced yesterday that she won't run for re-election in 2010. Evans has already secured the support of Senate President Pro Tem Darrell Steinberg and Assembly Speaker Karen Bass.
Gov. Arnold Schwarzenegger sent a letter today appealing the Obama administration's decision to deny California's request to declare a federal disaster over severe drought conditions. Read the letter here.
Assemblyman Ted Gaines, R-Roseville, sent a letter urging the governor not to close the
Marshall Gold Discovery State Historical Park. The Parks Department announced last week that the site, which was home to the discovery of gold that triggered the California Gold Rush, would close because of budget cuts.
A group of 28 legislators has signed a letter protesting the Department of Public Health's effort to retroactively cut off payments as far back as July 1 for non-profit organizations that provide assistance to domestic violence victims through the Domestic Violence Program. The program was eliminated in the recent round of budget cuts.
The California Chamber of Commerce and 33 other business groups are telling the state's tax reform commission it should back away from three major tax system changes now under consideration as it nears a deadline for submitting its report to the Legislature.
The coalition doesn't like removing Proposition 13's property tax limits from business property and a proposed new "carbon tax," both of which have been promoted by the tax commission's liberal bloc. But it also is warning about the potentially negative effects of a "net business receipts tax," similar to a European-style value-added tax, that commission chairman Gerald Parsky champions.
The commission was appointed by Gov. Arnold Schwarzenegger and legislative leaders to propose major changes in the tax system to reduce revenue volatility, believed to be a big factor in the state's chronic budget problems. It was originally supposed to make its recommendations in April but has extended the deadline twice and is now due to make its proposal in late September. Schwarzenegger has said he will call a special legislative session to consider its proposals.
"The California business community has consistently stated that the solution to California's revenue problems will only come from robust economic growth and job creation," said today's letter to Parsky. "We believe the proposed split roll property tax and the energy tax would be extremely detrimental to California's economy. As for the business net receipts tax, we believe it is risky and inappropriate to move forward with dramatic changes to the tax structure without first fully vetting their impact on California jobs and the economy."
Parsky and several other commission members were pushing the net receipts tax as a substitute for the sales tax, coupled with a flattening of personal income tax rates and perhaps elimination of the corporate income tax. Then the commission's liberal bloc balked and insisted that the split roll, the carbon tax and other changes be placed on the agenda.
The state's continuing and perhaps deepening recession - marked by a spike in July's unemployment to 11.9 percent - is hitting retail sales hard, a new Board of Equalization announcement indicates.
The board announced today that it is reducing quarterly allocations of sales taxes to 337 cities and counties, based on estimates that taxable sales dropped 18.74 percent during the second quarter (April-June) of the year. And it said 15 smaller cities would receive no monthly sales tax advance this month because its previous allocations were too high.
The reductions and freezes hit nearly half of the 768 local governments that receive a share of the state-local sales tax. Second quarter payments were reduced by 14.4 percent. This month's reductions are similar to those that the board made in May for the first quarter.
While the 18.74 percent decline hits cities hard, the state's share of the sales tax is being buoyed by a temporary tax rate boost, one cent per $1 of sales, that the governor and Legislature enacted in February.
A spreadsheet showing all of the allocations, including the list of 15 cities whose allocations were reduced to zero is available here.
As Jim Sanders reports in today's Bee, the prisons package stalled last night without enough votes to win approval in the Assembly. Assembly Speaker Karen Bass said lawmakers will take the plan up again on Monday.
Below, watch a video with remarks by Senate Republican Leader Dennis Hollingsworth and Senate President Pro Tem Darrell Steinberg after the plan squeaked by the Senate, 21-19, yesterday.
Video by The Bee's Hector Amezcua.
Administrators of the Healthy Families program will consider a number of structural changes today in hopes of avoiding cutting coverage for children and teens.
"We have been doing analysis internally and with (audit and assurance advisers) PricewaterhouseCoopers to see which ideas would be feasible and when they could be implemented," said Ginny Puddefoot, deputy director for health policy legislation at the Managed Risk Medical Insurance Board, which runs the program.
Healthy Families, which provides low-cost health insurance to 900,000 children and teens whose families are too poor to qualify for MediCal, has been coping with how to cut costs without curtailing coverage since the Legislature and Gov. Arnold Schwarzenegger slashed $178 million of its funding in the budget revision package.
The 12-year-old program, which was already under financial strain, had to freeze new enrollments for the first time earlier this summer. More than 55,000 applicants had been added to a waiting list as of Aug. 11.
Even in light of an $81 million pledge from the First 5 Commission, MRMIB members said last week that they would have to begin disenrolling children Oct. 1 because of a remaining funding shortfall.
Staff members have been considering potential changes to the benefits, premium levels and co-payments to minimize the effect of the planned disenrollments, Puddefoot said. Several potential solutions will be presented at the board's 10 a.m. meeting today. (You can see the meeting agenda here.)
Some of the proposed changes could require approval from the Legislature. With notices of disenrollment set to go out starting Sept. 1, Puddefoot said administrators are doing all they can to find savings or additional funding in the coming weeks.
"We're all bumped up against the end of the legislative session in a couple of weeks, so that complicates things," Puddefoot said. "We're still hoping to find some way to avoid (disenrollment)."
As Jack Chang reports in today's Bee, the Legislature is set to take up a package of cost-saving changes to the prison system.
Legislative Republicans, police chiefs and district attorneys have come out swinging against the plan, which includes the creation of an appointed commission with the power to rewrite sentencing guidelines. The package, which requires only a majority vote, is expected to spark heated debate.
You can read the language of the bills here.
Standard & Poor's on Tuesday kept California at an 'A' rating for its long-term debt and eliminated its immediate threat of a downgrade because it said the July budget revision reduced pressure on the state's fiscal condition for the time being.
S&P was the only rating house of the three major agencies not to downgrade California's credit rating in July to near-junk bond status after the state began paying bills with IOUs. The agency placed California on a "CreditWatch with negative implications" in June, which carries an imminent threat of a rating downgrade. S&P removed that status Tuesday, though it said California's long-term outlook remains negative.
Despite inherent risks in the budget revision, S&P analysts said they "nonetheless believe the effects of the budget revision agreement help to dampen the imminent downward pressure on the state's rating."
S&P called a Department of Finance estimate that the state will face a $7.4 billion structural deficit next fiscal year "optimistic." Instead, S&P said "the longer-term structural deficit is likely higher at $15 billion on an annualized basis."
State Controller John Chiang and State Treasurer Bill Lockyer said last week that California would seek a $10.5 billion short-term loan to resolve its cash needs in the fall. But the S&P report says California instead plans to seek a $7.8 billion short-term cash loan in September, while fiscal leaders are asking lawmakers for bills to defer $2.67 billion in payments.
Lockyer spokesman Tom Dresslar said the latest long-term debt rating has no direct impact on what rating will be assigned to the short-term cash loan, known as a Revenue Anticipation Note.
As lobbyists for card clubs and Indian gambling tribes push to legalize online poker in California, Senate President Pro Tem Darrell Steinberg, D-Sacramento, said today he's open to the idea but doesn't believe there is enough time in the Legislature's remaining four weeks to make a decision.
Tribes and card clubs are joining forces to propose an online poker consortium that would take advantage of the lucrative Internet poker boom that largely has been run by offshore operators.
With the state hurting for cash -- and Democrats desperate for revenues to soften cuts to social service programs and schools -- Steinberg said he essentially has one thing to say to proponents of online poker: Show me the money.
"I think it is a legitimate idea for consideration," Steinberg said today in a press conference. "I only have one question when I hear a proposal like that: how much money for the state General Fund? It's all I want to know. You know, is it two, three hundred million dollars? If it is, I'd consider it. But I think it's going to take more than four weeks to analyze that kind of proposal and the potential economic benefits."
For more background, read Peter Hecht's story from last week.
California isn't alone in feeling the fiscal pinch and it's also not alone in seeking to trim its prison and parole costs, a new nationwide survey finds.
"The Fiscal Crisis in Corrections," issued by the New York-based VERA Institute of Justice, a criminal justice reform foundation, says that 37 states (not including California) responded to its survey and that at least 26 of them have reduced penal spending in response to budget problems.
California, with a $10-plus billion prison expense, is seeking a $1.2 billion reduction in its latest state budget, but there's a political stalemate on how to achieve it. Gov. Arnold Schwarzenegger has proposed a plan to shrink the state's prison population, now nearly 170,000, by 27,000 through a variety of strategies, including early release of some low-risk inmates.
Schwarzenegger's fellow Republicans have balked, but in the meantime a panel of federal judges has ordered the state to drop its inmate population by more than 40,000. The issue will be rejoined Monday when the Legislature returns from its summer recess.
The VERA report indicated that other states are implementing what California is still considering. It said a few states cut prison spending in anticipation that the hole would be filled by federal economic stimulus funds but at least 31 states are reducing prison staffs, imposing hiring freezes, reducing salaries and benefits and/or eliminating pay increases. At least 22 states are closing penal facilities, otherwise reducing their prison beds and/or delaying construction of new prisons.
"High rates of failure among people on probation and parole are a significant driver of prison populations and costs in most states," the report said. "To cut down on new offenses and the incarceration of rule violators, several states are strengthening their community corrections systems. Many states began these efforts in the past few years as part of the national emphasis on helping people successfully return to the community following their release from prison. States are now bolstering both their reentry programs and community supervision programs and working to improve outcomes for people on supervision.
"The biggest budget savings come from policy changes that impact how many people
come into prison and how long they stay. Staffing typically accounts for 75 to 80 percent of corrections budgets, so substantial cost reductions can be achieved only when the prison population shrinks enough to shutter a facility - whether a single cellblock or an entire prison. In FY2010, states looking for large cuts have turned to release policies and found that they can identify some groups of people who can be safely released after serving shorter terms behind bars."
The report includes a rundown on prison budgets of the states that responded. Texas, second only to California in the size of its prison system with about 150,000 inmates, spends $2.8 billion a year, less than a third of California's costs.
The full VERA report is available here.
Children's health care advocates got both a boost and a blow today, as the California First 5 Commission announced it would contribute $81.4 million to the state's Healthy Families health insurance program.
But members of the Managed Risk Medical Insurance Board, which runs Healthy Families, still had to tell the program's administrators to begin disenrolling children Oct. 1 to help close a funding shortfall.
"It was a day of very good news and very bad news for kids," said Wendy Lazarus, founder of Children's Partnership, a nonprofit child advocacy organization. "I think the First 5 contribution shows tremendous leadership."
"(But) this is a really dark, grim situation for kids in California," Lazarus said. "I don't think anyone living here ever thought we would see a day where kids with very low income can't get heath care."
The 12-year-old program provides low-cost insurance to about 900,000 children and teens in low-income families that aren't poor enough to qualify for Medi-Cal. Adults in many of the families are working, but their jobs don't provide health coverage or don't cover dependents.
The Legislature reduced the Healthy Families budget by $128.6 million in its budget revision last month, and Gov. Arnold Schwarzenegger used his line-item veto to cut $50 million more.
The legal buzz this week might be about the lawsuits filed againt Gov. Arnold Schwarzenegger over the line-item vetoes to the budget revision, but State Worker columnist/blogger Jon Ortiz has a column today about another war being fought in the courts:
SEIU and several other state worker unions together and separately have launched at least a dozen furlough lawsuits in San Francisco, Alameda and Sacramento courts. All contend that Schwarzenegger's furloughs are either illegal pay cuts or are misapplied.
Read his entire column here.
Got big plans for Furlough Friday? Share them with us at our Capitol & California forum. Check out how other furloughed workers plan to spend their day off and upload a picture of what you did here .
California's projected cash flow is now strong enough that state Controller John Chiang says he will be able to stop issuing IOUs on Sept. 4, a month earlier than expected.
Read the story here.
The latest Department of Finance bulletin says California received $65 million more in revenues in July than forecast in the newly enacted budget revision.
For once, California is above a revenue forecast rather than below.
But don't celebrate too much. July is a low revenue month, unlike April, June or September. Out of $5.2 billion in revenues, the $65 million represents 1.3 percent above forecast. And the state only beat its forecast thanks to a $148 million cut in its July projection that was included in the budget revision enacted last month.
For categorical breakouts, Finance compared actual revenues against those forecast in May. Finance said personal income (-$74 million) and sales tax revenues (-$76 million) were below the May Revise forecast, while corporate taxes (+$104 million) were up. Those trends were different from the controller's report earlier this week because the controller's numbers didn't include updated cash received by state agencies.
The controller's report said one reason corporate taxes may be higher is that the governor signed legislation last year increasing penalties on corporations who understate their tax liability.
Updated at 11:50 a.m. with the governor's response
A coalition of advocates representing the disabled and disadvantaged has filed a second lawsuit against Gov. Arnold Schwarzenegger over the nearly $500 million in cuts he made to the budget revision using his line-item veto authority.
The move follows a decision by Senate President Pro Tem Darrell Steinberg, D-Sacramento, to personally sue the governor on the grounds that he overstepped his constitutional authority by vetoing provisions in the package that were revisions to past appropriations, not appropriations themselves. St. John's Well Child and Family Center et al. v. Schwarzenegger et al,, which was set to be announced today at a 10 a.m. press conference in Los Angeles, also argues an abuse of power by Schwarzenegger.
Read the writ, filed yesterday, here.
State Controller John Chiang released yesterday a monthly report comparing the state's financial situation in July 2009 to the same month last year.
Here are some key figures from the report:
Chiang said a cash comparison with the budget as revised last month is not yet available.
Read the full report here and the summary analysis here.
Also from the financial files, The Fresno Bee's E.J. Schultz blogged yesterday about a memo from Legislative Analyst Mac Taylor outlining the more than $200 billion in short- and long-term liabilities that the state has on its books. Read about that red ink here.
*Figures are adjusted to account for $362 million in personal income and corporate tax refunds paid for with I.O.U.s
Lawyers representing Senate President Pro Tem Darrell Steinberg, D-Sacramento, have filed a lawsuit against Republican Gov. Arnold Schwarzenegger over the line-item veto cuts to the budget revision.
The petition, filed in San Francisco Superior Court today, alleges that the governor overstepped his authority by using his line-item veto power to cut nearly $500 million from the package of bills passed by the legislature. As expected, the suit argues that the provisions in the budget revision are reductions to existing appropriations, not new appropriations:
"Although no one disputes the Governor's authority to reduce a true item of appropriation, that authority does not extend to making further reductions to existing appropriations or to eliminating restrictions that the Legislature placed on other appropriations."
State Controller John Chiang, a Democrat, is also named as a defendant in the suit. Steinberg spokeswoman Alicia Trost wrote in an e-mail that Chiang is named "for remedial purposes only" because he is responsible for allocating funds appropriated by law.
Download the petition here.
Related links:
LAObserved's LA Sketchbook cartoonist Steve Greenberg points out one state officeholder who might still be current in California students' out-of-date textbooks come 2010.
You can also read Bee reporter Susan Ferriss' story on the announcement here.
Video is by The Bee's Hector Amezcua
In announcing his intention to sue Gov. Arnold Schwarzenegger over the line-item vetoes in the budget revision, Senate President Pro Tem Darrell Steinberg said there were plenty of options for restoring the budget reserve without making deep cuts to heath and welfare programs. Jimmy Kimmel offered one idea on his late-night show a few weeks ago: expand the upcoming "garage-sale" auction of government-owned cars.
Senate President Pro Tem Darrell Steinberg is expected to announce at 1 p.m. today that he is suing the governor over his line-item veto cuts to the budget revision package. Though the news is still (officially) unconfirmed, Gov. Arnold Schwarzenegger's spokesman Aaron McLear has already put out a response, saying the governor's constitutional authority to veto appropriations is "unquestioned and will be upheld by the courts."
"Because the legislature failed to send him a balanced budget after months of debate the Governor was forced to make these difficult cuts. While Democrats are focused on a protracted legal battle to dig the state back into deficit the Governor will continue to focus on moving our state forward and getting Californians back to work," McLear said in the statement, which you can read here.
Still not tired of hearing about last month's deal on the state budget?
Budget junkies can get another fix from the California Budget Project, which has produced a point-by-point comparison of Gov. Arnold Schwarzenegger's May proposals to close the latest budget deficit, the version that Democratic legislators generated and the final deal hammered by the governor and legislative leaders.
The CBP chart isavailable here.
The Bee's Phillip Reese has an interactive database with estimates of how much local governments could lose as a result of the new budget, which included borrowing $2 billion from cities and counties and taking $1.7 billion from local redevelopment agencies.
Check back Sunday for a full story on the impact the budget revision is expected to have on local governments.
Gov. Arnold Schwarzenegger has now given the tax reform commission he and legislators appointed another deadline extension and says he'll call a special legislative session in the fall to consider the commission's recommendations.
"For too long our broken tax system has taken Californians on an unwelcome roller coaster ride," Schwarzenegger said last week in giving the commission a new deadline of Sept. 20. "This commission will help change that, and provide students, teachers, the elderly and the poor a more reliable funding stream. I assure all Californians that I will call on the full legislative body to immediately consider the commission's recommendations as soon as they are submitted."
That, however, assumes that the 14-member Commission on the 21st Century Economy, headed by Southern California businessman Gerald Parsky, can agree on how to change the state's income, sales and perhaps property tax systems to align them with the economy and reduce volatility in the state's revenues. Revenue volatility reduction is seen as a key ingredient in avoiding future budget crises.
The commission appeared headed toward flattening the personal income tax, the state's top revenue source, and implementing a "net business receipts tax" similar to the value-added taxes (VATs) common in European countries, but its more liberal members balked. At its last meeting in July, the commission agreed to expand its agenda to include changes in the property tax, a "carbon tax" on fuels and a state spending limit, but it now has scarcely seven weeks to agree on a plan.
The commission is now planning "workshops" in late August to explore those and other options. But reaching agreement won't be easy, a series of e-mails and other communications among commission members indicates.
The commission posts all of its internal communications on the Internet and one can gain insight into its disparate thinking here.
Birthday boy Gov. Arnold Schwarzenegger went "On The Record" with Fox News' Greta Van Susteren to talk about the budget cuts, how he'd wave his magic wand to fix California's fiscal and political problems and why former House Speaker Newt Gingrich , R-Ga., is one of his favorite politicians to watch.
The interview aired last night, as a new Public Policy Institute of California poll was released showing his approval ratings have dipped to an all-time low (The poll itself was conducted July 7 through July 21, so it concluded before the budget revision vote-a-thon and line-item vetoes).
You can read the interview transcript here and watch more video from the interview after the jump. Scroll down to our comments forum to let us know how you think he did... Greta? Not-so-Greta?
Enjoy recess while you can.
Gov. Arnold Schwarzenegger has just announced that he will call a special session in late September so legislators can consider the Commission on the 21st Century Economy's recommendations for overhauling the state's tax system.
An exact date for the special session has not been set, but the press release notes that the commission's deadline for submitting its findings has been extended yet again to Sept. 20. That means legislators could be back in the Capitol just over a week after the regular session ends Sept. 11.
The Legislative Analyst's Office has released its report on the budget revision package signed into law yesterday. Download the full report here.
Advocacy groups and lawyers are mulling over their next steps in response to Gov. Arnold Schwarzenegger's $489 million in line-item vetoes yesterday, the bulk of which were directed at social service programs.
The main crux of the issue -- if you believe there is an issue, which the governor's team firmly does not -- is whether Schwarzenegger can use his line-item veto authority to expand the size of legislative spending reductions.
The California Constitution says this in Article IV, Section 10:
(e) The Governor may reduce or eliminate one or more items of appropriation while approving other portions of a bill. The Governor shall append to the bill a statement of the items reduced or eliminated with the reasons for the action. The Governor shall transmit to the house originating the bill a copy of the statement and reasons. Items reduced or eliminated shall be separately reconsidered and may be passed over the Governor's veto in the same manner as bills.
In a normal budget act, there is little question that the governor can use his line-veto authority because the fine language appropriates money to each sector of state government. The governor's office believes there should be little question in this case, as well. Most of the 437-page main budget revision bill AB 1(4x), simply replaced the appropriation language from February's budget bill with lower amounts -- and for those sections, it's possible that Democrats would concede the governor is within his authority.
But Democrats, foreseeing that the governor may try to use his line-item authority to cut deeper, tried to veto-proof social service programs. In the last six pages of the bill, they inserted special "control language" that did not replace the appropriation amounts from the February budget for social services. Instead, the language in the revision bill said the February amounts were "hereby reduced." They argue the constitution specifies that the governor can line-item veto only appropriations, not reductions, and therefore, he is acting outside his authority.
Assembly Speaker Karen Bass, D-Los Angeles, has asked for an opinion from Legislative Counsel. Democrats believe that because they are able to pass spending cuts on a majority-vote basis, there is legal precedent for treating cuts differently from appropriations, which require a two-thirds vote.
While the governor signed the budget revision yesterday, Democratic state Controller John Chiang is charged with carrying out his budget. Earlier this week, Chiang spokeswoman Hallye Jordan said the controller's legal staff was reviewing whether the governor's line-item vetoes were constitutional.
If Chiang does carry out Schwarzenegger's vetoes, expect advocacy groups to file suit against Chiang. If Chiang does not carry them out, expect another legal battle between Schwarzenegger and the controller.
Those actions may be rendered moot, of course, if Democratic leaders and Schwarzenegger can find some way to secure new revenues that mitigate those cuts in the Legislature. While the Assembly last week scuttled the oil drilling project ($100 million) and the borrowing of local government gas tax money ($1 billion), Democrats could reopen those items to reverse the social service cuts.
Department of Finance Director Mike Genest predicted Tuesday that Democrats would not challenge the vetoes because "they have something to lose, too." His comment suggested that Democrats know full well that it is difficult to find another $489 million in savings -- and they might be better off politically allowing the governor to bear the brunt of criticism for the cuts he did implement yesterday.
Democratic leaders issued angry response statements Tuesday. But it remains to be seen how they will proceed once the Legislature resumes next month.
The deed may be done on signing the "good, bad and ugly" budget revision package, but the fallout over the steep cuts is just beginning.
Gov. Arnold Schwarzenegger used his blue pencil veto authority to trim the programs after legislators sent him a package that fell $156 million short of his planned reserve. One program slashed to a sliver of its former self? Healthy Families, which provides low-cost coverage to children and teens whose families don't qualify for Medi-Cal.
An additional $50 million was penciled out of the program's budget, bringing its total shortfall to $194 millon -- a figure that amounts to more than half its state funding.
The program already froze enrollment earlier this month, quickly amassing a waiting list of some 22,000 kids in need of health care, and swapped its application payment assistance program for $4.6 million in savings. Now, to cope with the cuts, it's expecting to disenroll hundreds of thousands of participants starting later this fall.
The Managed Risk Medical Insurance Board, which runs the program, will come together Thursday to work out how exactly the cuts will be made. But MRMIB Deputy Director for Health Policy Legislation Ginny Puddefoot said they expect to begin rolling back coverage in the coming weeks.
"It's hard to quantify the number of children, based on shortfall that currently exists the most likely scenario would be to notify the first wave in August," Puddefoot said.
No talk of preserving a safety net for the neediest here. Disenrollment will be based on when participants entered the program. Children who hit their one-year coverage anniversary will not be eligible to renew their enrollment, and will instead be moved to that growing waiting list.
"At this point, it is strictly based on eligibility renewal dates," Puddefoot said. "Those children who were enrolled in July or August, and those children who were first enrolled in September will be the first to be disenrolled.
Children's and healthcare advocates estimated that nearly a million kids will be denied coverage through the enrollment freeze and disenrollments combined.They called the cuts "inexplicable," "cruel" and "foolhardy" and worried about the lasting effect losing coverage for kids could have on educational development, emergency rooms and the economic pinch already being felt by families across the state.
"This is when the need is at its greatest for kids of have access to health insurance as more and more families are losing their insurance," said Ted Lempert, President of Children Now. "An additional hit to Healthy Families is, quite frankly, a shameful act and certainly not how any struggling families would act toward their own kids."
Puddefoot and others expressed hope that the First 5 California could step in to fill some of the shortfall. The group, which gave $16.7 million late last year to prevent 65,000 children from being shifted to a wait list, has pledged to provide some financial support in wake of the cuts. But a dollar amount has yet to be announced, and funding from the commission would only impact infants through 5 year olds.
Similar reactions are being felt across the board, with some lawmakers questioning the legality of the cuts. Schwarzenegger's signatures are on the bills, but the writing's on the wall: this battle's far from done.
The 27-bill budget "fix" signed by Gov. Arnold Schwarzenegger today included an additional $489 million in line-item veto cuts. Read the full budget summary or download a breakdown of the cuts.
Correction: An earlier version of this post incorrectly identified the size of the line-item veto cuts. The Bee regrets the error.
Lawmakers have outstanding budget issues to resolve when they return in mid-August, not the least of which is how to cut prison spending by at least $1.2 billion.
Lawmakers on Friday reduced the corrections budget by that amount, with a wink and a nod that Democrats probably would pass the most controversial cuts having to do with reducing the inmate population on their own with a majority vote.
But other issues are cropping up. Redevelopment agencies already are threatening to sue the state for taking $1.7 billion, so expect a court battle over that. Advocacy groups are carefully eyeing the governor's line-item vetoes today to determine whether the governor has the legal authority to cut from a budget revision, though Schwarzenegger's Department of Finance insists that he faces no legal hurdles.
And local governments plan to seek more bills in August that would ensure them to begin borrowing sooner to replace the $2 billion the state is taking from them under the budget deal, according to Jean Hurst, a lobbyist for the California State Association of Counties.
The Assembly in its final hour Friday eliminated a plan to securitize more than $7 billion in future redevelopment tax revenues. Under the "Big Five" handshake deal, that plan was written as the first option for taking local government money in 2009-10. The proposal said the state had until Dec. 1 to seek judicial approval that the securitization was legal.
The way the bills stand, local governments have to wait until Dec. 1 to begin pursuing a huge Wall Street loan to backfill their losses from the state, Hurst said. That's because if the securitization plan had gone through, the state would not have had to borrow from local governments.
But with the securitization plan gone, the state now intends to take the $2 billion from locals as a first option -- and Hurst said that means local governments want new language ensuring that they can begin borrowing as soon as possible.
As the Capitol sifts through the residue of last week's new deal on the state budget, Republican Assemblyman Anthony Adams is still coping with the fallout from February's budget deal, one in which he broke partisan ranks and voted to impose new income, sales and vehicle taxes.
Conservative activists, egged on by popular Southern California radio talkers John Kobylt and Ken Chiampou, launched a recall drive against Adams, whose district sprawls across a wide swath of Southern California deserts and suburbs. The two made Adams a "head on a pike" target and broadcast appeals to sign recall petitions.
Whether the recall effort succeeds is still up in the air, if not the airwaves. The Victor Valley Daily Press reports that the recall promoters have collected about 16,000 signatures, halfway to the 32,000 names of registered voters they must gather by October to force a recall election. The campaign has also picked up an endorsement from the Howard Jarvis Taxpayers Association.
The recall campaigns launched against Adams, and less vigorously against other GOP lawmakers who voted for the taxes, and voter rejection of several budget-related ballot measures in May had the effect of taking new taxes off the table in the negotiations that led to last week's budget revision. Gov Arnold Schwarzenegger, who earlier had said it would be impossible to balance the budget without new taxes, joined the anti-tax brigade after the May election.
The full Victor Valley Daily Press story on the Adams recall is available here.
Reactions to Friday's passage of the budget revision package poured in over the weekend. Read what lawmakers, labor, health and welfare advocates, local government groups and more had to say after the jump. We'll continue to update the roundup as more responses come in.
The Assembly today backed off a key component of the state budget deal that would have taken $1 billion in gasoline tax money from local governments.
Local governments said the scheme was illegal and vowed to sue. The shift -- which lawmakers said would be repaid -- would have cost Sacramento County about $20 million -- a 45 percent reduction in funds that improve local highways. The city of Sacramento figured to lose about $7.5 million, about half of its budget for street work.
Legislative leaders and Gov. Arnold Schwarzenegger agreed to the shift as part of the budget deal struck on Monday, and the Senate passed the measure early this morning on a 21-19 vote.
But the Assembly balked, and It was unclear how lawmakers would fill the hole in the budget deal.
For readers lucky enough to be asleep at 6:30 a.m., here's a video of Senate President Darrell Steinberg speaking to the media after the upper House wrapped up its all-night marathon of votes.
The Assembly is still in session, trying to round up enough votes to clear the remaining hurdles in the 31-bill budget revision package. Click here for our latest story on the ongoing effort to close the state's $26-billion deficit. You can also follow The Bee's Kevin Yamamura and CapitolAlert on Twitter.
Californians once purchased more than two million new cars a year but the severe recession has driven new car sales sharply downward to less than half that annual level, according to the latest quarterly report from the California New Car Dealers Association.
Registrations of new cars and light trucks declined by 42.9 percent during the first three months of this year, the second quarter in a row that sales had dropped below a quarter-million units. And it means, the association said, that new vehicle sales will fall below a million for the year for the first time since 1975.
Dozens of new car dealerships have closed in California, reflecting both declines in sales and the financial travails of major automakers, especially General Motors and Chrysler. State and local governments also take a hit since each new car sold generates close to $2,000 in sales taxes. A million-unit drop in annual sales, therefore, means about a $2 billion loss to governments. It also depresses ongoing revenues from vehicle license fees, which are now 1.15 percent per year of a car's value.
"Tight credit, continued strains in the housing market, high unemployment and concerns over personal discretionary spending, all helped to pull the market down in the second quarter," said Gary Shipman, CNCDA chairman and a Santa Cruz dealer. "The good news is that I think we have hit bottom, but it could be a slow climb out."
The full report is available here.
The Senate has begun debating the budget revision package, with the Assembly looking to follow suit soon. Click here to download the floor anaylsis of the bills being considered.
Assembly Speaker Karen Bass says her house will take up the budget tonight with plans to finish either late tonight or during the wee hours Friday.
Bass, D-Los Angeles, said she is trying to respect the Republicans' desire to have a 24-hour review of the budget bills before voting. Assembly Republicans were still in caucus as of 4:30 p.m., she said.
"My best guesstimate is 7 or 8," Bass said for her floor vote start.
Asked whether the start may be delayed until Friday, as had been rumored earlier today, Bass said she doesn't think that will be the case. She said the vote may last into early Friday, but she believes it will start sometime late tonight.
Bass has held mini-caucus meetings of 10 members each today, she said. She also said Democrats will caucus as a whole for an hour before session.
Republicans in both houses sought a 24-hour review of bills before voting, but it wasn't clear today when that clock began since some bills were ready Wednesday. Bass said she was also waiting for Senate Appropriations Committee to finish.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, said today that he's "not leaving here until this is done. I even have a cot in my office. ... We're staying. We want to end these IOUs."
The budget deal has come under fire from critics who say proposed cuts to social services and education sectors disproportionally and unfairly target the underprivileged.Local governments and environmental groups are also up in arms over aspects of the agreement.
It's time to add one more (not-so-disadvantaged) group to the budget hit list: California political icons.
One component of the budget revision package is a bill authorizing the sale and lease of some state buildings.According to the bill, the namesake buildings of some of the state's political legends are getting axed.
Included in the list of 11 properties pegged for sale are The Ronald Reagan State Building, The Public Utilities Commission Building (also known as the Governor Edmund G. "Pat" Brown Building) and a double-whammy, The San Francisco Civic Center, also known as the Earl Warren / Hiram Johnson Building.
Buildings named after former Democratic Assemblyman and Oakland Mayor Elihu Harris, former Sen. and state Court of Appeals Justice Joseph Rattigan and Spanish Friar Junipero Serra are also on the chopping block.
Perhaps legislators are hoping to leverage celebrity capital to raise the cash-value of the buildings among politically savvy potential buyers, a la Schwarzenegger's offer to autograph state-owned cars up for sale?
Above is a video of Senate President pro Tem Darrell Steinberg's remarks before going into caucus earlier this afternoon.
The 'best-case scenario' is still that the Senate will begin voting on the budget-related bills around 5 p.m., but judging by Steinberg's remarks, it's going to be a long night.
No word yet on when Assembly votes could come, but here is the Assembly's final Floor Report on the package.
Senate Republican leader Dennis Hollingsworth's office has posted the bill language for about half of the 28 budget-related measures lawmakers will consider today.
Check it out here.
If you are tracking the budget, we hope you got some serious shut-eye last night, because today promises to be a marathon day at the Capitol.
After surviving the prison-plan problem, the budget is expected to come up for votes in both houses later tonight - assuming the bills are ready in time.
The Senate is scheduled to convene at 2 p.m., with no indication of when the actual voting could commence. No word yet on when the Assembly will meet.
City and country governments are reeling over the proposed cuts and plans to borrow from their reserves to help close the budget gap.
As the budget deal is being debated today, other groups will be working with local and regional officials to sort through how to secure funding through the American Recovery and Reinvestment Act.
Cynthia Bryant, director of Schwarzenegger's California Recovery Task Force, State Auditor Elaine Howle and California Recovery Act Inspector General Laura Chick are among the 25 panelist scheduled to participate in today's "Road to Recovery Conference' at San Jose State.
In other news, the rate of growth of California's immigrant population has slowed over the last 10 years. The state still has the largest immigrant population in the nation, but the percentage of immigrants choosing to live in the state dropped 7 points between 1990 and 2007, according to a study by the Public Policy Institute of California. Dan Walters has more and a link to the full report in this post.
Assembly Speaker Karen Bass and Senate President Darrell Steinberg told reporters this afternoon that the budget agreement is back on track and votes are expected to come Thursday night. A Senate floor session has been scheduled for 2 p.m. tomorrow, but no word on what time the budget voting will begin.
Gov. Arnold Schwarzenegger also took some time to address reporters, saying that despite some "hiccups" and "bumps in the road," "the bottom line is we're going to get this budget done."
Schwarzenegger was asked at this afternoon's press briefing whether it was fair to call him insenstive in light of this Twitter video, in which he talks about autographing state-owned cars up for sale and waves a large knife for all of 3 seconds.
His response: lighten up. He's saddened by the cuts, of course, but still has fun with his job (maybe it's all those jacuzzi dips?) and sees no problem with elected officials waving knives, swords and the like in the name of good fun.
The cries of critics of the budget agreement were heard loud and clear across the state yesterday. County and city governments, labor, teachers, social services advocates and environmental groups all began to rally against the proposed cuts. Many newspaper editorial boards joined the growing chorus of voices opposing the deal. Sample snippets from today's editorials after the jump.
Yesterday we posted the gov's take on what the Big 5 agreed to Monday night, as well as an e-mail from Senate Republican Leader Dennis Hollingsworth briefing his GOP colleagues on the deal.
Here's a summary sent out by Dem legislative leaders, detailing the Big 5 agreement and outlining the 'major victories for Democrats' in the current plan.
Visit msnbc.com for Breaking News, World News, and News about the Economy
Gov. Arnold Schwarzenegger was on the airwaves early this morning, defending the proposed budget cuts on "Today" and "Good Morning America." As Kevin Yamamura pointed out in his Twitter feed , the guv's response to a question on how exactly the state plans to reduce the prison population isn't quite on message with what he and Prisons Secretary Matt Cate were saying last night. A possible explanation for the slight veer off message on such a sensitive topic? As we reported in today's AM Alert, the interviews were taped early yesterday evening, meaning they could have started before Cate's 5:30 p.m. conference call with reporters.
For more on the prison plan, check out today's story by Jim Sanders and Yamamura.
Schwarzenegger was also on "Good Morning America" for an interview that was more focused on his position on President Barack Obama's health care reforms than the budget crisis. More on that spot after the jump.
Monday night's budget deal appeared to be in peril by late Tuesday, after Republican Assembly Leader Sam Blakeslee of San Luis Obispo said he would withhold GOP votes because of a Democrat-backed proposal that would reportedly result in the early release of thousands of prisoners.
As Jim Sanders reported earlier today, the lawmakers hoped to help balance the budget by reducing the prison population by about 27,000 prisoners. Prisons Secretary Matt Cate said 6,300 elderly and infirm prisoners would be released to hospital settings or home detention, while sentencing and parole reforms would send fewer offenders into the system in the first place.
But Blakeslee said Repubicans and the governor clearly ruled out any plan that included "early prisoner release" in the Big 5 meeting. Here's an overview of what the governor's office says Big 5 participants agreed to Monday night.
CNBC is scheduled to air what it's calling an "inside look" at the California budget crisis tonight at 6 p.m. The show, which is branded by an ominous infographic, isn't just focused on how messed up California's finances have become. It's also intended to warn residents of the other 49 states that their economy could be the next to fall.
Here's how a CNBC press release described the one-hour special, which will be anchored by "Power Lunch" host Sue Herera.
"With reporters across California and on Wall Street, CNBC takes a look at how the ramifications of a financial failure in California will impact the entire U.S. economy as well as companies and investors around the world. California may be the largest state in trouble, but it isn't alone -- CNBC will tell you how financially healthy your state is."
Interviewees include former Gov.Gray Davis, Treasurer Bill Lockyer, Controller John Chiang and Insurance Commissioner and Republican gubernatorial hopeful Steve Poizner. Some video clips are already up on the program's Web site, and we hear Team Poizner is going to be "live tweeting" their guy's remarks.
Coalitions opposing the Big 5's deal to close the state's $26 billion budget deficit began launching counterattacks against the forthcoming package almost immediately after the news broke that an agreement had been reached.
In this morning's roundup of reactions, critics blasted the plan, which relies heavily on deep cuts to the education and social services sectors as well as proposals to borrow cash from cities and counties, as filled with "devastating" cuts and "painful flaws," going so far as to liken some provisions to a "reckless Ponzi scheme." Several stakeholder groups, including Los Angeles County, are taking the first steps toward suing the state to block the proposed cuts.
Now, the Courage Campaign, a progressive netroots organization, has launched an ad that presents the deal as a plan that will "close" California. Here's their take on the proposed budget revision:
Capitol Weekly snagged a scoop today by publishing an e-mail Senate Republican Leader Dennis Hollingsworth sent to his caucus to break down the details of the budget agreement reached last night.
Read the letter here.
Legislative aides provided details last night of the budget deal between Gov. Arnold Schwarzenegger and legislative leaders. Here's a roundup of items that didn't make our print story today:
-- Sale of state assets. The negotiated deal authorizes the sale and leaseback of 17 state office buildings, including six buildings associated with the East End Complex in downtown Sacramento. Under the plan, the state would essentially enter into a contract to sell the buildings to a private owner with an agreement that it would lease the space back over a certain period of time. The deal, however, does not allow the sale of Cal Expo, San Quentin State Prison or most other assets that Schwarzenegger proposed selling. It only allows for the sale of the Orange County Fairgrounds.
-- High School Exit Exam. Democrats in their majority-vote budget plan sought to suspend the state's HIgh School Exit Exam starting in 2009-10. But Republicans and Schwarzenegger disagreed, and the leaders compromised by exempting only special education students.
-- Number of school days. The deal allows school districts to reduce the school year by five days, as Democrats agreed to in their budget plan.
-- Insurance fee. The deal does not include a 4.8 percent surcharge on property insurance that Schwarzenegger sought to raise $119 million for CalFIRE expenditures.
-- Tax accelerations. We had this in the story, but here's a further explanation. The deal includes a 10 percent increase in income tax withholding starting in January 2010, as well as an increase in the June 2010 tax payment for quarterly filers. Even though the state captures more tax revenues, it is not technically a tax increase because: a) those who withhold can either opt out of the 10 percent increase or obtain a large refund in April 2011; and b) quarterly filers will pay less in the second half of 2010. In both cases, however, the state will face lower than normal revenues in 2010-11 to make up for it.
-- State Parks. There will be some closures or reduction in park services, but nowhere near the closure of 220 parks that Schwarzenegger threatened in May.
-- Welfare and social service programs. State leaders agreed to develop a controversial plan that would centralize the enrollment of welfare and social service programs, possibly with a $2 billion annual contract with a private firm to run the system. Schwarzenegger has proposed the idea as a way to increase efficiency, but Democrats have warned that other states who privatized their enrollment systems have suffered higher costs and enrollment problems. Legislative aides said Monday that they agreed to explore a system that allows stakeholders to vet the proposal and requires legislative approval.
Lawmakers are being briefed as we post on the details of last night's budget agreement, but in the meantime we're posting a slew of statements we have received in response to the deal.
Legislative leaders emphasized that dire times call for desperate measures (read: deep cuts) in their official statements, while the governor had a more upbeat take on the situation, applauding the effort it took to reach an agreement. Stakeholders in the social services sector expressed disappointment and disgust with the deal that was announced last night. Read a roundup of responses after the jump.
We'll be updating the list as more responses roll in, so be sure to check back throughout the day for more reactions. And you can send your take on the deal to tvanoot@sacbee.com.
The Bee's Jim Sanders tells Capitol Alert that leaders are reporting the details of last night's budget breakthrough to their respective caucuses. As we reported last night, floor votes on the deal are expected Thursday.
Senate President Pro Tem Darrell Steinberg and Assembly Speaker Karen Bass are briefing their Democratic caucuses now in separate conference calls. Assembly Republican leader Sam Blakeslee briefed his members last night. Senate Republican leader Dennis Hollingsworth has not yet scheduled a briefing.
As part of the budget deal, state leaders agreed to eliminate in January the Integrated Waste Management Board, the oft-maligned panel with ex-legislator appointees who earn $132,178 per year.
The board's primary objective is to reduce landfill waste and increase recycling in California, and proponents have said that the panel has made California a leader in those areas. But the board's many critics note that board members do not have to work full time to earn that six-figure salary.
As my colleague Peter Hecht noted in February, waste board members last year held 12 meetings and attended 45 committee hearings and conferences, though they say they spend a lot of time meeting with industry and environmental advocates and researching facilities.
The board includes three Democratic legislators who were termed out last year, former Senators Carole Migden and Sheila Kuehl, as well as former Assemblyman John Laird.
Based on what legislative aides said Monday, the board's functions will continue to exist in a new department yet to be named. The working title is the "California Department of Resource Recovery." Basically, the board's staff will continue operating but without the political appointees that have drawn public criticism.
(Update: The meeting was delayed until 3:30 p.m.)
Legislative leaders said Monday they expect to complete a handshake deal later today on closing the state's $26 billion deficit after meeting with Gov. Arnold Schwarzenegger for two and a half hours.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, said leaders will return at 3 p.m. "with the expectation that we are going to wrap this up." He added that he and Assembly Speaker Karen Bass, D-Los Angeles, anticipate a floor vote in their houses Thursday.
Republican leaders said about a half dozen issues still must be resolved.
"Having said that, I think there is a very solid chance of getting this resolved by the end of the day," said Assembly Republican Leader Sam Blakeslee, R-San Luis Obispo, expressing more optimism than he had before the meeting.
Blakeslee said he was going to his office to make calls and conduct research before returning for talks this afternoon. He and other leaders were vague about which issues are still outstanding. Blakeslee and Senate Republican Leader Dennis Hollingsworth, R-Murrieta, said final discussions are concerned with making sure language is specific in how cuts are made.
They said they need a package that is credible enough to take to Wall Street so California can obtain a short-term cash loan to end its reliance on IOUs and ensure it can pay its bills.
Their working framework relies heavily on spending cuts to most sectors of state government, capturing money from local governments and accounting shifts that take funds from 2010-11.
"Some of these issues are extremely technical," Blakeslee said. "We want to have a budget which ultimately is going to meet the test the markets have."
To that point, Steinberg said again Monday that leaders are working on ways to mitigate a possible $4 billion cut to local governments, including borrowing $2 billion from cities, counties and special districts. Local governments are seeking language that assures the state will place a priority in 2013 when it repays them the money, so that they can obtain loans from Wall Street to cover that loss, said Paul McIntosh, executive director of the California State Association of Counties.
McIntosh said previous bill language had placed local governments behind schools and other debt repayments, making it difficult for them to obtain reasonable loans.
"We need that assurance not necessarily for us, but more because it's what Wall Street wants see," McIntosh said.
McIntosh warned that local governments may sue the state if lawmakers and Schwarzenegger follow through on taking local gas tax money and redevelopment funds.
California isn't alone in facing very severe state budget deficits, but a new report from the National Conference of State Legislatures cites the "sheer size" of California's problem as dwarfing those of other states, even in relative terms.
The NCSL report says that collectively, states faced $142.6 billion in deficits for the 2009-10 fiscal year and many already are seeing signs that the total could grow.
"If you think legislators are breathing a sigh of relief because their budgets are passed, think again," said William Pound, NCSL executive director. "If history repeats itself, states are bound to see budget gaps reappear within the first quarter of FY 2010."
The report focused on California, noting that the original estimate of a $24.8 billion gap for 2009-10, plus a leftover deficit of $14.8 billion for 2008-09 "was resolved in a February 2009 budget agreement--except that it wasn't. The resolution included five ballot measures, representing about $5.8 billion of the fix, that failed to get voter support in a May special election.
"Adding the $5.8 billion unresolved figure to the amount of the gap that was closed ($18.9 billion), plus the newest gap ($14.2 billion) that officials expect because of declining revenues, California's cumulative FY 2010 gap explodes to a whopping $38.9 billion or 35 percent of the general fund budget."
The full NCSL report is available here.
After taking a break from budget talks yesterday, Gov. Arnold Schwarzenegger and legislative leaders are aiming to resume private "Big Five" negotiations this afternoon.
Talks broke down late Wednesday because Democrats and Schwarzenegger disagreed on whether to permanently ensure the state gives schools supplemental payments in certain years. For a more lengthy explainer, see yesterday's Capitol Alert item.
Yesterday's break in negotiations gave budget aides and lawyers time to work out how the state can repay schools $9.5 billion for education cuts in 2008-09. Democrats and Schwarzenegger agree that the state should commit to paying that money as part of this budget deal. (Republicans disagree, but Democrats can approve the change on a majority-vote bill because state law does not require a two-thirds vote for education appropriations.)
Schwarzenegger believes the state should approve a one-time payment to schools but not commit the state to permanently doing so in years similar to 2008-09. He essentially wants to codify the contents of May's Proposition 1B, which dedicated a onetime repayment to schools but was rejected by voters.
Democrats and education advocates, however, believe the state should go beyond 1B by "clarifying" Proposition 98 with a permanent fix that ensures the state owes schools money in any future situation similar to 2008-09.
Democrats asserted Wednesday that there was no way to issue a one-time payment to schools in the Legislature that would not be subject to legal challenge or legislative manipulation in later years. While 1B would have accomplished a onetime payment, education advocates felt more confidence in that measure because it would have been written into the constitution.
Budget aides and lawyers -- including those from the California Teachers Association -- were examining Thursday how best to legally bulletproof the $9.5 billion payment and whether there's a mutually agreeable way to do so without permanently changing Proposition 98.
Most people anticipate legal challenges from fiscal conservatives regardless of what happens, so lawmakers and the governor are looking for ways to protect the $9.5 billion payment. Democrats knew this in June. In their conference committee majority-vote budget package, they passed a permanent clarification to Proposition 98 with a 45-day statute of limitations for any legal challenge to the new law.
Update: Sources said that although education appropriations can be approved by majority vote, the latest compromise plan on education is being moved on an urgency basis and thus needs a two-thirds vote.
State Treasurer Bill Lockyer warned today that the longer it takes legislators and Gov. Arnold Schwarzenegger to adopt a budget-balancing plan, the closer California's credit rating sinks to junk status.
And, Lockyer said, "if our credit rating sinks to junk status, the state will find the door to the infrastructure bond market locked shut."
Then it gets worse, he cautioned in a news release. "The ripple effect will be felt by the state's entire public finance system," he said, "not just infrastructure bonds, but commercial paper, variable rate bonds and other securities. And the fallout will hit local governments. When the state drops to junk status, it undermines the creditworthiness of all government issuers in California."
On Tuesday, Moody's Investors Service downgraded the state's general obligation bond rating to Baa1, following a similar move by Fitch Ratings the week before. That's three grades above junk bonds, and the lower the ratings the more it costs California to borrow. It's also less likely investors will deal in California bonds, even though the state has never defaulted or even been late on a bond payment.
Political blogger Greg Lucas obtained a memo that Republican Assembly leader Sam Blakeslee has sent to his colleagues sayng that after Wednesday's Big 5 budget negotiations, "we are very close" to a deal.
The memo follows:
We broke our Big 5 meeting just a few moments ago. It's clear that we are very close to obtaining as good a deal as we are likely to get given the state of negotiations and the leverage available to us with unified rep caucuses and a sympathetic governor.
There remain a few important outstanding questions and no deal is yet inked.
However, it is now time for us to meet as a caucus and review everything we understand will be in the deal to ensure we can deliver the votes prior to making any public announcement that the deal is "done".
We will hold caucus at noon tomorrow to review the components of the tentative agreement and identify the last outstanding issues to be resolved.
The best news - NO TAXES
Budget talks stalled Wednesday when Democrats sought a permanent clarification to the Proposition 98 school funding guarantee that Republicans and Gov. Arnold Schwarzenegger wouldn't provide.
The clarification would specify that in bad economic years when Proposition 98 allows the state to use a formula giving schools roughly 40 percent of general fund revenues -- otherwise known as "Test 1" -- the state would owe schools supplemental payments in later years.
Democrats and school groups believe the intent behind Proposition 98 requires the state to pay schools that supplemental money after a Test 1 year. But Schwarzenegger has asserted that the constitution is unclear on the matter and the state could avoid paying school supplemental money in such cases.
Sure enough, under new budget numbers released last week by the Department of Finance, the 2008-09 fiscal year would count as a Test 1 year, a situation the state has not faced since Proposition 98 took its present form in 1990.
California could see a nearly $1.4 billion per year increase in state revenues were it to legalize marijuana, the state Board of Equalization says in an analysis of pending legislation to to do that.
The bill (Assembly Bill 390) by Assemblyman Tom Ammiano, D-San Francisco, is still awaiting its first committee hearing and is likely not to be considered until next year. It would impose not only sales taxes but a $50 per ounce fee on marijuana sales, which would be licensed by the state much as alcoholic beverages are regulated.
Today, although considered illegal by federal authorities, California allows limited sales of marijuana for medicinal purposes, subject to local control, in accordance with a ballot measure approved by voters in 1996. And the state imposes sales taxes on those pot transactions. But wider sales would, under the Ammiano bill, be dependent on federal permission.
California is considered by federal authorities to be the nation's top marijuana producing state with 8.6 million pounds a year, valued at $13.8 billion, making it one of the state's largest agricultural crops, much of which is exported to other locales.The Board of Equalization analysis concludes that assuming 16 million ounces of marijuana consumption in California a year, legalization under AB 390 would generate $990 million from the $50 per ounce special levy and $392 million in sales taxes.
"We can no longer afford to keep our heads in the sand when it comes to marijuana," Ammiano said in a statement. "The move towards regulating and taxing marijuana is long overdue and simply common sense. The benefits of regulation are clear - controlling marijuana would generate up to $1.3 billion in much needed revenue for the state, restrict access to only those over 21, end the environmental damage to our public lands from illicit crops, and improve public safety by redirecting law enforcement efforts to more serious crimes.
"It defies reason to propose closing parks and eliminating vital services for the poor while this potential revenue is available. California has an historic opportunity to be the first state in the nation to enact a smart, responsible public policy for the control and regulation of marijuana."
Democratic leaders raised expectations Tuesday by telling reporters they expected a budget deal that night and reiterating as much during a break from talks with Gov. Arnold Schwarzenegger and Republican leaders.
They ultimately fell short Tuesday, cutting off talks just before midnight. But they predicted they would need only "one more working session" Wednesday to bridge the state's $26 billion deficit. They still have not agreed on a method to cut education spending -- an issue fraught with political peril -- nor have they finalized the total package of spending cuts for the 2009-10 budget year.
In a sign of solidarity, all four legislative leaders emerged together Tuesday from Schwarzenegger's office to say they were a day away from a final budget agreement.
The leaders plan to hold separate caucus meetings Wednesday morning. They are then scheduled to resume "Big 5" negotiations with Schwarzenegger at 1:30 p.m.
Despite the hopeful talk from lawmakers, Schwarzenegger's office was less enthusiastic. Schwarzenegger spokesman Aaron McLear said the governor would not lay out a timeline for a final deal. "We're not there," McLear said of negotiations.
If they reach a deal Wednesday, Bass said there likely wouldn't be a floor vote until next week. She said it would take several days to draft budget language.
For the second time this month, a major Wall Street ratings house on Tuesday downgraded California's long-term bond rating after the state began issuing IOUs.
Moody's Investors Service downgraded California's general-obligation bond rating to Baa1 from A2, a drop of two notches and only slightly above junk status. Fitch Ratings issued a similar two-notch downgrade last week. California has never defaulted on its bond payments, but it had the lowest bond ratings of any U.S. state prior to this month's ratings deterioration due to its ongoing budget problems.
The Moody's downgrade potentially increases California's borrowing costs for public works projects, raising the stakes for the state's ongoing budget saga.
Moody's said in a statement that its downgrade "reflects the increased risk to the legally or constitutionally required payments ('priority payments') as the state deadlock continues and the controller has begun to make certain payments that are not legally or constitutionally required to be paid on time ('non-priority payments') with IOUs."
Moody's also kept California on its "Watchlist" for a further downgrade, warning that "if the state gets to a position where it is unable to make priority payments, a multi-notch downgrade may result."
California's Baa1 rating is only three notches away from junk status and tied for the lowest Moody's rating in state history. Moody's last downgraded California to Baa1 in December 2003, citing the state's budget stalemate and Schwarzenegger's drastic reduction in the state's car tax at the time.
"The political stalemate continues to wreck California's reputation and continues to pound taxpayers deeper and deeper into a hole," said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. "The action by Moody's is the latest evidence of the need for the Legislature and the governor to quickly and credibly fix the budget."
A federal judge on Monday ordered California to pay In-Home Supportive Services workers up to $12.10 per hour in wages and benefits immediately, suggesting the state had dragged its feet in response to her earlier injunction.
California lawmakers and Gov. Arnold Schwarzenegger had agreed to drop the state's contribution to IHSS wages and benefits to $10.10 per hour as part of their February budget deal.
In a lawsuit filed by the Service Employees International Union, U.S. District Court Judge Claudia Wilken in Oakland ruled last month that the state did not analyze the impacts of the wage cut before approving it, running afoul of federal law. She blocked the wage drop to $10.10 that was supposed to take effect July 1.
The cut would have affected wages in 13 counties and would have saved $98 million this fiscal year. Following the ruling, the state put the burden on counties to ask for IHSS rates to be restored to their pre-July $12.10/hour rates. Nine of the 13 counties have asked for that restoration. The state also said it could take up to 60 days before the state began paying the higher rates again.
Wilken on Monday did not find state officials in contempt, but she said "their manner of compliance has not carried out the intent of the order." She said her initial decision had intended for the $12.10 rate to remain in effect July 1 and that the state should immediately notify all counties by Tuesday that it would pay that amount.
Lizelda Lopez, a California Department of Social Services spokeswoman, said the state has requested that the payroll system begin issuing checks to IHSS providers at the higher rate in the nine counties that asked for the higher rate.
"This change cannot be made within 24 hours, and so the Department will make arrangements for providers to receive a supplemental check to cover the difference," Lopez said.
"We are taking the steps within our authority to comply with the court order as expeditiously as possible including adjusting the level of wages and benefits to the pre July 1st level for those counties that have requested it," Lopez said. "However, it is important to note that the state does not set the wages and benefits for IHSS providers, the counties do. The state does not have the authority to force counties to pay wages that they have not agreed to."
Update (3:45 p.m.): Lopez said the Department of Social Services is contacting the four other counties today to see whether they want to return to the higher, pre-July rate.
Correction: Savings should be $98 million, not $98 billion.
Gov. Arnold Schwarzenegger and legislative leaders are scheduled to resume budget talks this afternoon to bridge the state's $26 billion deficit.
Legislative leaders described talks positively over the weekend, but they still need to resolve several outstanding issues. Chief among them is whether to suspend the state's Proposition 98 guarantee for school funding, as The Bee outlined Sunday.
To resolve the Proposition 98 guarantee, leaders will need to make a deal with education groups -- principally the California Teachers Association, which began airing $1 million in ads last week blasting the governor and opposing any change in Proposition 98.
Schwarzenegger himself began airing ads Monday telling voters that he is holding the line against taxes and believes the state should cut "waste, fraud and abuse." It's a message that he believes resonates with voters and shores up his negotiating position.
Leaders still need to agree how much the state should cut spending in social programs and corrections. Democratic leaders have suggested that weekend talks helped bridge the divide in that area, but they took yesterday off to give budget aides time to review the latest proposals and determine how much of an impact the cuts will have.
Republicans are still wary of borrowing $2 billion in local government funds, another issue that will have to be resolved.
As Gov. Arnold Schwarzenegger and legislative leaders wrangle over whether to cut state spending on schools as part of a deficit-closing package, federal education authorities released a new compilation of academic test score data today, indicating that California's gap between achievement by black and white youngsters is wider than the national average.
The National Center for Educational Statistics report revealed that both black and white eighth-graders in California score below national averages in reading, and the gap between the two groups, 29 points, is three points above the national gap. On a 0-500 scale, California's white eighth-graders are at 266, four points below the national average for whites, and the state's black eighth-graders are at 237, seven points below the national average for blacks.
The eighth-grade gap is even wider when it comes to mathematics. Again, both groups score below the national averages for their grade and race, and the gap between them in California is 35 points.
The picture is only a bit brighter among fourth graders in California. White students are scoring somewhat above the national average in reading but blacks are well below average, although the gap between the two groups has narrowed somewhat since 1992, from 36 points to 27 points currently (2007 data). The gap has also narrowed markedly over the years in mathematics achievement, from 39 points in 1992 to 29 points in 2007.
"While the report released by the NCES today does not provide new data about California student achievement, it does provide a stark reminder of the prevalence of the achievement gap here and across the countr," state schools Supt. Jack O'Connelll said. "The achievement gap is a real threat to the economic well-being of millions of students as well as to our state and national economies. We have put ourselves in a permanent national recession by failing to close these gaps."
"I realize that these are extraordinarily difficult economic times for schools," O'Connell continued, "but we cannot let budget cuts distract us from our goal of closing the gap and helping all students meet their full potential. We owe it to our students -- and to our state -- to stay the course."
California ranks below the national average in per-pupil spending, although how far below is a subject of intense political debate, and educational advocates contend that slicing billions of dollars from state school appropriations will put the state further behind in academic achievement, while their critics say much of the money is being squandered on administrative overhead and too-generous salaries and fringe benefits for teachers and administrators.
The full NCES report is available here.
The American Cancer Society and other anti-smoking groups are ramping up their campaign to nearly triple California's tax on cigarettes and other tobacco products, citing boosts in other states that leave California with one of the nation's lowest taxes on smoking.
A $1.50 boost in California's 87-cent-per-pack has been part of the Democratic legislative leaders' plan to balance the state budget, saying it would raise $1.2 billion a year to help pay for health care, but Republicans have shunned it and other tax boosts.
The new drive for a tobacco tax boost includes new data indicating that 10 other states, half of them with Republican governors, have boosted their taxes this year, leaving California's tax at the 32nd highest in the nation.
CIgarette taxes range up to $3.46 per pack in Rhode Island after the latest round of tax increases, according to the compilation by the pro-tax coalition.
"Ten states have implemented cigarette and tobacco tax increases in 2009 alone, including Arkansas, Delaware, Hawaii, Florida, Kentucky, Mississippi, New Jersey, Rhode Island, Vermont, and Wisconsin," said Jim Knox, chief legislative advocate for the American Cancer Society. " California hasn't raised the tax in over ten years and it's about time that we do. A $1.50 increase can help reduce teen smoking rates and save over $8 Billion in health care costs associated with smoking. Our coalition encourages the members of the legislature and Governor Schwarzenegger to support the $1.50 increase."
A former UCLA chancellor asked the California Supreme Court today to declare that the state constitution's requirement of two-thirds legislative votes to raise taxes is invalid.
The suit was filed by Akin Gump Strauss Hauer & Feld LLP on behalf of Charles Young, former chancellor of the University of California, Los Angeles, and director of the Museum of Contemporary Art in Los Angeles. The suit described Young as "a citizen, taxpayer, and voter of the State of California, interested in seeing that the California government carries out its public duty consistent with constitutional mandates..."
The legal theory of the suit, which names the Legislature's chief clerks as the technical defendants, is that when voters passed Proposition 13 in 1978, cutting property taxes and requiring a two-thirds vote for tax increases, it was a "revision" of the state constitution rather than an "amendment."
The constitution allows amendments to be made by initiative petition but allows revisions - generally a more fundamental change - to be made only through a constitutional revision commission or a constitutional convention.
It's essentially the same argument that opponents of Proposition 8, the 2008 measure that outlawed same-sex marriages, made in attempting to persuade the state Supreme Court to void that measure. But the court, which had earlier sanctioned same-sex marriages, ruled that Proposition 8 was valid.
The two-thirds vote requirement has largely thwarted efforts by Democrats and liberal groups to raise taxes to cover the state's periodic budget deficits since Republican votes are needed. A few Republicans did vote for new taxes last February, but the budget remains imbalanced, and GOP leaders, along with Gov. Arnold Schwarzenegger, are insisting that the remaining deficit be covered by spending cuts rather than new taxes.
The state's chief sources of revenue, income and sales taxes, fell in June more than $1 billion below estimates that were scarcely a month old, state Controller John Chiang reported today, exacerbating the state's budget deficit crisis.
Personal income taxes in June were $987 million below what Gov. Arnold Schwarzenegger's administration had estimated in its May revision of the state budget, while sales taxes were down $154 billion.
The two shortfalls were offset, in part, by $1.31 billion in corporate taxes that were 41.2 percent above estimates -- attributed by Chiang to one-time payments by corporations to avoid a new state penalty for underpayment.
The below-expectations revenues make the state's 2009-10 budget deficit, pegged by the administration at $26.3 billion, that much worse. Schwarzenegger and lawmakers are stalemated over how to deal with the gap. Chiang's office has begun issuing IOUs in lieu of checks to many state creditors because of a severe cash crunch.
"California continues to pay for its history of unbalanced budgets," Chiang said, "The state spent $10.4 billion more than it collected last year alone, and is now without enough cash to cover all of its payment obligations. Our major sources of revenue have continued their trend downward, leaving no viable option but to craft a new budget that recognizes California's recovery has yet to begin."
The full monthly controller's office report may be found here.
Despite California's high taxes, the poor are more likely than the rich to leave the state for other locales, the Public Policy Institute of California concludes in an analysis of Census Bureau data - a report that may affect a current political debate over the effects of taxation.
Among poor families, those with incomes of $22,000 or less, 1.73 persons leave California for every one that comes here, PPIC said in a report entitled "Are the Rich Leaving California?" The ratio drops as incomes rise, with those in the top quintile, with incomes of $110,000 up, the least likely to leave. At the very top, families with income of $300,000 or more, the ratio drops to 1.09.
That said, the states without personal income taxes, such as Texas, Nevada and Florida, are the most likely destinations for high-income families and individuals leaving California. However, those states are also among the most frequent destinations of low-income families as well.
The data don't include the latest increase in state taxes, which Gov. Arnold Schwarzenegger and the Legislature passed in February. And they use Census Bureau numbers that disagree with the state's own demographers, who believe the outflow from California is much lower than federal analysts detect.
California is highly dependent on personal income taxes from the highest-income residents. The top 1 percent of taxpayers pay half of state income taxes and about a quarter of all state revenues. Opponents of tax increases argue that raising rates will drive them out of the state, citing golfer Tiger Woods as an example of a high-income Californian who moved to Florida. But the PPIC study bolsters the countervailing view that raising marginal tax rates would have little effect on interstate migration.
The fuller PPIC report is available here.
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."
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.
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.
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.
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.
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."
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.
Gov. Arnold Schwarzenegger and Senate President Pro Tem Darrell Steinberg said separately Thursday that they are optimistic a budget deal can be struck within several days.
The tone of their comments marked a stark contrast to Capitol fighting over the last few weeks between Democrats and Republicans over bridging the state's $26.3 billion budget gap.
Steinberg also said Democrats had given up any attempt to increase taxes on tobacco or establish an oil severance tax.
In a Capitol news conference, Steinberg said significant progress is being made behind closed doors, adding, "It's time that we get this done."
Steinberg said he is encouraged by lengthy discussions Wednesday with Schwarzenegger and legislative leaders.
"I'm going to be here and I know that some of my colleagues are going to be here around-the-clock today, tomorrow and over the weekend with the hope and expectation that over the next several days we will complete this and complete it successfully."
Senate President Pro Tem Darrell Steinberg has sent members home for the July Fourth holiday weekend with advice to stay within four hours of the Capitol should budget progress require a floor session.
Steinberg, D-Sacramento, and "core members" of the caucus will stay in town to negotiate the spending plan, according to spokeswoman Alicia Trost.
The next scheduled session is noon on Monday, but the Senate remains on call over the weekend.
Gov. Arnold Schwarzenegger used the finger Thursday for his latest attack on the Legislature.
The governor said he can't understand why the Democrat-controlled Legislature opposes his budget-related proposal to require fingerprinting of recipients of in-home support services, which help elderly, blind and disabled Californians live independently.
"That's why I don't understand the Legislature," he said in a Los Angeles press conference.
Schwarzenegger's fingerprinting proposal, part of a package of governmental changes he seeks in budget negotiations, is meant to help detect fraud committed by people receiving aid under numerous identities.
"(Legislators) say this is an insult," Schwarzenegger said. "I say why is it an insult when you get fingerprinted?"
From Steve Wiegand
State senators didn't balance the budget Tuesday night, but their failure came only after some tense moments and a rare public scolding by one senator of another.
At the center were three bills, already approved in a bipartisan fashion by the Assembly, which would have freed up enough cash to temporarily stave off the need to issue IOUs to pay state bills. All 25 Senate Dems ultimately voted for them; none of the 15 Senate Reeps did.
For 45 minutes, the clerk dutifully called the roll of the senators who had yet to vote. That consisted of Sen. Abel Maldonado, R-Santa Maria, who never voted either way. At one point, Senate majority leader Dean Florez of Shafter ordered senators to sit down and stay in their seats.
That prompted Sen. Dave Cox, R-Fair Oaks, to rise and inquire where it said in the rules that senators had to stay seated. "I'm just checking, Mr. President," Cox said with a twinkle in his eye. "I'm not trying to be a pain in the butt."
The remark drew laughter -- and a rebuke from Sen. Mark Leno, D-S.F. Leno said it was "sad, if not pitiful" to be laughing when the house was dealing with budget cuts that would devastate the lives of millions of Californians. "That folks are joking in this room," Leno said, "is beyond understanding."
That quieted the room. And Cox contented himself with sidling over to a desk in front of Leno and grabbing a piece of gum from another senator.
Gov. Arnold Schwarzenegger has set an 11:30 a.m. press conference in Room 1190 to talk about the future of budget negotiations, just hours after Senate President Pro Tem Darrell Steinberg said the governor's refusal to sign stop-gap budget measures (that the governor proposed) "may be the most irresponsible act I have seen in my 15 years of public service."
Gov. Arnold Schwarzenegger reiterated Monday that he will veto any majority-vote budget solution with new taxes and went so far as to call such a maneuver "illegal."
As Democrats in the state Senate pursued a majority-vote budget package Monday morning, the Republican governor held a press conference in his office to say that the plan was dead on arrival.
"What they are working on right now is, I think, all part of the kabuki," Schwarzenegger said. "They are wasting time by going through those drills, trying to pass a simple-majority, illegal tax increase. I will never sign anything like this. I think they know I will never sign those kinds of things. So why waste time and run out of time, and then all of a sudden we have to hand out IOUs?"
The "kabuki," as the governor calls it, happens for a reason. By sending the governor a majority-vote budget package, Democrats want to say that they passed a solution but that Schwarzenegger rejected it. That claim may ring slightly hollow, since a majority-vote plan couldn't take effect for another three months and would not necessarily avoid IOUs, but it's part of the political maneuvering that takes place in the Capitol.
Schwarzenegger emphasized that he wants the Legislature to solve the entire $24 billion budget problem by Tuesday without new taxes and with several reforms, such as eliminating boards and commissions.
Senate President Pro Tem Darrell Steinberg's office responded that lawmakers have approved eliminating state agencies and restructuring certain boards, an efficiency plan different from what the governor proposed but which saves the same amount of money.
Governor Arnold Schwarzenegger made it clear this morning he won't sign a package of taxes and cuts approved by Assembly Democrats last night as a way of balancing the state budget.
"I will veto any majority vote tax increase bill that punishes taxpayers for Sacramento's failure to live within its means," the governor said in a prepared statement. "The Legislature will have a difficult time explaining to Californians why they are running floor drills the day before our budget deadline. We do not have time for any more floor drills or partial solutions. It's time for the Legislature to send me a budget that solves our entire deficit without raising taxes."
It's sort of sun-rises-in-the-east news, since the governor had already said he did not favor further taxes or fees as part of the budget-balancing solution.
But it does blunt the effects of the squeeze play Democratic legislators were attempting. Even as Assembly Speaker Karen Bass, D-L.A., and Senate President Darrell Steinberg, D-Sacramento, were meeting with Schwarzenegger Sunday night, the Assembly was passing a package of bills that made deep cuts in state spending, raised taxes on cigarettes, imposed a new tax on oil production and raised or imposed new fees on property insurance policies, vehicle registration and drivers licenses.
The Senate was set today to take up the bills.
California's highest-income residents are amassing ever-greater shares of personal income while those at the bottom are falling behind when adjustments for inflation are taken into account, according to a new study of state income tax data by the California Budget Project.
The CBP is a think tank in Sacramento that presses for policies that benefit poor and working class Californians and its new study buttresses its contention that current policies favor the rich. It covers trends through 2007, the latest for which data are available, and therefore does not deal with income effects of the current recession.
"One-quarter (25.2 percent) of total AGI went to the wealthiest 1 percent of taxpayers in 2007, nearly twice their share (13.8 percent) in 1993, the earliest year for which data are available. In contrast, taxpayers with incomes in the middle of the distribution had just 10.0 percent of total AGI in 2007, down from 13.0 percent in 1993," the new CPB study concludes.
"This means that the top 1 percent of taxpayers received 25 times their proportionate share of AGI in 2007, while middle-income taxpayers received half of their proportionate share of income. If the share of income going to the wealthiest 1 percent of taxpayers had remained the same since 1993, the bottom 99 percent of taxpayers would have had an additional $123 billion in income in 2007 - equal to $8,388 each."
The distribution of personal income is an important economic index because the deficit-ridden state budget is dependent on personal income taxes for more than half of its support, and the top 1 percent of taxpayers account for half of income tax revenues. Those revenues have dropped sharply in the last two years, largely because of declines in capital gains income by the wealthy.
A commission appointed by Gov. Arnold Schwarzenegger and state legislators will soon deliver a plan for overhauling the state's taxation system, aimed at making it less volatile, and one of its recommendations is likely to be some kind of flat income tax that would reduce reliance on taxes from the wealthy and increase the burden on middle- and lower-income taxpayers.
The full CBP report is available here.
Senate President Pro Tem Darrell Steinberg convenes a 9 a.m. floor session today, vowing to "work every day" to pass a budget by July 1. Steinberg insists he won't bend on protecting in-home care for the elderly, college assistance for young adults and health care for children. And he is hoping he won't look like a pretzel once the deal is done.
Check out the video of his presser after Wednesday's wranglings to find out more on what's next to come in the "serious business" of sorting out California's fiscal mess.
Speaking of health care, the Health Care for America coalition will be holding rallies today outside offices of U.S. Dianne Feinstein in San Francisco, Fresno, San Diego and Los Angeles to demand more strident support from the California senator for President Barack Obama's universal health care efforts.
The coalition includes Health Access California, the Service Employees International Union, the American Federation of State County and Municipal Employees, Associations of Community Organizations for Reform Now (ACORN), the California Partnership and the Children's Defense Fund.
While the budget and health care may dominate the day's attention, the Little Hoover Commission will hold a 9 a.m. hearing in Capitol Room 437 on management and governance of California's water supply.
Maybe it's just a reminder that all those clouds - ominous or otherwise - around the state house these days couldn't exist without water. Hot air alone is not enough.
The Service Employees International Union has just dropped another wad of cash for another television commercial, this time lambasting Gov. Arnold Schwarzenegger for calling for "sacrifice" by cutting social services but refusing to tax cigarettes and oil extraction.
The ad buy, described by spokesman Mike Roth as a "six figure" air time purchase, falls short of the SEIU's recent $1 million commercial blitz to pressure lawmakers and the governor for a budget deal to its liking.
The text of the newest commercial, running today in Sacramento and all other state markets, reads as follows:
"Balancing the state budget requires sacrifice AND common sense. When lawmakers cut health care for kids, the governor called it 'shared sacrifice.' When they slashed aid to college students, and home care for seniors, he called it 'shared sacrifice.' Now they propose taxes on Big Oil and Tobacco and he calls it a deal-breaker. His plan? Even more cuts for children, students, and seniors.Tell the Governor special interests should sacrifice, too. It's common sense."
If anyone doubted that today's legislative debates on the Democrats' version of the state budget are basically "drills" aimed at staking out public positions, rather than actually doing something, a leaked copy of the Assembly Democrats' "talking points" should put the issue at rest.
Veteran Capitol journalist and blogger Greg Lucas obtained a copy of the points Democrats are supposed to make during the debates, including one in which the legislators are to insist that it's not a drill, but a genuine effort at resolving the political impasse on closing the budget deficit.
Democrats were told by their leaders to praise the plan because it protects the safety net of health and welfare services and schools and calls for "shared pain."
"This is not a drill. This is the deficit fix," says one suggested line that is certain to be parroted. "This is the responsible solution vetted in public with hundreds of hours of public testimony..."
The memo is a peek into the essentially staged nature of supposed debates on legislative floors and is available here.
Battlelines were hardening today over a Democratic plan to bridge a $24 billion budget gap, a package of more than a dozen bills scheduled to be voted upon Wednesday.
Senate President Pro Tem Darrell Steinberg said that Republicans have signaled that they won't support proposed tax increases in the package, including proposals targeting tobacco and oil extraction.
But even without taxes, the Democrats' plan would fill more than $21 billion of the gaping hole that threatens to leave the recession-wracked state unable to pay all its bills next month.
"Why isn't it better to solve $21 billion instead of zero?" said Steinberg, D-Sacramento.
Democrats cannot implement their package without support from Gov. Arnold Schwarzenegger, however, and the governor's spokesman said that any partial or stopgap plan will be rejected.
"Anything less than $24 (billion) doesn't solve the problem," McLear said.
Schwarzenegger also will reject the Democrats' tax increases if they reach his desk, according to McLear.
"Increases in taxes are not an option," he said.
McLear said he expects the Democrats' plan to fall short of the necessary votes for passage Wednesday, prompting more negotiations as the state inches closer to a financial abyss.
Steinberg said that Democrats cannot accept Schwarzenegger's alternative plan, which calls for elimination or deep cuts to services ranging from health insurance for low-income children to financial assistance for college-bound students.
"The price is too high," Steinberg said. "We're not eliminating the safety net for the most vulnerable Californians. It's anathema to everything I believe in and that the members of my caucus believe in."
Republican legislators also threaten to block the Democrats' plan Wednesday.
To take effect immediately, the program cuts proposed in the Democratic package would require at least a handful of GOP votes in each house -- and that support appears increasingly unlikely because many Republicans say the cuts are not deep enough.
Steinberg noted irony in the notion that Republicans, who for years have pushed for smaller government, are threatening to reject a package containing more than $11 billion in program cuts.
"It's a little bit odd," Steinberg said.
At the close of day Wednesday, one more state senator sent in official word that he's ready to take a 5 percent pay cut to do his part for the budget crisis.
That leaves just two senators left who haven't agreed to Senate President Pro Tem Darrell Steinberg's call last week to collegues to take a voluntary reduction.
A week ago, Sen. Sam Aanestad's spokesman said the Grass Valley Republican would take a cut if his caucus agreed to it.
Maybe the caucus agreed.
The state controller's office confirmed receipt Wednesday of Aanestad's request for the 5 percent salary cut "effective immediately."
Aanestad sits on the Senate Rules Committee, which during an executive session Wednesday approved cuts in health benefits and a 5 percent reduction in salary for all Senate staff earning over $50,000 a year.
The senators' pay cuts will kick in July 1.
Those who aren't on record yet requesting the cut are Roy Ashburn, R-Bakersfield, and Roderick Wright, D-Inglewood.
Read the list of the senators who've put in their paperwork for the reduction after the jump:
Three more senators' letters rolled in to the state controller's office Friday requesting self-inflicted salary cuts -- including one from the man who started it all, Senate President Pro Tem Darrell Steinberg.
The Sacramento Democrat asked colleagues last Tuesday to voluntarily slice 5 percent of their salaries as of July 1.
Senators should sacrifice, too, he said, as Californians face deep cuts in services and state employees -- including Senate staff -- have been given or will get their salaries reduced by furloughs.
Also submitting letters via e-mail or fax Friday were Sen. Dean Florez, D-Shafter, and Sen. Gloria Romero, D-Los Angeles.
Any other senators who plan to volunteer must submit their requests to the controller's office by July 22 for the cut to be applied for the pay period that begins July 1. The senators are paid once a month. Of course, sources in the controller's office say, the cut can also be applied retroactively.
California's general fund budget is dependent on personal income taxes for about half of its support, which is why it and other states with high dependence are feeling the nation's most severe budget pinches, a new study by the Nelson A. Rockefeller Government Institute reveals.
"The April 15 deadline for personal income tax returns brought very bad news for many states," says the report, called "April Is the Cruelest Month."
Overall, state income tax collections this year are running 27 percent below what they were a year ago, the Rockefeller survey found, although a few states actually reported increases.
California's income tax revenue decline, 33.8 percent, is the fourth highest in the nation but the other states reporting higher percentages - Arizona, South Carolina and Michigan - are much less dependent on income taxes. In Arizona, for instance, just a quarter of its general fund revenues come from the income tax.
When those two numbers are combined, the decline in income tax revenues means an overall revenue drop of 16 percent in California, one of the highest numbers in the nation. New York and Massachusetts are faring worse than California, as is Oregon, which has no sales tax and is dependent on income taxes for a whopping 68.5 percent of its revenues.
The full Rockefeller report is available here.
Moody's Investor Service, following on the heels of Standard & Poor's, placed California on a credit watch list today, citing the state's chronic budget deficits and a "continued political stalemate" over closing them.
"Although the executive branch has proposed a package of budgetary and cash measures, thus far no meaningful solutions have come out of the Legislature," Moody's said. It listed the state's fiscal problems as continued deterioration in the state's economy - a concern underscored by today's announcement that California's unemployment rate reached a record 11.5 percent in May - and voters' rejection of several budget-related ballot measures in May that limit alternatives for closing the deficit, currently estimated at more than $20 billion for the 2009-10 fiscal year.
"If the Legislature does not take action quickly, the state's cash situation will deteriorate to the point where the controller will have to delay most non-priority payments in July. Lack of action could result in a multi-notch downgrade," Moody's said. "If the Legislature does take action, we will assess the likely impact of those actions: whether they improve liquidity, whether they improve budgetary balance, whether they provide long-term solutions or quick fixes, and whether we believe the solutions to be viable, to determine whether the actions taken leave the state in a position consistent with the current rating level."
California already has the lowest credit rating of any state.
The California Republican Party seemed to hit political paydirt in a YouTube ad that pilloried the Service Employees International Union for "bullying state leaders in the budget process."
The ad featured footage of an angry woman telling lawmakers that union members would work to defeat lawmakers who didn't vote their way.
It turns out that the woman portrayed as an SEIU union leader in the commercial is a home health care worker from Fresno named Lisa Brown, who works for the state by caring for her son who has Down syndrome.
Now Brown is calling on Republicans to pull the ad and "apologize for its content."
"I am the mother and care provider for a sweet young man with developmental disabilities who doesn't comprehend the implications of budget cuts on the table in Sacramento," Brown said a letter to the state Republican Party.
Brown, who is an SEIU member but not a union official, said: "Your attempt to label me a 'union bully' would be hilarious if it weren't so dangerous to people that I love.'"
The GOP ran the video to counter a $1 million SEIU advertising blitz featuring a television commercial that urges lawmakers to consider taxes on oil extraction, cigarettes and alcohol to avoid social services cuts.
In the selected clip in the GOP ad, Brown hardly treads easily on lawmakers:
"We helped to get you into office, and we got a good memory," she says angrily at a legislative budget hearing. "And come November, if you don't back our program, we'll help to get you out of office."
Brown said in her letter that she appeared at the hearing "to speak from my heart and in my own words" on behalf of services for the disabled.
But California Republican Party spokesman Kevin Roberts said the ad succinctly portrayed SEIU political threats against elected officials and will continue to run.
"I'd say the clip speaks for itself. It's an open threat in a public hearing that many Californians are appalled to see," he said.
Two more senators' letters requesting 5 percent pay cuts as of July 1 have arrived at the State Controller's Office today.
The letters were from Carol Liu, D-La Cañada-Flintridge and John Benoit, R-Palm Desert.
A third senator, Jeff Denham, R-Merced, had declined a 2.75 percent pay raise back in December 2007. Denham sent a letter Thursday asking that his salary be set at $110,397, which is the same as taking a 5 percent pay cut from the $116,209 most senators get paid.
Official letters are starting to roll in -- two so far -- from state senators answering the call to sacrifice during a time of fiscal crisis and volunteer for a 5 percent pay cut.
As of this afternoon, the State Controller's Office, which issues legislators' paychecks, reported receiving letters from two senators: Ellen Corbett, D-San Leandro, and Patricia Wiggins, D-Santa Rosa.
Most senators receive a salary of $116,208 a year.
Wiggins actually sent her letter last week, an aide said. That was before Senate President Pro Tem Darrell Steinberg, D-Sacramento, sent out a letter Tuesday afternoon urging colleagues to step out and take a cut as of July 1.
Steinberg and Sen. Lois Wolk, D-Davis, say they're definitely doing it, although their names are not yet on the controller's official list.
Some senators have already taken a cut or declined to take prior salary increases, controller records show. Back in December 2007, four senators declined to take a 2.75 percent salary increase that kicked in January 2008.
They were Jeff Denham, R-Merced; Christine Kehoe, D-San Diego; Gloria Negrete McLeod, D-Chino; and Mark Wyland, R-Solana Beach.
In February of this year, Sen. Dave Cox, R-Fair Oaks, took a 5 percent pay cut. In May Sen. Lou Correa, D-Santa Ana, went for a 10 percent reduction.
And in June, two senators volunteered for an 18 percent cut: Alan Lowenthal, D-Long Beach, and Abel Maldonado, R-Santa Maria.
There's nothing like massive budget cuts to gore a few state agency oxen -- and sometimes the oxen gore back.
Witness today's news release from the California Statewide Law Enforcement Association (CSLEA), which represents about 7,000 cops of various sorts who work for the state. Among them are officers of the Bureau of Narcotic Enforcement in the state Dept. of Justice. The BNE agents have a sterling national reputation as top law dogs in fighting the illegal drug industry, especially the organized crime element.
But the budget changes approved by the two-house conference committee include a hefty cut in the bureau, which agents say will result in the loss of 70 positions.
To stir up public opinion, the CSLEA and Association of Special Agents - Dept. of Justice say they are planning to run radio and newspaper ads around the state tomorrow. Public support might come in handy, particularly since the headline on their news release isn't likely to make many legislators feel warm and fuzzy about restoring the cuts. It read:
"California Legislature surrendering to drug lords in Mexico"
A day after Senate leader Darrell Steinberg urged colleagues to do their part for the budget crisis - and take a 5 percent pay cut - Capitol Alert looked into what some Sacramento-area lawmakers were planning.
Sen. Lois Wolk, D-Davis, will be taking the 5 percent reduction in her salary. "That's in addition to the $35,000 a year in per diem money she already declines," said Craig Reynolds, Wolk's chief of staff. He said she'll be sending a letter to the State Controller's Office to let those who issue the paychecks know.
Sen. Dave Cox, R-Fair Oaks, already volunteered to take a 5 percent pay cut last February, his aides pointed out.
Sen. Sam Aanestad, R-Penn Valley, won't discuss the idea until the Senate Rules Committee meets next Wednesday. That's when the committee is scheduled to give thumbs up or down to series of ideas for chopping the Senate's own $100 million annual operating costs by 10 percent.
Aanestad spokesman Bill Bird said the senator's impression is that the Rules Committee will take up Steinberg's idea in a package of proposed cuts - even though the Rules Committee doesn't have the power to vote to cut senators' salaries.
After the vote, Bird said, the senator expects the Republican Caucus will take up the matter of the proposed self-inflicted pay cut. "If the caucus supports it, then he'll support it," Bird said.
On Tuesday Steinberg, D-Sacramento, said he's already made up his mind to take the voluntary cut.
The Rules Committee, which he chairs, does have the power to save nearly $4 million out of the Senate's operating costs with a proposal to cut salaries of Senate staff making over $50,000 a year. The plan is cut 5 percent of their salaries with a furlough day and reduce their health benefits.
Standard & Poor's Ratimg Services has placed California's credit rating, already the lowest among the states, on a watch list "with negative implications" due to the state's chronic and unresolved budget deficit.
The credit watch notification on general obligation and lease-revenue bonds reflects "our
assessment of the state's projected depletion of cash by the end of July 2009 absent the adoption of a significant revision to the fiscal 2010 budget," S&P said in a statement.
"Although we continue to believe the state retains a fundamental capacity to
meet its debt service, insufficient or untimely adoption of budget reforms serve to increase the risk of missed payments in our view," the notice continued.
The action affects approximately $59 billion of GO debt and $8.1 billion
of appropriation debt. "Both the timing and magnitude of the state's impending liquidity shortfall raise significant credit concerns, in our view, particularly if the state were to begin fiscal 2010 without having meaningful budget revisions in place. We believe that without budget revisions, the state may need to defer (or issue registered warrants in lieu of making) cash payments for certain lower-priority obligations (such as vendors, student aid, and tax refunds) in order to preserve cash for required payments for education and debt service.
"Were the state to do this, or if it were to adopt a budget package that relied on assumptions that we regard as too optimistic or that relied on mechanisms
for bridging the projected shortfall through at least fiscal 2010 that we regard as unreliable, we may consider lower ratings."
S&P's warning was issued as Gov. Arnold Schwarzenegger and legislative leaders enter an intensive phase of negotiations over how to close a 2009-10 budget deficit estimated as high as $24 billion, including the governor's proposed $4.5 billion reserve.
Schwarzenegger has proposed sharp cuts, especially in education and health and welfare programs, while Democratic leaders want to ease the cuts with some new taxes.
The California Republican Party is running a pointed ad on YouTube in a low-budget answer to the Service Employee International Union's $1 million television advertising blitz urging lawmakers to consider new taxes along with spending cuts.
While the SEIU commercial suggestively calls on the Legislature to tax oil extraction, cigarettes and alcohol to avoid slashing vital social programs, the GOP lambastes the union for "bullying state leaders in the budget process."
To view, click here.
The text of the ad reads as follows:
Announcer: "Two million Californians are out of work and state leaders just imposed one of the largest tax increases in history. But the big labor unions want to raise your taxes again to try to protect every penny of state bureaucrats' salaries.
Labor unions are spending millions on ads and are even bullying state leaders in the budget process with blatant threats to protect their bloated contracts."
Video of SEIU speaker addressing legislators: "We helped to get you into office, and we got a good memory. And come November, if you don't back our program, we'll help to get you out of office."
Announcer: "For too long SEIU and their cronies have used intimidation to hijack the budget process. And with the economy in shambles, union bosses are now demanding even higher taxes on hardworking, overtaxed families. Call the Democrat leadership in Sacramento and tell them it's time to stand up to the union bullies."
Republican Assemblyman Steve Knight's district will be targeted first in a new campaign by a coalition of union groups to pressure legislators to raise revenue in balancing the state's budget.
The six-figure campaign of targeted mailings was announced today by the "Fair Budget Coalition," a group of public employee labor unions.
Coalition members include the American Federation of State, County and Municipal Employees, the California Teachers Association, California Federation of Teachers, State Building and Construction Trades, Service Employees International Union California State Council and other groups.
Spokesman Mike Roth said the goal is to stress that Knight, R-Palmdale, and other GOP lawmakers are out of touch with their constituents, who want to see the state's projected shortfall of $24 billion solved through a combination of program cuts and revenue increases.
Knight said he is open-minded on budget issues but does not base his decisions on television ads.
"It's not going to sway me," he said.
The freshman GOP legislator said he does not want to cut money for schools or services to the elderly, disabled or other vulnerable populations. But harming the state's economic engine with tax hikes is not a viable alternative because it would extend the state's recession, he said.
"I don't want to hurt our business community and I don't want to hurt our taxpayers," Knight said. "That's exactly what will happen by (further) taxing them and raising their fees."
Knight won his seat by less than 2 percentage points last November in a district that encompasses portions of Los Angeles and San Bernardino Counties. Republicans outnumber Democrats by slightly more than 1 percentage point.
Knight's district will receive the first two in a series of mailers by the group to "draw attention to the Republican assemblyman's support for budget cuts that harm middle-class families and vulnerable populations," the coalition said in a written statement.
One of the mailers begins with a headline that reads, "Steve Knight's Cuts Are Hurting Californians," and its appeal ends with Knight's photograph, office phone number and a line reading, "Tell Assemblyman Steve Knight that enough is enough."
The coalition objects to the extent of proposed cuts to schools, health care, home care and other services in solving the fiscal emergency that has been exacerbated by a sagging economy and plunging tax revenue.
Roth said the campaign will be expanded to other legislative districts. He declined to identify targeted lawmakers or to elaborate on the cost of the mail appeal, other than to say it totals six figures.
Marty Hittelman, president of the California Federation of Teachers, said that he hopes the campaign will build momentum for a balanced approach that solves the state's fiscal emergency without unduly hurting the needy or damaging schools.
"If we go around the state and put up advertising that asks the public to tell legislators that they need to do the job they were elected to do, which is to provide the services that Californians need, then perhaps we can get some movement in Sacramento," Hittelman said.
Republicans consistently have balked at the notion of tax hikes to bridge the budget gap. Hittelman said that some Democrats may be targeted, too, if they are unwilling to consider revenue generation.
The coalition's campaign is separate from a $1 million television advertising campaign launched last week by Service Employees International Union to encourage adoption of tax hikes in curing the budget shortfall.
Hittelman said the California Federation of Teachers will launch a radio campaign this week as well.
Gov. Arnold Schwarzenegger said Friday that he is willing to abandon his budget-balancing proposal to borrow $2 billion from local government -- if lawmakers can agree on an alternative.
Schwarzenegger addressed the issue during a question-and-answer session that followed an Escondido speech he gave about the urgent need to mend the state's $24 billion budget hole this month.
"By the way, this is not yet a 100 percent thing," Schwarzenegger told a questioner who complained about the proposed raid of property tax revenue from cities, counties and special districts.
"My Republican colleagues have said they don't like that idea of borrowing from local government, and my Democratic friends have also said that they don't like to borrow from local government.
"So if both parties don't like to borrow from local government, of course we won't borrow from local government, that's clear," Schwarzenegger said.
The governor said the state's finance director, Mike Genest, has developed a list of potential new cuts - in areas ranging from foster care to state employee health care - that could negate the need to borrow from local government.
Aaron McLear, Schwarzenegger's spokesman, said the governor never has wanted to borrow from local government but wants to impress upon lawmakers the trade offs necessary to replace that $2 billion.
"What the governor is doing is stepping in, saying, 'If you don't want to do that, then here are the cuts it would take to avoid that,'" McLear said.
"This is really just a part of negotiation," he added. This is not him backing off of anything, or him changing anything. We need to start negotiating."
The Schwarzenegger administration this morning defended the state government umbrella agencies targeted for elimination by a two-house budget committee trying to solve the state's fiscal woes.
"We don't think that elimination across the board is the way to go," said Deputy Finance Director Ana Matosantos. "We think in some areas consolidation would make some sense. In other areas we think it would make us less, not more efficient."
Michael Cohen of the Legislative Analyst's Office said the move would likely save about $15 million in the state's deficit ridden General Fund, which is an estimated $24.3 billion out of whack through June 30, 2010.
Last week, the budget committee voted unanimously to dismantle the following eight offices and reassign only necessary positions:
• Health and Human Services
• Labor and Workforce Development
• Resources
• Environmental Protection
• Business, Transportation and Housing
• State and Consumer Services
• Office of Planning and Research
• Office of the Secretary of Education
Saying that borrowing money without a balanced budget in place "would be irresponsible," Gov. Arnold Schwarzenegger revoked a financial mechanism today that he agreed to last year for seeking emergency loans.
In a letter to state Controller John Chiang, the governor said he was rescinding his authorization for a General Cash Revolving Fund, which he had approved in April 2008. The fund is legally necessary to enable the controller to borrow money on the commercial credit market through the issuance of Registered Anticipation Warrants, or RAWS. The warrants usually carry steep interest rates and up-front fees, but would give the state more than a year to repay.
"I have informed legislative leaders that under no circumstances will I agree to issue a RAW to paper over our current budget shortfall," Schwarzenegger said. "This revocation ends any chance that the state could issue a RAW and helps to clarify that our only alternative to running out of cash is to enact the budget solutions needed to restore the 2009-10 budget to balance."
The governor and legislators are wrestling over the best way to close a $24 billion hole in the budget they approved last February for the fiscal year that begins July 1.
Schwarzenegger has proposed a package of about $17 billion in cuts and about $7 billion in accelerated tax collections, borrowing from local governments, selling some state assets and making some accounting maneuvers. Assembly Speaker Karen Bass, D-L.A., has said her caucus wants more revenues raised, although she stopped short of specifically calling for higher taxes. Senate leader Darrell Steinberg, D-Sacramento has suggested restoring some of the cuts by spending down a $4.5 billion reserve the governor wants.
But a spokesman for state Treasurer Bill Lockyer said Lockyer does not favor a reduction of the reserve because it would make it harder for him to borrow money from Wall Street.
"When you start slashing the reserve, you slash our ability to instill confidence in investors that the state will be able to meet its obligations," said Tom Dresslar.
Chiang and Lockyer have warned that if the governor and lawmakers don't have a deal in the next three weeks, they may be unable to borrow enough money in the private markets to ease the cash flow crunch the state normally faces in the first months of a fiscal year. Chiang has estimated that the state's coffers will run out of cash by July 28.
Without the governor's move, officials said it would have been possible, although hugely expensive, for the state to borrow money to see it through the summer while a budget fix was hammered out.
But Schwarzenegger told reporters on Wednesday that there was no good reason to delay making the "hard decisions" on a budget fix.
"It doesn't get any easier in three weeks from now or four weeks from now" he said. "Now is the time to make those kinds of changes, make those kinds of cuts. I will not under any circumstances sign a RAW.
"If anyone comes to me and says 'the budget is not done, we are running out of money,' then, let me tell you, the state will come to a standstill, because I will not sign a RAW just so the Legislature will have additional time to solve the problem."
A consortium of 75 labor organizations, health advocacy associations and other groups sent a letter to legislative leaders this morning demanding that tax breaks given to businesses in February be repealed before other programs are cut from the state budget.
"Fairness dictates that everyone shares in the pain," the letter says. "And that includes some of the world's wealthiest corporations. Before considering additional cuts to programs Californians care so deeply about, we ask that you shut down these corporate tax giveaways."
The "giveaways" were part of an economic stimulus element in the $40 billion budget-balancing package approved by the Legislature and Gov. Arnold Schwarzenegger in February. They included giving tax credits to small businesses that create new full-time jobs in the next two years, and tax breaks to television and film productions made in California and to companies that do business in more than one state.
In the letter, the coalition estimated the tax breaks would cost the state $2.5 billion a year, although other estimates have put the cumulative impact at about $1 billion.
"This is an issue of basic fairness," said California Labor Federation Executive Secretary-Treasurer Art Pulaski. "Not one additional dollar should be taken from education, services for children, seniors and the disabled or public safety until these unnecessary tax giveaways to wealthy corporations are shut down."
The groups signing the letter ranged from Asian Pacific American Legal Center to the Women's Foundation of California.
The rollback demand adds another ingredient to the budget-balancing soup. The governor has proposed to close a $24 billion gap through about $17 billion in program cuts and $7 billion in accelerated tax collections, borrowing from local governments and other one-time maneuvers.
Earlier this week, Senate President Darrell Steinberg, D-Sacramento, suggested drawing down a $4.5 billion emergency reserve the governor has proposed, in lieu of cutting some social service and education aid programs. Wednesday, Assembly Speaker Karen Bass, D-L.A., indicated her caucus would seek as-yet unspecified "revenue increases."
State Controller John Chiang released the state revenue report for May today, and bottom line: Things are getting worse.
Chiang said the revenue projections for May -- made in early May as part of the governor's revised budget proposal -- were off $827 million when the books closed on the month.
Personal income taxes were off $475 million, 23 percent below estimates. Sales taxes (off $109 million, 3.3 percent) and corporate taxes (off $84.4 million, 25.8 percent) also fell below projections.
Year over year, state general fund revenue in May was down 17.7 percent -- $1.14 billion -- from May 2008. One possible bright spot: Corporate tax collections were up over May 2008, but still below estimates in the governor's May revision. The controller's office attributed that uptick in corporate taxes to a new law creating a 20 percent penalty for corporations that didn't pay their full tax liability by May 31. The increase in May represents companies moving to beat the deadline and avoid the penalty.
"Without immediate solutions from the governor and Legislature, we are less than 50 days away from a meltdown of state government," Chiang said in a statement. "A truly balanced budget is the only responsible way out of the worst cash crisis since the Great Depression."
Chiang has said the state will run out of cash in July, projecting a $2.78 billion cash deficit on July 31.
Chiang's full report is available here.
The Daily Show with Jon Stewart took on the California budget crisis this week.
Watch John Hodgman's report here.
The California State Council of Service Employees International Union launched a $1 million statewide advertising blitz today with a television commercial calling for new taxes to help balance the state budget.
The commercial -- filled with images of Gov. Arnold Schwarzenegger and potential tax targets, including oil derricks, cigarettes and booze -- can be viewed here.
Here's the text of the ad:
In Sacramento ... a budget crisis. To solve it, we need balance ... cooperation ... common sense.The politicians propose cuts that hit families ... with no sacrifice from the special interests.
It means a million kids will lose health care. Hundreds of thousands denied college. Seniors forced into nursing homes. All while keeping huge tax breaks for Big Oil. And no tax hikes on tobacco or liquor.
Tell Sacramento to balance spending cuts and taxes. It's just common sense.
Democrats have remained coy on the idea of new taxes, but Sen. Abel Maldonado, R-Santa Maria, told the Santa Cruz Sentinel last week that it is "not reasonable" for any legislator to rule out taxes to help resolve the $24.3 billion deficit.
"For Republicans to say we're not going to do this or for Democrats to say we're not going to do that is not reasonable. We're going broke," Maldonado said. "Taxes and cuts and maybe even borrowing should be on the negotiating table."
(Hat tip to the Flash Report for the link)
Gov. Arnold Schwarzenegger said today that while he's naturally impatient, he wouldn't criticize the pace legislators are setting in finding solutions to the state's $24.3 billion budget deficit.
"I'm never happy with the speed of anything that is happening here in this building," the governor told reporters at a Capitol news conference called to announce a new Web site at which state government audits, contracts and other documents will be available for public inspection.
"I'm always just more anxious to get going, anxious to work around the clock," he said. "But they are working very hard and I'm not taking anything away from them."
A 10-member two-house legislative committee is poring over the budget for the fiscal year that starts July 1, looking for programs to pare. Wednesday, the committee voted unanimously to eliminate eight state agencies that report directly to the governor. In terms of reducing the deficit, the cuts were more symbolic than substantive, since they would save only about $25 million.
State Controller John Chiang has warned that if a balanced budget is not in place my mid-June, it will be difficult for the state to seek short-term loans on the private investment market to smooth out a cash shortage it faces in the first few months of the fiscal year.
Schwarzenegger said that while he might have started with programs that could result in larger savings, "I'm not about to tell the legislators how they should do their business. I think in the end, what is important is the outcome."
In the misery-has-company department, we have a report today from the National Conference of State Legislatures, wherein it is disclosed that tax revenue-wise, things are tough all over.
According to an NCSL survey, 35 of 38 states that submitted data said they have collected less personal income tax (PIT) revenues through April of this year than April 2008. (Alabama, Colorado and North Dakota were up. Go figure.)
Those looking for a silver lining or a last-guy sense of superiority will be heartened to learn that four states (New York, Tennessee, Arizona and Michigan) suffered bigger PIT drops than California.
The Golden State was second in the biggest-drop-in-sales-tax-revenues category, to the state of Washington.
"You don't have to look any farther than the state of California to know that having a 'Gordian knot' of conflicting measures acting upon on your state budget is a recipe for disaster." - Colorado state Treasurer Cary Kennedy,
speaking after Colorado Gov. Bill Ritter signed a bill loosening restrictions on general fund spending and establishing a rainy-day reserve fund that will be fed when economic times are good.
California can cut $6 billion from education through June 2010 without jeopardizing federal funds after the Obama administration on Wednesday approved the state's revised application for stimulus money.
Gov. Arnold Schwarzenegger's finance officials said last month that they mistakenly assigned $2 billion to California's education spending in 2005-06 when the money was actually spent in 2006-07. The error played a big factor in California's current budget discussion because the state cannot spend less on education now than it did in 2005-06 as a condition of receiving stimulus money.
Under the state's initial application, California could only have cut about $2 billion from the state's education budget through June 2010. But Gov. Arnold Schwarzenegger last month proposed cutting $6 billion from K-14 schools to shrink a $24.3 billion budget gap, alarming education advocates.
Schwarzenegger aides said that they mistakenly assigned $2 billion from 2006-07 to 2005-06 because technically the money was meant to "settle up" reduced education payments in 2005-06.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker Karen Bass, D-Los Angeles, said Tuesday that they had no position on whether the state's new application should have been approved. But Steinberg said Democrats were not willing to cut $6 billion from schools.
School groups lobbied the Obama administration and questioned the convenient timing of Schwarzenegger officials discovering they had made an error favorable to more budget cuts right as they needed to make additional school reductions.
The Department of Education on Wednesday said that it concluded California's application revisions "are consistent with the manner by which state appropriations for 'settle up payments' are treated for accounting purposes."
Bob Wells, Association of California School Administrators executive director, said, "It's just a shame. I think it pretty much gives the green light to the state to continue cutting schools."
Wells said $6 billion in cuts would result in more teacher layoffs and larger class sizes. Schwarzenegger proposed giving school districts the flexibility to reduce the school year by up to seven and a half days in order to save money.
"The governor is fighting for California's fair share of Recovery Act dollars and is pleased that the administration approved our application," said Schwarzenegger press secretary Aaron McLear.
The Schwarzenegger administration has so far produced three May revisions of the 2009-10 budget, each one adding additional spending reductions and other steps to handle the state's ever-widening budget deficit - and created great confusion among Capitol types in the process.
The three revisions have been merged into one spreadsheet detailing how the administration proposes to close the deficit, adding up to $3.1 billion in changes for the current fiscal year, $20.8 billion for 2009-10 and another $18.6 billion in 2010-11. The spreadsheet is available here.
Gov. Arnold Schwarzenegger will address a joint session of the Legislature today in a budget speech that likely will be similar to the State of the State address he gave in January. The governor is expected to urge lawmakers to come to quick resolution while recognizing the various roadblocks in California's budget system rather than blaming lawmakers. Sort of a "don't hate the player, hate the game" approach that he's adopted for the last year.
You can watch the speech live online at 10 a.m. on Cal Channel. Or, if you'd prefer just the audio, you can listen live online at KQED.
As members of the State Lands Commission, Lt. Gov. John Garamendi and state Controller John Chiang today officially urged lawmakers to reject Gov. Arnold Schwarzenegger's plan to plug part of the budget hole with proceeds from offshore oil drilling.
The three-member commission earlier this year rejected a similar plan to allow Plains Exploration & Production Co. to slant drill into California waters off the Santa Barbara coast, with Garamendi and Chiang voting against the Tranquillon Ridge project and Department of Finance chief deputy director Tom Sheehy voting in favor. The company already drills in federal waters adjacent to California waters.
The lands commission has opposed new offshore oil leases since 1969, when a major oil spill occurred off the Santa Barbara coast. Some environmentalists supported the Tranquillon Ridge project earlier this year because they brokered a deal with Plains Exploration & Production to shut down other oil platforms in exchange. But other environmentalists disapproved of the new oil lease.
In his revised May budget, Schwarzenegger proposed allowing the Tranquillon Ridge oil lease in exchange for $1.8 billion over 14 years, including $100 million in 2009-10.
"This is a deliberate attempt to overturn the decision of this body, the State Lands Commission, a decision that was based on the finding that this proposal was not in the interests of the state," Garamendi said in a statement.
Schwarzenegger spokeswoman Lisa Page responded: "Governor Schwarzenegger's proposal to use Tranquillon Ridge as a vehicle to end oil drilling off Santa Barbara's coast and bring new revenues into the state is a win-win that will benefit California now and will benefit the environment by speeding up the permanent removal of drilling platforms from the Santa Barbara coastline."
Photo: AP/Michael A. Mariant. Oil platform off the Santa Barbara coast.
Starting July 29, California won't have enough cash to pay its bills, state Controller John Chiang told the governor and legislative leaders today.
The state will be in the red by $317.1 million that day, Chiang wrote them in a three-page letter.
"Two days later, on July 31, our cash deficit increases to a negative $1.02 billion," he added.
He pleaded with them to pass a balanced budget by June 15 to make it easier for the state to borrow money to cover the cash crunch.
Click here to read the letter.
The controller's office has also prepared a graphic outlining California's cash outlook from July 2009 through June 2010, available here.
Gov. Arnold Schwarzenegger was in Livermore this morning dedicating the "world's largest, highest-energy laser system," right around the time his Department of Finance was announcing $3 billion more in state spending cuts, including less money for schools and adult daycare.
The governor has spent time in meetings with aides determining which cuts to propose. But even as Finance announced his cuts this week - elimination of welfare grants, reducing HIV/AIDS assistance for the poor, shutdown of 220 state parks, 5 percent pay cut for state workers - Schwarzenegger has made appearances to promote fuel-cell technology and stopped by "The Tonight Show" to commemorate outgoing host Jay Leno's last week.
Yesterday, the governor was in Capitol Park examining a shiny new electric Hummer H3 and promoting it as a good vehicle for soccer moms since it can fit half a soccer team.
"Oh, yes," Schwarzenegger said when asked if a soccer mom could afford the Hummer. "There are many SUVs that are more expensive than this. This is around $56,000, I believe ... the thing is, again, with all those alternative vehicles because they are so new, I think they will reduce in costs as soon as they produce more of them."
After talking about the car, the governor addressed several budget questions.
Schwarzenegger said that he felt bad about the multitude of cuts he had proposed to eliminate several programs for the poor, but the fact of the matter is, California is broke. He said he can't promise things like welfare grants and Healthy Families low-cost health care when the state must balance its budget and Californians don't want to pay any more taxes.
"I despise all of those kinds of cuts," he said. "They are painful when you go through them. There is not a minute of the day when I don't think about and see the faces of the kinds of people this will affect... So, it's very tough. But under this crisis, those are the kinds of decisions we have to make."
So was it odd the governor spent much of the week promoting technology of the future while the state's present condition is in such turmoil?
"On one hand, the governor has a responsibility to balance the budget, which he's doing," said Schwarzenegger press secretary Aaron McLear. "On the other hand, he also has a responsibility to promote new technology like this. Protecting the environment never stops. Just because we have a budget crisis doesn't mean he's going to end his priority of protecting the environment and promoting innovative ideas like this. He's always done this and he'll always do it."
Photo credit: AP/Rich Pedroncelli
Details are still being worked out, but early indications are that Gov. Arnold Schwarzenegger's plan to defund state parks would be particularly bad news for day hikers and birdwatchers.
Schwarzenegger's Department of Finance is predicting that around 80 percent of California's 279 state parks could close because they don't take in enough user fees to be self-sustaining. The ones that would survive fall into three general categories, according to Finance spokesman H.D. Palmer.
The first category that would stay open would be Off-Highway Vehicle parks popular among off-road motorcyclists and users of ATVs and 4x4s. Those parks have their own dedicated funding stream separate from the state's general fund.
The second category would be state reservoirs, which receive funding from watercraft users and gas tax revenues. Folsom Lake likely would be spared under this category, according to State Parks spokesman Roy Stearns.
And the final category would be state beaches and any other park popular enough to generate more revenue than it costs to operate. Seven of the top 10 state parks by attendance in 2005-06 were beaches, while two of them were for off-road users.
The San Francisco Chronicle compiled its own list today of Bay Area parks that could close. That list includes some of the most popular parks for hikers, like Mount Tamalpais and Henry W. Coe.
Now, you might ask, couldn't hikers just venture onto state park property through a trailhead? They would do so at their own risk, it seems. Park access would be prohibited for most of those properties, according to Palmer.
In the end, this might be another version of the Washington Monument strategy, as incoming Assembly Republican leader Sam Blakeslee outlined on Flash Report during Schwarzenegger's 2008 proposal to close 48 state parks. The closures would save only $70 million in 2009-10 and $143 million in 2010-11.
Then again, the summer of 2009 makes 2008 look like an easy walk in the park.
Photo credit: Janet Fullwood/Sacramento Bee, from Calaveras Big Trees State Park, which is at risk of closure
With California facing fiscal calamity, the assessor for one of the state's largest cities has launched a long-term, grass-roots campaign to increase state revenue by altering Proposition 13 property tax restrictions.
San Francisco Assessor Philip Y. Ting filed documents this week with the secretary of state's office to create the "Close the Proposition 13 Loophole" committee, which now can begin soliciting donations.
The effort is intended to increase future state revenue, but not soon enough to ease next year's projected $24.3 billion shortfall.
Ting said his committee plans to solicit minimal sums initially, startup costs, but added, "We're really building a grass-roots movement around this issue with perhaps the long-term idea of going to the ballot."
Jesse Mainardi and Kevin Heneghan, attorneys for The Sutton Law Firm, are listed as officers of the committee. Mainardi formerly worked for the state Fair Political Practices Commission and Heneghan for a public policy law firm, Nielsen Merksamer.
Ting is not pushing a specific proposal, but he wants to see Proposition 13 altered to allow creation of a "split roll" that would increase taxes on commercial property, perhaps when it is sold.
The idea of a split roll has been gaining steam among Democratic lawmakers and interest groups that would like to see the state's fiscal problems solved by generating more revenue, not solely by program cuts.
Ting said there are many "split roll" possibilities, including creating a different tax rate for commercial property, reassessing it more often, or allowing it to increase at a faster annual pace than homes.
Ting said he launched the new political committee at the urging of numerous private individuals in the Bay Area and Northern California, but that he did not act at the behest of lawmakers or Capitol interest groups.
"I really felt strongly that change was going to come from the grass-roots level first, and if we started by working with all the Sacramento insiders first, that wasn't going to be the recipe for change," he said.
Ting said he does not believe that California voters, by rejecting five of six ballot measures last week, sent a clear message opposing new revenue generation by the state in years to come.
"I don't think people voted against spending so much," he said. "They voted against the fact that there wasn't any reform in those ballot measures. People are starving for systematic reform, which I think is very hard, it's very tough.
"It means that that we're going to have to talk about issues that a lot of people considered sacred cows. (Proposition 13) is obviously one of the most sacred cows in the state."
The Schwarzenegger administration today proposed $5.6 billion in additional spending reductions to narrow the state budget deficit in lieu of floating additional short-term loans, including elimination of the state's welfare-to-work program known as CalWORKS.
Dropping CalWORKS would save an estimated $1.3 billion next year and is the largest single piece of a 25-item list of additional spending cuts given to a two-house committee working on the budget deficit.
The deficit has been pegged at $24.3 billion by the Legislature's budget analyst and Gov. Arnold Schwarzenegger had wanted to cover part of it with some loans known as "revenue anticipation warrants" or RAWs, but abandoned that strategy last week after learning that the federal government wouldn't back the loans. Without those guarantees, obtaining financing from private lenders was uncertain.
Whacking the state prison budget by an additional $788.5 million is the second largest item on the list. The complete list may be found here.
Gov. Arnold Schwarzenegger considers himself a glass-half-full guy, and he ended his California Small Business Day speech in Sacramento with a dose of optimism. But it seemed clear the governor has just about had it with California's governance system, especially after last week's special election was a colossal failure. Though he blamed many of the state's budget problems on the current economic collapse, he said part of our woes are "self-inflicted."
"California hasn't had a responsible fiscal system since Earl Warren in the late '40s and early '50s," he said.
The governor ticked off a number of complaints about the system this morning:
-- The state relies too much on personal-income and capital gains taxes.
-- The state doesn't have a spending cap, nor a "rainy-day fund" (the latter point is questionable given that Schwarzenegger asked voters to establish a "rainy-day" reserve in 2004, albeit one with weak restrictions).
-- Federal judges tell California how to run its prison health-care system.
-- Federal stimulus rules restrict how California can cut from its budget.
-- California requires a two-thirds vote to approve the budget.
-- An "endless list" of ballot-box budgeting requirements, including Propositions 13, 42, 49 and 1A, all of which he has championed in the past.
"Until we fix our system, nothing will ever change," Schwarzenegger said. "This is no way, of course, to run a state."
The last two points were most interesting. While Schwarzenegger did not explicitly say he opposes all of these facets of California governance, the mere mention of Proposition 13 and the two-thirds vote requirement in a list of items he says impinge upon his ability to govern is significant.
It was also notable that he named his own after-school measure, Proposition 49, among those that tie his hands and make it difficult to balance the budget. Schwarzenegger led the campaign for that initiative in 2002, and many believe it played a significant role in helping his gubernatorial aspirations a year later.
Schwarzenegger said voters sent "a very clear message" last week that California should live within its means, slash government and not raise taxes, though plenty of groups on the left would disagree. To that end, the governor's Department of Finance is expected to release more specifics today on additional cuts it would use to bridge the state's $24.3 billion deficit.
Addendum: Schwarzenegger press secretary Aaron McLear says the governor believes California should have a "robust debate" about its budgetary system, but Schwarzenegger does not support revoking the two-thirds vote requirement or Proposition 13.
Photo: AP/Rich Pedroncelli
At last! Three "enduring budget myths" exposed! Yup, if you go here, you can watch Assemblywoman Noreen Evans, D-Santa Rosa, explain and explode (at least the Democrats think so) three views of the state's budget mess that she says are base canards:
"We just need to control our state spending."
"State bureaucracy is too big and inefficient."
"Bad behavior in the Capitol prevents a budget from being adopted on time."
Evans then goes on in a pretty slick seven-minute video to counter those premises, with lines like "we could lay off every state worker and still not be able to balance the budget." You can see for yourself, here.
Anthony Matthews, a spokesman for Evans, said the video was written and produced in-house "with existing Assembly resources. Therefore, costs were minimal."
Remember Democrat Curren Price if the Assembly lacks a single vote to fix the state's ailing budget.
Price's election Tuesday to the Senate will leave the Assembly with a vacant seat, meaning that an additional GOP vote - four rather than three - will be needed by Democrats to secure a supermajority.
The development threatens to have significant repercussions, given the arm-twisting and political warfare that preceded GOP Sen. Abel Maldonado's casting of the deciding vote for the budget adopted in February.
Democrats' numerical loss in the Assembly, however, marks a gain for their counterparts in the Senate, which will need one less GOP vote to pass a budget - two rather than three.
Price will fill a seat vacated by Democrat Mark Ridley-Thomas, who was elected to the Los Angeles County Board of Supervisors in November. The Inglewood assemblyman will leave the lower house once Tuesday's election results are certified, which can occur no later than June 27.
Assembly Speaker Karen Bass said she will ask Gov. Arnold Schwarzenegger to call a special election to fill Price's Assembly seat quickly, adding that she is confident that voters will elect another Democrat in the Los Angeles district, where Republicans are outnumbered by more than four to one.
Meanwhile, Bass joked that she will try to find a way for Price to serve both legislative houses.
"He's going to vote in the Assembly in the morning and in the Senate in the afternoon," she quipped.
Gov. Arnold Schwarzenegger, who was slammed within Republican ranks for supporting a tax increase to pass a state budget in February, said he will not support hitting voters' pocketbooks again.
Schwarzenegger, speaking to reporters Thursday after a legislative prayer breakfast, said the message from this week's election is that voters support less state spending, not more revenue.
"There's one thing for sure," he said. "There will be no revenue increases. This means cuts, cuts, cuts, and living within our means. That was the message of the people."
Schwarzenegger also said that next year's projected shortfall, previously estimated at $21.3 billion, may have risen even higher amid the current recession -- perhaps to $25 billion.
The Republican governor said he may reconsider the notion of short-term borrowing of $7.5 billion from the investment market and local government to help ease the shortfall.
The hefty borrowing was part of a plan released by Schwarzenegger last week to fill the fiscal hole.
Schwarzenegger said he is not a big fan of borrowing.
"What it basically means is that you're pushing it off to the future," he said of state debt.
Schwarzenegger said drastic measures are needed and state officials must "think big" and "outside the box."
Election? What election?
Gov. Arnold Schwarzenegger's office is steering today's attention to two things: auto emissions and budget negotiations.
To that point, Schwarzenegger's office announced today that he will return to Sacramento on Wednesday to meet with legislative leaders in a Big Five session tomorrow.
After the governor finishes his appearance at President Obama's White House press conference this morning to discuss new fuel efficiency standards, Schwarzenegger will meet with California's congressional delegation to discuss his $750 million in Medi-Cal cuts that require a federal waiver. He'll also meet separately with Sen. Barbara Boxer and Sen. Dianne Feinstein this afternoon.
Tomorrow, he'll meet with Health and Human Services Secretary Kathleen Sebelius to ask the Obama administration for the federal waiver.
And then it's back to Sacramento for an afternoon Big Five meeting.
Update (9:58 a.m.): The Big Five meeting is expected to include both new Republican leaders, Sen. Dennis Hollingsworth and Assemblyman Sam Blakeslee, as well as outgoing Assembly Republican Leader Mike Villines, who is scheduled to step down officially June 1.
Schwarzenegger administration officials explained Friday why they believe they can cut three times as much from schools than previously thought.
The answer: Accounting error.
Before Gov. Arnold Schwarzenegger released his May Revise on Thursday, school groups took solace in the fact that federal stimulus rules require states to maintain education funding at a 2005-06 level, so the state wouldn't be able to cut too much from their budget.
Jeannie Oropeza, an education budget manager in the Department of Finance, said that under California's existing funding application with the federal government, the state would only be able to cut about $1.8 billion from schools. That squares with the limit that education groups and Democratic aides said earlier this week was the most California could cut from schools.
But Oropeza said that the state made an accounting error in its application. She said the state mistakenly assigned $2 billion extra in school funding to 2005-06 that should have been applied to 2006-07. If true, then the state could actually cut as much as $6.2 billion from K-12 schools under the stimulus guidelines -- though only $5.4 billion under the state's constitutional guarantee in Proposition 98.
Oropeza said the Department of Finance has already spoken to the Obama administration and is confident that it can successfully resubmit its application next week with the revised numbers.
"We found that issue and we talked to the federal government and we are submitting our revised numbers," she said.
Expect education groups to investigate these numbers further. They already fundamentally disagree with the governor over the purpose of the stimulus money. The governor believes it is intended partly to help states offset their budget problems; education groups believe it is meant only as a supplement to existing state funding and as a way to bolster student performance.
"I think the federal government knew that all states were having difficulty with their budgets, so part of the intent was to help them sort of mitigate some of the reductions they knew states would have to make," Oropeza said.
Reaction was quick today to the two May revision budget proposals that Gov. Arnold Schwarzenegger unveiled this afternoon. This posting will be updated as statements come in to Capitol Alert.
Senate President Pro Tem Darrell Steinberg, D-Sacramento:
The message from the governor's May Revise is clear. California's budget deficit continues to grow because of a national and International economic crisis that can be felt in every classroom, boardroom and unemployment office in the state. While Californians will have a chance to affect our budget deficit in next week's election, it doesn't change the fact that there are difficult choices ahead for this Legislature and the governor. Regardless of what happens on May 19, on May 20 we will begin to respond to this fiscal challenge swiftly and responsibly, doing the best we can with the money we have. (2:38 p.m.)
Senate Republican leader Dennis Hollingsworth, R-Murrieta:
As painful a reality as these reductions may be, the financial well-being of our state demands it. The truth is that if we had acted sooner, some of these tough choices could have been avoided. (10:23 a.m.)
The governor has put out his proposal. Senate Republicans will work with him to bring spending in line with revenues. To do that we must put Californians back to work. (4:42 p.m.)
Sen. Dave Cogdill, R-Modesto:
The governor has made it clear that the choices for closing the deficit are ugly and uglier. The simple math behind the growing budget gap is not a scare tactic, it's a harsh reality.
If voters strike down the budget reforms on the ballot, there will be fewer options available to eliminate the shortfall. The recent budget agreement already contains $15 billion in real spending cuts. Now lawmakers will be faced with even more difficult choices that will undoubtedly hurt core services such as protecting our communities, ensuring our children receive a quality education and providing health care to vulnerable Californians.
As chair of the Senate Select Committee on Surplus Property, I'm pleased to see that the governor has proposed the sale of various surplus state properties. Although this will not help the immediate budget crisis, it is an important solution for the long-term health of California's finances. (2:39 p.m.)
Assembly Speaker Karen Bass, D-Los Angeles:
The deep cuts included in both of Governor Schwarzenegger's budget proposals reflect the impact the extended national recession continues to have on California. We have consistently said that all issues must be on the table, so we will closely examine each and every one of the Governor's proposals announced today. We understand the people of California don't care about politics-as-usual when it comes to solving the budget, and we will reject any stunts or gimmicks that get in the way of serious solutions. Californians are frustrated and families who depend on services from the state --whether schools or firefighting or health care for children - are worried. We will work to solve the budget deficit in a way that protects a safety net for the most vulnerable among us, acknowledges the fact we need an educated workforce to keep our economy going, and respects the strains all Californians are facing in this economy. (3:32 p.m.)
Senate Republican Leader Dennis Hollingsworth said Thursday that California should use its political might to seek waivers from the federal government allowing the state to cut more spending than allowed under stimulus rules.
Budget aides believe California is limited in how much it can cut from schools, Medi-Cal and social service programs because the state could jeopardize its funding from this year's federal stimulus package. Hollingsworth said earlier this week he wants to see the state reduce spending to levels of several years ago, when the state took in as much money as it is projected to in 2009-10.
"I think the main thing we need to be mindful of is California is in a unique situation, and it may be necessary for us to go back to D.C. and ask them to loosen up some of the strings that they've attached to this money," Hollingsworth said.
The Republican leader said he opposes the governor's proposed cuts in corrections and borrowing from cities and counties.
As George Skelton pointed out, today's May Revise release may be less about scare tactics than setting up political cover for the multitude of cuts necessary to balance the state's budget deficit.
If polls are to be believed, Propositions 1C, 1D and 1E are going to fail next week, and Schwarzenegger probably knows it. By tying the more likely $21.3 billion budget to the fate of next week's ballot measures, the governor is putting voters, labor unions and anti-tax groups on notice that they will share blame for the cuts that lie ahead.
Today's press conference theoretically gives Schwarzenegger political cover to say that everyone's fingerprints will be on whatever comes next, even if the $5.84 billion on the ballot only amounts to 27 percent of the gap.
While cuts should make up the bulk of today's proposal, borrowing and accounting maneuvers may also play a factor. And Senate President Pro Tem Darrell Steinberg, D-Sacramento, has suggested the state can leverage more federal stimulus money to help plug holes.
Budget watchers are curious to see how Schwarzenegger and his Department of Finance navigate the labyrinth of legal roadblocks that prevent the state from slashing major blocks of spending. Some speculate the state can't even cut its way out of a $21 billion problem without running afoul of some federal guideline or state constitutional requirement. For that reason, Democrats believe there is only a $38 billion pot of money in the existing $92 billion spending plan available to cut.
"It's going to be a very difficult thing do, between the federal matches and the maintenance of effort requirements," said Sen. Denise Moreno Ducheny, D-San Diego. "We may have to talk about realignment with the counties and cities. I'm really interested to see which cuts the governor wants to propose."
Here are some of the stumbling blocks:
Federal stimulus requirements: By accepting federal stimulus funds this year for Medi-Cal and education, the state agreed to keep spending at 2006 levels, otherwise known as "maintenance of effort" requirements. While the state constitution could enable the state to slash $5 billion or more from K-14 education, the federal stimulus guidelines may only allow for $1 billion or $2 billion of those cuts, according to Democratic aides. Higher education is also protected by the same rules.
The same goes for Medi-Cal eligibility and In-Home Supportive Service payments. If the state goes after those areas, they'll run the risk of threatening federal money.
Look for Schwarzenegger to get creative today in maneuvering around these requirements.
Courts: The state could cut Medi-Cal rates for hospitals and doctors, but those rates are already under litigation for being too low. Corrections provides some opportunity for cuts, yet the state has to be conscious of the fact that its prison health care programs are already under federal receivership. Schwarzenegger still has to find $400 million in corrections savings from the February budget.
While critics cite the costs of illegal immigration each budget year, the state faces constitutional barriers in denying services to illegal immigrants in the wake of Proposition 187 litigation.
State Constitution: For once, Proposition 98's guarantee for school spending may not be a major hurdle in cutting spending, given that the federal stimulus requirements are more restrictive. The state can borrow gas-tax and local-government money, but by constitutional mandate, it must repay the money within three years with interest.
On a separate note, the state constitution prevents the state from taking First 5 cigarette-tax money and Proposition 63 mental-health funds without voter approval, which is what Schwarzenegger and lawmakers are seeking Tuesday. The constitution also prevents the state from altering the California Lottery without voter approval. That's the main reason lawmakers had to put Propositions 1C, 1D and 1E on the ballot; if not for the state constitution, they would have already done what those measures propose.
That fiscal exercise state officials and bureaucrats know as the May Revise will fire up in a big way today as Gov. Arnold Schwarzenegger proposes two separate budget revision plans to help rescue California from a $15.4 billion deficit - or far worse.
Meanwhile, former eBay CEO Meg Whitman, who hopes to become the next governor to battle California's fiscal mess, will address the Roseville Chamber of Commerce's economic summit Thursday afternoon.
While Schwarzenegger will be making a final week pitch to pass a package of May 19 special election ballot measures he deems critical to California's financial health, Whitman will be giving the hard sell to defeat them.
While Schwarzenegger is expected to warn of an extra $6 billion budget hit for California if the measures fail, Whitman can be counted on to pitch her campaign pledge to come up with $15 billion in "savings and efficiencies" within 4 years.
While Schwarzenegger will warn of a need for $2 billion in borrowing from cities and counties and a cut of up to $4 billion for schools if the initiatives fail, Whitman is expected to echo her call for a "head count" reduction of tens of thousands of state workers.
Whitman's fiscal road show will take place at 1 p.m. at the Highland Point Corporate Center in Roseville.
Schwarzenegger hits the budget stage at the Capitol at 2 p.m.
Bee columnists Daniel Weintraub and Dan Walters and Deputy Legislative Analyst Michael Cohen will be blogging live on sacbee.com from the governor's press conference and afterwards.
Gov. Arnold Schwarzenegger will propose eliminating or consolidating about two dozen boards, bureaus and departments as part of the revised budget plan he will release Thursday, according to a source familiar with the plan.
Many of the ideas will be recycled from past budget proposals, such as creating a single Department of Energy by consolidating functions from 12 existing state entities. The governor also will propose eliminating the oft-maligned Integrated Waste Management Board after Democratic lawmakers last month blocked bills that would have done just that.
The Department of Finance has not yet assigned a cost savings to the various moves, but the amount of money would be trivial compared to the $15.4 billion or $21.3 billion budget gap the state faces. As with the last time Schwarzenegger pursued the measures, the moves seem intended more as a gesture of reducing bureaucracy rather than bridging the overall budget gap.
For instance, the Integrated Waste Management Board is financed outside the state's General Fund, but it has become a lightning rod because former legislators and Capitol aides have earned six-figure salaries while sitting on the panel.
Schwarzenegger will propose merging the tax collection arms of the Franchise Tax Board, Board of Equalization and Employment Development Department. He also will seek to eliminate the Department of Boating and Waterways, Office of Environmental Health Hazard Assessment and Community Services and Development department by transferring their functions.
Other proposals include:
-- Assembly Bill 33 by Assemblyman Pedro Nava, D-Santa Barbara, merging the Department of Corporations, Department of Financial Institutions and Department of Real Estate
-- Consolidating the Postsecondary Education Commission and the Student Aid Commission while decentralizing Cal Grants
-- Eliminating the following: Inspection and Maintenance Review Committee, Landscape Architects Technical Committee, Bureau of Naturopathic Medicine, Telephone Medical Advice Services Bureau, Court Reporter Board
-- Consolidating the Board of Geologists and the Geophysicists to the State Mining and Geology Board
-- Consolidating the Professional Fiduciaries Bureau under the Board of Accountancy
-- Consolidating the Board of Behavioral Sciences and Psychiatric Technicians under the Board of Psychology into a new board of mental health
-- Consolidating the Hearing Aid Dispensers Bureau under the Speech-Language Pathology and Audiology Bureau
-- Consolidating the Board of Vocational Nursing and Psychiatric Technicians with the Board of Registered Nursing
-- Transfering operations of the Science Center
Gov. Arnold Schwarzenegger will release two May revised budgets Thursday, one that covers a $15.4 billion hole in case three ballot measures pass and another that covers a $21.3 billion gap if they fail.
But the $15.4 billion plan is probably destined for the shredder.
After all, proponents already abandoned advertising for Propositions 1C, 1D and 1E. Campaign experts saw that as an acknowledgment that those measures are failing so badly that they're a foregone loss, especially Proposition 1C, which contains $5 billion of $5.84 billion in General Fund cash solutions. So what we're really talking about is the $21.3 billion problem -- or if you think 1D and 1E stand a chance, a $20.3 billion hole.
So what will be in Schwarzenegger's doomsday budget? We laid out some scenarios on Sunday. The governor has already indicated some $6 billion in solutions:
-- $2 billion in borrowing from cities and counties as allowed by a 2004 ballot measure
-- $3.6 billion to $4 billion cut to schools
-- $335 million gained through early release of prisoners and burdening county jails
-- $80 million through a 10 percent cut in the Cal Fire budget
Schwarzenegger press secretary Aaron McLear said the governor is likely to pursue an extra fee tacked onto homeowner insurance policies to pay for emergency response, at a cost of about $11 annually per homeowner. When the governor proposed the plan last year, it would have raised an additional $105 million.
McLear said the governor is not planning to propose any other fee hikes or tax increases in his budget.
Besides that, the governor has said he will revisit state worker furloughs and layoffs.
Chris Woods, budget aide for Assembly Speaker Karen Bass, D-Los Angeles, said Monday that due to various constitutional and federal protections, the state can only target about $38 billion in the budget -- largely social services and corrections. K-14 education is protected by Proposition 98 and by a mandate in the federal stimulus package to maintain a certain level of funding. Higher education is also protected by federal stimulus rules, as are some social services.
Schwarzenegger warned Tuesday that he's looking at further cuts in Medi-Cal. Social service advocates are already bracing for those cuts, though they don't think the governor will try to reduce eligibility because the state would lose federal stimulus funding. They also don't think the governor will cut the rates the state pays to hospitals and doctors for serving Medi-Cal patients, because those rates are already so low that they are being litigated.
That leaves vulnerable things like the "optional" benefits that the federal government does not mandate but have been a favorite target for Schwarzenegger and former Gov. Gray Davis. The state will eliminate $259 million of those in July, including Denti-Cal. The state could move to eliminate other benefits such as prosthetic limbs or hearing aids, as Davis proposed in 2003. But even those would only save a fraction of the deficit problem.
It's widely believed in the Capitol that no more than five or six people truly understand how Proposition 98, the 21-year-old, voter-approved state school finance law, truly works.
Fortunately, a couple of those folks with that arcane knowledge work for the Legislature's budget analyst, Mac Taylor, and they have produced a 20-minute on-line tutorial for legislators, journalists, school officials and anyone else who wonders how roughly 40 percent of the state budget is calculated and spent.
It's especially timely beause the state faces multi-bilion-dollar deficits and school finance is the central issue in the debate over what to do about it.
The webcast, which won't win any awards for glossy special effects, features Rachel Ehlers and Edgar Cabral and is available here.
Assembly Speaker Karen Bass announced Monday that she is cutting Assembly members' budgets by 10 percent, effective immediately, amid the state's continuing recession.
The slice amounts to $29,000 per year from the budget used by each Assembly member to hire staff and run their office.
Bass disclosed the cuts at a morning meeting with The Bee Capitol Bureau. They will save the Assembly about $2.3 million annually. If legislators react by reducing staff, the Assembly would realize additional savings in fringe-benefit costs.
Monday's reductions do not require a vote by the Assembly Rules Committee, said Bass, D-Los Angeles.
In other cost-cutting moves, Bass announced a freeze on Assembly staff salaries and a cap on the number of staff positions, unless critical vacancies create exceptions. The Assembly also plans to close its Washington D.C. office, by June 30.
Bass' announcement comes just one week before Californians go to the polls to decide the fate of several ballot measures that would impose tighter spending controls and generate about $6 billion to help balance next year's state budget.
The Assembly leader's decision also comes in the wake of an about-face last month in which she rescinded pay hikes to about 120 Assembly employees -- about 80 Democrats and 40 Republicans - after they were disclosed by the media.
Jon Coupal, president of the Howard Jarvis Taxpayers Association, which is fighting next week's ballot measures, said that any cuts to legislative spending are welcome but that those announced Monday are "probably more window dressing than anything else."
"Cynicism remains high," Coupal said. "I think if they had been serious about reducing legislative spending, they wouldn't have tried those salary increases a couple weeks ago...We'll see if (Monday's cuts) are sustained after the election."
Bass said that the belt tightening, including the cuts in office budgets from $292,000 to $263,000 annually, is part of a long-term streamlining of operations that she has been undertaking for months.
Bass said she has been committed to a reorganization since last May, when she became Assembly leader.
"From the time I became speaker, I wanted to do a reorganization of the speaker's office and I wanted to look for ways to be efficient and effective," she said.
"So making changes to our budgets, as well as establishing the (Government Accountability and Efficiency Committee) where we look at the entire state government, are steps that I committed to make and I've been implementing step by step."
The $29,000 reduction per Assembly member office is a sum based on an entire year. For the seven months remaining in the current year, the amount will be prorated, amounting to a cut of about $17,000.
Bass' cuts to Assembly member's budget target only base office and staff costs, not additional funds typically distributed for overseeing committees or to the caucuses of both parties. Bass recently said she has cut 20 staff positions in her Democratic caucus.
The Assembly previously had pledged to donate $15.1 million, roughly 10 percent of its total budget this year, to help other state agencies process unemployment claims, fight wildfires, conduct Capitol tours, and operate a Capital Fellows program for students. Money saved by Monday's cuts will add to that sum, said Shannon Murphy, Bass' spokeswoman.
Bass said that the Assembly will not accept any budget increase allowed in the coming fiscal year, 2009-2010, under a formula created by a nearly 20-year-old ballot measure, Proposition 140, that typically hikes legislative funding each year to recognize changes in population and per capita income.
California has received $2.1 billion less this year in tax revenues than projected in the February budget, according to State Controller John Chiang.
In April alone, the state's General Fund revenues were down $1.89 billion, 16 percent below what the February budget projected. Personal income taxes were down $1.06 billion, corporate taxes were down $831 million and sales taxes were down $108 million.
It's another bad sign as state leaders prepare for the May revised budget later this month. Nonpartisan Legislative Analyst Mac Taylor projected in March that the state would fall below revenue projections by $8 billion. Taylor said today that his figure was mostly for the budget year starting July 1, so the $2.1 billion Chiang estimated would come on top of the $8 billion deficit projection.
Meanwhile, the Public Policy Institute of California just released a poll showing Propositions 1C, 1D and 1E trailing. Those measures would provide $5.8 billion in budget cash in 2009-10. Of particular concern for budget officials is that Proposition 1C is failing badly (32 percent for, 58 percent against), since it would provide $5 billion in cash.
If the ballot measures fail, the state would be looking at a $16 billion deficit (the LAO's $8 billion plus Chiang's $2.1 billion plus the ballot's $5.8 billion). But the LAO number came in March, after which economic indicators grew worse, which means the overall deficit figure could be higher than $16 billion.
Department of Finance spokesman H.D. Palmer wouldn't release the administration's internal deficit projection, but compared to the LAO's March projection, he said, "No one's looking for an uptick."
The California Federation of Teachers filed a lawsuit today against Gov. Arnold Schwarzenegger and other state officials to recoup $12 billion in education funds it says the state owes schools.
The suit in San Francisco Superior Court comes as CFT campaigns against Proposition 1A, a spending limit and temporary tax hike on the May 19 ballot. That proposal, in conjunction with Proposition 1B, would help provide schools $9.3 billion of the $12 billion that CFT is demanding.
But CFT opposes Proposition 1A because it believes the measure would limit long-term funding for schools. The lawsuit is partly a political attempt to undercut the argument for Proposition 1A by saying the measure is unnecessary because schools can recover the money in the courts.
"Proposition 1B is going to fail, and besides that, we still have to worry about funding for 2009-10," said Marty Hittelman, CFT president. "We need to do this right away so we can take care of 2009-10, since they're already debating that. We want to make sure they understand they have to repay us."
After revenues sharply declined, the state cut 2008-09 school funding by $7.9 billion, and Gov. Arnold Schwarzenegger believed the state did not legally owe that money back to education. School groups disagreed and threatened to sue the state before Schwarzenegger and lawmakers put Propositions 1A and 1B on the ballot to repay that money, plus another $1.3 billion owed from 2007-08.
CFT also wants the courts to resolve for good whether the state owes schools money in similar budget situations in the future.
"The governor has consistently increased funding for education every year he has been in office, but with less revenues into the state, everyone has to cut back," said Schwarzenegger spokesman Aaron McLear. "If the ballot measures are defeated, the education community unfortunately will see further cuts."
The well-financed California Teachers Association has raised millions of dollars to help pass Propositions 1A and 1B, and the group prefers using the ballot to obtain $9.3 billion rather than going to court, where the outcome is unclear and could take years to resolve.
"We're the ones who brought it to the attention of the governor and told the governor unless the money would be paid back we would sue," said CTA President David Sanchez. "For CFT to jump at it like this before the initiatives fail or pass, I'm disappointed. ... Under 1A and 1B, there's a set plan for how to pay back schools, there's a timetable, a funding mechanism. This lawsuit is premature."
CFT maintains that the state legally owes schools $9.3 billion in funds from this year and last, and that the courts remain the best venue to recoup that money. CFT, in its suit filed with Service Employees International Union Local 99, also asserts that the state owes schools an additional $2.6 billion for 2009-10 based on the current budget agreement.
Hittelman said he believes schools would be repaid sooner under a court settlement than under Proposition 1B, possibly by 2010-11 rather than 2011-12. Repayment under a court settlement would depend upon when revenues begin to rebound, whereas Proposition 1B guarantees repayment starting in 2011-12.
Department of Finance officials told education groups today that K-14 schools could see a $3.6 billion cut due to a projected drop in revenues, as the nonpartisan Legislative Analyst's Office suggested in March would be a possibility.
Finance officials did not tie the reduction to the May 19 ballot measures but said $3.6 billion is the amount in allowable school cuts under Proposition 98 assuming the LAO's projection of $8 billion in lower revenues proves accurate, said Dennis Meyers, assistant executive director for the California Association of School Business Officials.
The ballot measures may have little impact on 2009-10 school funding, Meyers said, because the $3.6 billion figure is based on a revenue decline regardless of whatever gap exists should Propositions 1C, 1D and 1E fail. But he said the measures' failure could put more pressure on the governor and the Legislature to take the full $3.6 billion.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, said earlier today that the state can't cut too much out of education without jeopardizing federal stimulus funding. The federal package requires that the state maintain school funding at its 2006 level to be eligible. He said he'd prefer to look for savings in corrections and acknowledged that health and human services would face cuts if the ballot measures fail and the state faces a significant revenue drop this year.
If the early-week pattern holds true, the governor's office will tell education groups that schools could lose more than $2 billion if voters reject the May 19 ballot measures.
The Budget Reform Now committee says schools will lose $3 billion to justify its latest ad claim that 43,000 teachers could be laid off if the ballot measures don't pass. Like the committee's previous warning that 24,000 local firefighters and police could be laid off, this latest claim takes a worst-case scenario view by saying schools will deal with the nearly $3 billion cut solely through teacher layoffs.
Budget Reform Now says K-12 education accounts for approximately 50 percent of state spending, so half of the $5.84 billion in revenues from Propositions 1C, 1D and 1E equals a $2.92 billion cut. The 50 percent estimate is an overstatement, given that schools account for closer to 40 percent of General Fund spending. If using the 40 percent number, the cut would be more like $2.33 billion.
Budget Reform Now this past weekend essentially warned that local governments would lose $2 billion if the ballot measures fail to pass, and the Schwarzenegger administration followed up Tuesday by confirming that scenario to local government groups. With Budget Reform Now warning of a $3 billion cut in education in its latest ad, expect a similar follow-up from the administration.
Schwarzenegger says these are not scare tactics, but rather telling the public the consequences of not voting for revenue measures on May 19. Not everyone agrees with that assessment.
As we said yesterday, the latest ad is misleading in that it touts Propositions 1A and 1B, yet the money for 2009-10 that would offset the supposed teacher layoffs would only come from Propositions 1C, 1D and 1E.
Assemblyman Anthony Adams, R-Hesperia, today officially became the second Republican targeted in a party backlash against six Republicans who voted for the state budget deal.
Secretary of State Debra Bowen today certified a recall petition drive against Adams. The effort is headed by 10 proponents, including former Assemblyman and unsuccessful U.S. Senate Candidate Richard L. Mountjoy.
Mountjoy has already told the conservative Flash Report that he intends to run in the recall against Adams if the measure qualifies. Recall petitioners must collect collect 35,825 valid signatures of registered voters by Oct. 13 for the measure to qualify for the ballot.
Another recall effort was recently launched against state Sen. Roy Ashburn, R-Bakersfield. Recall backers in Ashburn's district have until Sept. 30 to collect 42,376 valid signatures.
Adams may face a more strongly organized opposition. Two powerful Orange County Republicans, former party chair Mike Schroeder and Lee Lowrey, chairman of the conservative Atlas PAC, were quick to embrace the Adams recall effort.
On recall petitions, proponents charge that Adams "was elected on a promise not to raise taxes but took the easy Sacramento way by caving into the special interests and raising taxes.
"Adams broke his tax pledge. Adams must go," the proponents' petition argument reads.
On behalf of Adams, recall opponents say: "The petition you hold is the creation of two very wealthy Orange County men who care less about our community and more about their own political ambitions. They want us to pay $900,000 in our hard earned tax dollars to pay for another election and their partisan political games...because Adams stood with taxpayers and working families and against their reckless agenda."
Days after a Republican congressman asked Gov. Arnold Schwarzenegger to step down, Assembly Republican Leader Mike Villines has a target on his back.
Shawn Steel, a former California Republican Party chairman and one of two representatives to the Republican National Committee, on Wednesday told Rob Johnson of Modesto's KMPH 840 that he and other Republicans plan to ask Villines to step down from his Capitol leadership post.
Steel said Republicans are angry that Villines helped approve billions in temporary taxes during the latest budget agreement and that he is now advocating passage of Proposition 1A, which contains a spending limit but also $16 billion in additional taxes.
"We are definitely going to be going straight forward and asking that he, after the election on May 19th, that he resigns, he steps down," Steel said. "It's embarrassing having a Republican supporting one of the biggest tax increases in American history on a state level. And he doesn't have good justification for it."
Steel didn't specify which "state party leaders," besides himself, would ask for the resignation. Steel was not immediately available for comment Wednesday.
Steel and Villines got into a back-and-forth argument Saturday during the California Republican Party's executive committee meeting in Sacramento, as Villines asked the party to endorse all six May ballot measures. (The party voted to oppose all of them.) Villines at that time suggested that the party was hurting itself by being obstructionist and blocking solutions to the state's budget crisis, while Steel said the party's woes were the fault of leaders who abandon positions on issues like taxes.
Villines dismissed Steel's comments during an unrelated Capitol press conference.
"I've known Shawn for a long time, and I consider Shawn to be a friend," Villines said. "You know, there's just a strong disagreement in our party, but we're a big tent, we're a big tent party. We're the party of Reagan, and everybody can have a position. We're going to have to go through a rough patch. I believe fundamentally that these reforms and these initiatives are very, very important for California ... and Shawn feels differently. So we just have a disagreement, and I guess we'll just have to leave it at that."
California Republican Party Chairman Ron Nehring issued the following statement late Wednesday: "We fully support the leaders elected by our legislative team, including Assembly Leader Villines. There is a diversity of opinion within any party at times, but there is no doubt that Mike has been a great, hardworking leader for our party and every Californian."
Jim Sanders of The Bee's Capitol Bureau contributed to this report.
April is California's big month for tax receipts. In general, more than half (56.9 percent in 2007-08) of the state's general fund revenues come from personal income taxes. And about one quarter (23.6 percent in 2007-08) arrive during the month of April.
So the rate in which money is flowing into the state's coffers is pretty important, especially with a projected budget hole of $8 billion in the coming year (and that's if voters approve all of the measures on the May 19 special election ballot).
Anyway, state Controller John Chiang has created a Web site where everyone can track how California is doing in terms of April revenues.
Last year, as of April 14, the state had collected $35,796,956,000*
This year: $31,331,346,000 -- roughly $4.4 billion less.
But the key number is $38.3 billion. That is the amount the state Legislature projected California to collect by April 30 in the budget pact reached in February.
If the state falls short, it just shows the deficit is deepening.
Again, the tracking site is here.
*The original version of this post displayed the numbers in millions, not billions.
Photo: Controller John Chiang speaks to the Bee Capitol Bureau. Credit: Brian Baer/Sacramento Bee.
Lawmakers return from their week-long spring break today for the start of a three-week spring for the Legislature's policy committees to hear all fiscal bills before the May 1 deadline.
In the Assembly, the Banking and Finance, Natural Resources, Rev and Tax, Rules, Transportation and Utilities and Commerce committees kick off the process today.
In the Senate, the Business and Professions committee meets.
Both houses have floor sessions scheduled.
Speaking of deadlines, you have until midnight tonight to enter the latest Capitol Alert caption contest (and potentially win a $25 Starbucks gift card) featuring Gov. Arnold Schwarzenegger and his new bronze bear.
On Friday, Kevin Yamamura explored the governor's new ursine obsession. (For the record, we'd more than welcome the governor's own caption guess, whether he's selected as the winner or not.)
In other bearish news, state Controller John Chiang reported Friday that California's cash outlook has been hurt badly by weaker than expected retail sales.
"Unfortunately sales taxes continue to be hammered by diminished retail spending across the state," Chiang said in a news release.
Sales taxes collections were $218 million, or 11.8 percent, below budget projections in March.
And that was before the new 1 percent sales tax hike that went into effect on April 1.
State Controller John Chiang said today that California's revenue picture continued to deteriorate in March, thanks to a sharp decline in retail spending statewide.
In his monthly report detailing California's cash balance, receipts and disbursements in March, Chiang said general fund revenue in March was down $178 million, or 5.2 percent, from estimates in the recently adopted 17-month state budget.
"Unfortunately sales taxes continue to be hammered by diminished retail spending across the state," Chiang said in a news release.
Sales tax receipts were $218 million, or 11.8 percent, below budget projections.
Corporate taxes were ahead of forecasts by $43.4 million, or 2.6 percent.
Personal income taxes collected topped estimates by $404 million, or 32.6 percent.
Chiang said that although revenues are trending downward, the recently adopted budget "is tracking much closer to actual receipts."
The state started the fiscal year with a $1.45 billion cash deficit. That has now grown to $22.3 billion on March 31, 2009, Chiang said.
That deficit is being covered by the issuance of a combination of Revenue Anticipation Notes (RANs) and internal borrowing from special funds.
The state's tax commission meets again today in Davis, its fourth such meeting.
Originally the commission -- officially known as the "Commission on the 21st Century Economy" -- was slated to issue its report for how to overhaul the state's tax system by April 15.
But the truncated schedule has been expanded, with the report now due by July 31.
The commission's undertaking -- modernizing the state's tax codes -- has lots of interest groups fidgeting nervously.
And while the commission's stated goal is tax stability (and not higher revenues), many in the anti-tax community have viewed that goal skeptically.
There's plenty in the commission's posted documents to fuel anxieties on all sides.
There's the report on how much a split-roll property tax system would net the state ($7.5 billion in the current year). There's another report on the carbon tax. And another on widening the sales tax. And on and on.
"These documents represent a broad range of perspectives and do not necessarily reflect the opinion of the Commission or its staff," notes a disclaimer atop the page.
Still, the topics are at least being discussed internally. And worried about externally.
BLACK TIE: Gov. Arnold Schwarzenegger will be in Southern California this evening attending a black-tie event with the Los Angeles Urban League. It's the group's big awards dinner honoring Academy Award-winning African American men.
Here are the first three radio spots in the campaign to pass the measures on the May 19 special election ballot.
The first ad is from the Budget Reform Now committee spearheaded by Gov. Arnold Schwarzenegger. It advocates for all the measures.
The second ad is paid for by the California Teachers Association and entitled "Wait a Minute." It advocates for Propositions 1A and 1B.
The third ad, also paid for by the California Teachers Association, is entitled "27,000." It advocates for Propositions 1A and 1B.
"Wait a minute, wait a minute, there's another special election coming up on May 19th?" a woman asks in a new radio campaign ad.
Yes, there are just under six weeks until the May 19 special election. And starting this week, the campaign for the budget package has begun on the airwaves. (At least the radio airwaves, which are significantly cheaper than airing TV spots.)
Listen to all the radio ads here.
The coalition campaign for Yes on Propositions 1A through 1F spearheaded by Gov. Arnold Schwarzenegger has released a spot touting how the measures will "bring sanity and stability to our budget process" and "protect against even higher taxes -- and prevent more cuts to schools, public safety, healthcare and infrastructure."
For all the obvious reasons, the ad happens to omit the fact that Proposition 1A would extend the tax increases approved by the Legislature while implementing a spending limit.
Meanwhile, the California Teachers Association has launched a pair of radio ads touting Proposition 1A and 1B.
Proposition 1B would ensure payment to schools of $9.3 billion starting in 2011. But it will only go into effect if Proposition 1A, which would create a spending cap and extend tax hikes, also passes.
So the CTA is pushing for both as a package.
"Because in times like these, we have to protect our kids in schools," says the announcer in one ad.
But that woman who asks "wait a minute" about the fact that there is an election in the first place shows the challenges ahead for the campaign.
They have to not only convince people to vote yes -- but also that there's an election worth showing up for in the first place.
So far, the governor-backed Budget Reform Now committee has raised nearly $4.4 million to do just that, while the separate CTA campaign has $2.7 million.
Speaking of fundraising, Schwarzenegger will appear tonight at a fundraiser in Glendora for Republican Assemblyman Anthony Adams of Hesperia.
Adams was one of the six GOP votes for the budget package. Conservative groups are already targeting Adams for a recall.
A cool $500 gets you in the door with a ticket, but a "platinum" $3,900 donation gets four guests in and photo with the governor.
The Legislative Counsel, the Legislature's lawyer, is defending a tax-raising plan floated by Democrats late in 2008 to raise taxes with only a majority vote.
Typically, tax hikes take a two-thirds vote. But the Democrats' plan called for swapping taxes dedicated to certain programs for fees and then hiking other taxes.
The March 9 opinion is addressed to Gov. Arnold Schwarzenegger. The opinion, however, was requested by the tax commission Schwarzenegger created to overhaul the state's tax codes, not the governor's office.
Read the full seven-page opinion for yourself.
In the Legislature's rosiest of budgetary scenarios, voters would approve all the measures on the May 19 ballot and the total funds netted (through transferring from mental health and early childhood programs and borrowing from the lottery) would be about $6 billion.
Even then the nonpartisan legislative budget analyst says the state will face an $8 billion shortfall.
If the ballot measures fail, the deficit hole would grow to $14 billion.
Rightfully so, folks around the Capitol are already peering around the corner to the next budget fight, likely this summer. Given that it's legislative spring break this week, let's do the same.
The Republican legislative leadership has said there will be no more tax hikes.
"We made it clear that any further budget action we may need to take in the coming months must be done solely through savings to government programs," GOP leader Mike Villines said after the latest deficit emerged.
There's been some scuttlebutt about the building about potentially returning to the Democrats' December plan to hike taxes with a majority vote.
The Democrats' plan called for swapping certain taxes for fees, while raising other taxes that then went to the state's general fund. Tax hikes typically require two-thirds support - and thus GOP votes.
A March 9 opinion from the Legislature's lawyer, issued to the tax overhaul commission created by Gov. Arnold Schwarzenegger, gives the legal green light to majority-vote approach.
"We think that a tax bill is not subject to the two-thirds vote requirement if the cumulative effect of the 'changes in state taxes,'...when considered in their entirety would be neutral or would produce a net decrease in state tax revenues," Diane Boyer-Vine, the legislative counsel, wrote.
Capitol Alert has posted the full opinion here.
Meanwhile, the GOP senators who broke ranks to vote for the tax hikes in February are doing pretty well for themselves these days.
More committee shuffling by the Senate two weeks ago landed Sen. Roy Ashburn, R-Bakersfield, as the vice-chairman of the Joint Legislative Audit Committee.
And ex-GOP leader Dave Cogdill landed the vice-chairmanship of the Senate Banking, Finance and Insurance Committee, a move requested by Cogdill, approved by GOP leader Dennis Hollingsworth and executed by the Rules Committee controlled by Senate President Pro Tem Darrell Steinberg.
(Read about the previous internal Senate shuffling.)
HEALTH FORUM: Gov. Arnold Schwarzenegger will be in Los Angeles today for a health forum co-hosted by the White House. It is the fifth and final such forum held across the country.
Schwarzenegger will be joined by Washington Gov. Chris Gregoire and Melody Barnes, the domestic policy council director for the White House.
Photo: Senate President Pro Tem Darrell Steinberg, D-Sacramento, goes over the plan for voting on the budget plan with GOP leader Dennis Hollingsworth, R-Murrieta, before the Senate voted on the budget on Feb. 19, 2009. Credit: Brian Baer/Sacramento Bee.
After last fall's elections, the Democratic leaders in the California Senate and Assembly were a mere five votes shy -- in both houses combined -- of a complete two-thirds governing supermajority.
They've never come that close since.
Vacancies -- created through members taking other offices and running for open congressional seats -- are likely to frustrate Democrats and empower Republicans for at least the rest of the year.
"It does create complications," said Senate President Pro Tem Darrell Steinberg, D-Sacramento. "You want to have a full house."
The two-thirds majority is a magical combination in California because that is the level of support needed to pass a budget or raise taxes in the Legislature.
Exhibit A, of course, was the February budget debacle, in which Steinberg locked state senators in the Capitol as the taxes-and-cuts package deadlocked one vote shy of passage.
At the time, the Democrats needed three GOP votes to pass the budget, but only had the support of two Republicans. There was one Democratic vacancy, created by ex-Sen. Mark Ridley-Thomas, D-Los Angeles, resigning his post to join the Los Angeles County Board of Supervisors.
"We would have been out of here Saturday night instead of the following Thursday without all of the drama if we had had a full house, in all likelihood," Steinberg said.
The final GOP vote, Sen. Abel Maldonado, wrestled major concessions from majority Democrats, including placing a constitutional amendment on the 2010 ballot to overhaul state elections.
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To this day, Ridley-Thomas' seat remains unfilled. Democratic Assemblyman Curren Price of Inglewood finished first in the primary last week and is expected to take his place in the upper house after a May 19 runoff.
Of course, that will create a vacancy in the Assembly, which will likely last until early October by virtue of the state's election-scheduling laws.
"Every vote we pick up, it is exponential for the Republicans," said Assembly GOP leader Mike Villines. "It gives us a lot of ability to move the debate and navigate to issues that we care about."
In the Assembly, Democrats control 51 seats in the 80-member house, three shy of a two-thirds majority. That number will rise to four once Price departs for the Senate.
Then there are those open seats in Congress.
For the fifth year, Next Ten, a nonprofit group, has created a tool for everyday Californians to try their hand at balancing the state's chronically imbalanced budget.
In 15 minutes.
Check out the California Budget Challenge, as it's called.
The idea is to give folks the idea of the costs, benefits and consequences of policymakers' decisions.
You even get to vote on all the May 19 ballot measures (and learn about them) before you get started. (Currently none of the fiscal measures, Proposition 1A through 1E, are passing among Next Ten users. Proposition 1F, which would prohibits raises for elected officials in deficit years, is passing.)
After you're done, feel free to come back here and comment on the results.
Mike Zapler at the San Jose Mercury News has the story of one furloughed set of state workers that is costing state government, not saving it money.
The governor, in the interest of fairness and simplicity, has insisted that his unpaid time off policy, which covers about 235,000 workers, be implemented across the board. So that means no exceptions even for the one state agency -- a team of nearly 1,400 employees who review claims for federal disability payments -- funded entirely by the feds.
Sending those employees home one day a month means the state will forgo about $10 million -- or 5 percent of the agency's $210 million annual budget -- from Washington, without saving state government any money. Meanwhile, it's taking the agency longer to process claims, delaying disability benefits at a time when such requests are soaring."There really is no reason to do this, it's a no-brainer," said Pete Spencer, the regional commissioner for the U.S. Social Security Administration, which oversees the disability claims program. "If the governor is saying he wants to take all the money the federal government is offering, this is one area he's not doing it."
The Schwarzenegger administration sent back what Zapler reports appeared to be a form letter. "The letter did not acknowledge that furloughing the disability agency's workers would not shave state expenses because all its costs are paid by the federal government," Zapler reports.
In an e-mail to Capitol Alert, Aaron McLear, a Schwarzenegger spokesman, defended the furloughs, saying that a court supported the governor's stance that, "All employees falling under the Dills Act are subject to the Governor's Executive Order."
"California families and businesses are tightening their belts and doing more with less," McLear wrote. "State government needs to do the same."
Even if it isn't saving the state any money?
State Controller John Chiang said today California has enough money to get through the end of the current fiscal year without borrowing any more from Wall Street. The news means the state will save an estimated $15.4 million in interest it would have had to pay on short-term note sales.
In a letter to state Treasurer Bill Lockyer, Chiang said the state will enter April with $1.1 billion in the bank and should have $4.38 billion on hand when the fiscal year ends June 30. The controller had originally forecast California would end March about $1.9 billion in the hole.
But Chiang said in the letter that three factors had combined to change the red ink to black:
But Chiang also cautioned that if voters reject measures on the May 19 ballot that would provide about $6 billion in extra revenues, or if the economy continues to sour, the state will be back in the hole again by June.
Gov. Arnold Schwarzenegger can't be happy that the ballot measures he and leading Democrats are pushing for the May 19 special election took a gut punch in this morning's Los AngelesTimes from former LA Mayor Richard Riordan.
Titled "California's May ballot scam," Riordan's op-ed says the Republican governor and legislative backers of the measures could challenge Bernie Madoff for "swindler of the year."
The governor and Democrats say Props. 1A through 1E are needed to help balance the current budget problem and help future years by creating a rainy day fund that essentially would preserve revenue for down years.
But Riordan says both parties are blindly supporting the approach. Democrats, he writes, are supporting "propositions that will drastically cut services to the state's neediest...after legislators increased the state sales tax, a regressive tax that places a larger burden on the poor..."
And to my conservative friends: Will you be intimidated into voting for something you know is wrong? You should be against increases in taxes, not for ideological reasons but because they will be economically disastrous for California. The rich (and I am one of them) already have their mansions, airplanes and yachts. There is nothing morally or ethically wrong with increasing their taxes. But if the burden becomes too great, the rich will simply take their money (and the taxes they pay and the jobs they create) and move elsewhere. And it is the poor who will be hurt by such an exodus.
The California Teachers Association wasted little time in backing up its ballot endorsements this week with a $2 million investment in Proposition 1B, a measure that would obligate the state to pay schools a total of $9.3 billion starting in 2011-12.
The CTA voted last weekend to endorse all six budget-related measures, but it is focusing on passage of Proposition 1B, which directly affects funding for teachers. Of course, Proposition 1B is of little use if Proposition 1A does not pass. The CTA also gave $47,500 toward proponents of that measure.
Schwarzenegger and legislative leaders have packaged six proposals, Propositions 1A to 1F, as a combined solution to the state's budget problems, but individual groups are lining up to support their own causes. Besides CTA, California Lottery vendor GTECH Corp. gave $250,000 last week to support Proposition 1C, which would relax lottery rules to attract more players and revenues.
State Treasurer Bill Lockyer announced Tuesday that he stopped taking orders for the state's general obligation bond sale Tuesday after investors purchased $6.54 billion -- $2.54 billion more than the original $4 billion target.
The additional money should go toward construction projects around the state that slowed or stopped after officials froze California's Pooled Money Investment Account in December. A board that oversees the account last week authorized $500 million in payments toward construction projects contingent on Lockyer selling at least $4 billion in bonds this week.
The state benefited from heavy demand from individual retail investors, who purchased nearly half of the bond total. Institutional investors, such as mutual funds, bought the remainder.
California offered high yields that ranged from 3.20 percent to 6.10 percent based on maturity date. Investment experts said the yields were higher because the state's credit rating had been downgraded this month. The higher yields, along with California's track record of repayment and a nine-month absence from the bond market, contributed to the demand, said Jason Dickerson, a fiscal expert with the Legislative Analyst's Office.
The first six-figure check against any of the May 19 ballot measures landed Tuesday as local mental health agencies donated $100,000 to fight Proposition 1E, which would take away roughly $230 million in mental health funds during each of the next two years.
The California Mental Health Advocates for Children and Youth also donated $15,000 to fight Proposition 1E.
Gov. Arnold Schwarzenegger and legislative leaders have packaged six budget-related measures together and are asking voters to pass all of them. Proposition 1E is among the more crucial for fixing the current budget deficit because it would provide direct general fund relief.
Proposition 1E would take money from Proposition 63 funds that are raised through an income tax on millionaires. Senate President Pro Tem Darrell Steinberg, D-Sacramento, led the campaign for Proposition 63 in 2004, but he supports Proposition 1E as part of the budget deal.
One of California's largest public employee groups and one of its key union locals are splitting on a package of fiscal reform measures the Legislature put on the ballot to help close California's $40 billion budget deficit.
The good news for Gov. Arnold Schwarzenegger and lawmakers hoping for support for the May ballot initiatives is that the executive board of the 5,000 member Local 2620 of the American Federation of State County and Municipal Employees is calling for "yes" votes on every single measure.
"As dedicated public servants our top concern is the ability to provide critically needed services that help protect public health and safety," said Nancy Swindell, president of AFSCME 2620, said in a statement.
"The failure of Propositions 1A-1F would jeopardize the services we are committed to protect," she added.
The worse news for the governor and lawmakers is that the executive board for the 179,000-member American Federation of State County and Municipal Employees is calling for "no" votes for the entire package.
"The spending cap (in Prop 1A) is an awful way of not balancing a budget plan for California," said Willie Pelote, a lobbyist for the statewide group. "The governor and the Legislature came up with that as a budget deal for California. We disagree. We believe the state of California can do better."
It seems that the split between the local and the statewide union may hinge on which has the higher percentage of state workers.
Local 2620, headquartered in Oakland, represents a heavy concentration of state employees, including psychologists, rehabilitation therapists, day care and senior care home inspectors and vocational rehabilitation counselors.
In the statewide union, only about 28,000 of AFSCME's members are state employees.
Pelote said that "our sisters and brothers" in the local are in contract talks with the state and want to support the budget initiative plan. He said the statewide union has no protest over the local breaking ranks.
"I understand the situation they're caught in if their members feel they want to vote 'yes' on the initiatives," Pelote said. "But we're taking a 'no' position. And that's what we're putting out in the press."
While the large and powerful California Teachers Association has declared its support for all six budget-related measures on the May 19 special election ballot, it's much-smaller cousin (and sometime rival), the California Federation of Teachers, is going the other way.
The CFT, following a weekend convention, declared that it would support just one of the six measures, Proposition 1B, which would provide future payments to schools to make up for state aid cuts this year. It was especially scornful of Proposition 1A, which would impose a rolling spending cap on state spending and allow temporary tax increases to be extended.
Proposition 1A, the CFT said, would "create a maze of rules controlling California budgeting that would severely restrict the state from enacting budgets that adequately address the realities that California will be facing in coming years, especially the ability to address the needs of California's aging population." It also denounced the measure as a "power grab" by Gov. Arnold Schwarzenegger.
The CFT's support for Proposition 1B, however, did not address a poison pill in its language that says it is void, even if enacted, unless Proposition 1A also passes. So if the union gets its way on Proposition 1A, it will make Proposition 1B meaningless.
The California Teachers Association will support all six budget-related measures on the May 19 ballot, ensuring Gov. Arnold Schwarzenegger won't have to contend with the well-financed teachers' union this time around.
The action was not surprising, considering that CTA already wrote the ballot argument in favor of Proposition 1B, which would repay $9.3 billion to schools starting in 2011-12. The group's state council voted Sunday to support all six measures.
But the California Nurses Association, one of CTA's most vocal partners in the labor coalition that took down all four of Schwarzenegger's special election measures in 2005, has come out against the six May ballot measures.
Because of how lawmakers wrote the proposals, CTA needs Proposition 1A to pass in order for Proposition 1B to take effect. Some labor groups, including the nurses, oppose Proposition 1A because it would set limits on state spending in good economic years, while anti-tax groups dislike the fact that the measure would increase taxes by roughly $16 billion from 2011-13.
But CTA felt the $9.3 billion in Proposition 1B, as well as some education protections from the spending limit in 1A, were enough to get their support.
"The repayment of some of the money cut from education will allow local school districts to restore student programs, reduce class sizes and rehire educators who have been laid off," CTA President David A. Sanchez said in a statement. "Many of these initiatives, especially Propositions 1A and B, are dependent on each other and if they fail, the state is back to square one in trying to balance the budget and our schools could face even deeper cuts."
Bonnie Castillo, legislative director for the California Nurses Association, said her organization felt the budget process that led to the six ballot measures was "undemocratic" and offered no public opportunity for input.
She criticized the cuts included in the budget lawmakers and Schwarzenegger approved last month and said it would serve as a basis for future budgets if Proposition 1A passes. The measure relies on a trend line over the previous 10 years to determine spending limits.
"Proposition 1A is based on a budget that has massive cuts to social services that really are badly needed and affect our most vulnerable," Castillo said. "To have that budget as the basis for future budgets is brutal."
Castillo said her union doesn't have nearly as much time to prepare for the May election as it did for the 2005 special election, plus the coalition has changed, so it's hard to make a comparison. She said she believes her group's effort will be largely grassroots.
"The teachers are supporting it this time," Castillo said. "I don't know if you can compare it to last time because of the number of months before that election and the folks working on it together the last time."
Insurance Commissioner Steve Poizner and former eBay boss Meg Whitman may be rivals for the Republican gubernatorial nomination next year, but there's no disagreement between the Silicon Valley denizens about Proposition 1A, one of a half-dozen budget-related measures on the May 19 special election.
Poizner and Whitman both oppose the measure, even though Republican Gov. Arnold Schwarzenegger says it is vital to straightening out the state's tortured finances by creating a rolling spending cap.
Whitman laid out her objections to Proposition 1A in a recent Sacramento Bee op-ed article, complaining that it would indirectly extend billions of dollars in state tax increases. Poizner's similar screed is contained in an article posted today on Flashreport, a conservative blog, to wit:
"Make no mistake: If they get away with their latest scheme it will cost you dearly.
Specifically, the politicians don't want you to know all the facts when it comes to Proposition 1A. This is the ballot measure that would impose a state constitutional spending limit - a concept that is supported by an overwhelming majority of Californians.
However, if the measure passes, it will also extend the huge tax increases recently approved by the legislature.
"Passage of Proposition 1A means that the near-doubling of the car tax, the 1 cent statewide sales tax increase, the income tax hike and the reduction in the dependent tax credit would continue for an additional two years. That adds up to an estimated $16 billion in higher taxes. It's no surprise these taxes are not supported by the majority of Californians.
"That's why our state legislators want to keep the truth from you about Proposition 1A and they've stacked the deck in their favor. So when you read the official ballot description of the measure - what should be an objective description on what is being voted on - you will see no mention of the taxes. The legislative leadership wrote the ballot description themselves and intentionally omitted any reference to the tax increase extension. They made sure what you read is biased."
Poizner noted that he successfully led the effort against a ballot measure last year that would have changed legislative term limit but, like Whitman, stopped short of pledging that he would devote some of his vast personal fortune to defeating Proposition 1A. Schwarzenegger has assembled a coalition to support and raise money for the measure's passage and are waiting to see whether any deep-pocket source would pour in money to oppose it, either a public employee union opposed to spending limits or someone on the right opposed to a tax extension.
The third GOP candidate for governor, former Congressman Tom Campbell, supports Proposition 1A, saying its needed to get a handle on state spending. He was briefly Schwarzenegger's budget director.
The bad news for California's economy keeps on coming.
The unemployment rate in the state rose to 10.5 percent in February. A year earlier it stood at 6.2 percent, according to the state Employment Development Department.
The U.S. unemployment rate rose to 8.1 percent.
Meanwhile, California's budget opened up yet another hole -- this one $8 billion -- the nonpartisan legislative analyst estimated last week.
The legislative leaders who labored for weeks trying to find a way to patch the $40 billion budget gap closed last month were quick to react today to LAO projections of a new $8 billion hole.
Senate leader Darrell Steinberg even extended a special invitation to GOP gubernatorial hopefuls Steve Poizner and Meg Whitman, who have been critical of the February budget deal.
Assembly Speaker Karen Bass, D-Los Angeles
"Given the nation's continuing economic problems since we passed the budget, it is not surprising to see the state's revenue projections continue to fall. We must keep a careful watch on revenues during these volatile times, and all of us, Democrats and Republicans alike, must be prepared to continue to make tough decisions should the May Budget Revision also show significant declines in revenue. We also have to keep in our minds the potential that if the ballot measures fail on May 19th, the budget problem grows by another $6 billion."
Assembly Republican Leader Mike Villines, R-Clovis
"Republicans take very seriously the warning issued today by California's Legislative Analyst that our economy continues to deteriorate and revenues continue to decline. We understood when we passed the budget in February that our state's fiscal crisis was not over, and that the Legislature may be called upon to make further spending reductions in the months ahead.
"We agree with the Analyst that further tax increases should not be on the table. When we passed the budget in February, we made it clear that any further budget action we may need to take in the coming months must be done solely through savings to government programs.
"The Analyst's report echoes what Republicans have been saying all along -- that economic recovery and job creation must continue to be an important priority for the Legislature in the coming months. We will continue working to try and pass economic recovery measures that will create more jobs for those out of work and inspire more economy activity in our state."
Senate President Pro Tem Darrell Steinberg, D-Sacramento
"We will solve the challenge outlined this morning by the Legislative Analyst with the same intensity that we solved the $42 billion problem in February."
"It should come as no surprise that the Nation's economic downturn continues to severely impact California's budget - retail sales continue to decline and unemployment continues to rise and American families lost $5.1 TRILLION in the last 3 months of 2008."
"Like thousands of businesses and millions of families, state government has less money to spend."
"But moms and dads will continue to get their kids off to school. Sick people will need an emergency room. There will be fires to put out. Criminals to prosecute. And elderly people to care for."
"Fortunately, the action we took in February makes what we face more manageable."
"For months those who have lobbied us have told us what not to cut, what not to tax, what not to do."
"That time is past. We have entered the post-press release period of our budget crisis."
"I am extending an invitation to both Meg Whitman and Steve Poizner to meet with us. They've both said that as Governor they could close our budget gap without raising taxes. Well now, that's what we need to do and we need their list of cuts and savings."
"We invite any and all people and stakeholders who are skeptical of the magnitude of the challenges we face to step forward with their ideas."
"Senate Budget Subcommittees are already meeting to craft additional changes to the budget. In addition, the Senate Budget Committee will convene in the coming weeks to hear from the Legislative Analyst on this report and what steps we can take to fix this problem."
"We will solve the problem."
Senate Republican Leader Dennis Hollingsworth, R-Murrieta
"The fact that the LAO is projecting a $6 Billion deficit for the 2009-2010 Budget is not a surprise. I said early on this budget was not going to fully solve the problem. We had anticipated the budget shortfall would be around $10 billion, and it still could reach that number."
"Now we need to focus on re-evaluating some of the solutions previously discussed that include helping the private sector create jobs and stimulate the economy. We also need to use any federal stimulus money California receives efficiently and effectively and look at streamlining government by reducing spending. We can't go back to the taxpayer's again to ask them to fix the problem, especially after hitting them with a $1,000 price tag just three weeks ago."
"Clearly, more work is needed and I look forward to working with my colleagues in the Assembly and Senate to achieve that task."
The Legislature's budget analyst, Mac Taylor, declared today that the immense package of spending cuts, new taxes and loans aimed at closing the state's $40 billion budget deficit will fall short by $8 billion because the state's economy is continuing to falter.
"Unfortunately, the state's economic and revenue outlook continues to deteriorate," the Legislative Analyst's Office (LAO) said in a review of the package, which covered the remainder of this fiscal year and all of the next.
"Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion. Consequently, the Legislature and governor will need to adopt billions of dollars in additional solutions in the coming months to bring the 2009-10 budget back into balance."
Taylor had some more bad news for the state's political leaders. Because so many of the "solutions" adopted last month are temporary, "without corrective actions, the state's huge operating deficits will reappear in future years - growing from $12.6 billion in 2010-11 to $26 billion in 2013-14."
Taylor said that to close the newly discovered $8 billion gap, the state should maximize its use of federal "stimulus" funds and "continue developing programmatic solutions, especially those his office has been recommending in recent months but the Legislature and the governor shunned in adopting their package last month.
The LAO report will renew the Capitol's partisan and ideological squabbling over spending cuts and new taxes and fuel calls on the left for even more tax increases and those on the right for deeper spending cuts. The full LAO report may be found here.
One of the intriguing early machinations of the still-very-far-way 2010 GOP primary is how Steve Poizner, Meg Whitman and Tom Campbell will come down on the budget package headed to the ballot in May.
Yes, the insurance commissioner and former eBay chief have already blasted the package.
But both are wealthy and could curry favor with the GOP base by actually spending some of their millions against it.
On Wednesday, Campbell, a former budget director for Gov. Arnold Schwarzenegger, officially endorsed the package, offering full-throated support for the spending cap measure, which would extend the tax increases by two years.
"Proposition 1A is the intervention taxpayers need to stop this out of control spending and get our budget onto a stable path for the long-term," Campbell said.
Meanwhile, Jennifer Nelson reported on the FlashReport that Poizner told a GOP group he would take a "major role" in opposing the measure:
When asked if he would take a major role in leading an opposition effort, he said yes, that he plans to work with anti-tax groups to rally opposition to the measure.
Whether that includes digging into his wallet remains unclear. Poizner has spent his funds in ballot campaigns before, most notably opposing Proposition 93, which would have extended term limits for incumbent state lawmakers. That issue was another winner among the GOP base.
Schwarzenegger has seemed to take the early jockeying in stride. When asked about Whitman's critical comments of the plan last month, the governor retorted, "She's a smart woman. I'm sure she will look at this and see it's a terrific package."
Gov. Arnold Schwarzenegger will make his case for the budget package on the May 19 ballot in an appearance at the Commonwealth Club in San Francisco.
The noon address will be broadcast live on the radio -- 89.3 FM in Sacramento and 88.5 FM in the Bay Area. Or online at kqed.org.
ART TORRES AND STEM CELL COMMISH: California stem-cell agency has on its agenda today the selection of the next vice-chairman.
That could be Art Torres, the chair of the California Democratic Party. Or it could be Schwarzenegger's pick, current board member Duane Roth.
Or both?
The California Stem Cell Report noted an agenda item that could potentially change the agency's bylaws to have two vice chairs.
Previously:
Schwarzenegger names his pick for stem cell vice chair
Art Torres' next job: Stem cell vice-chairman?
FIELD POLL: Only 41 percent of Californians say the state is "one of the best places to live," according to a new Field Poll.
Still, residents don't much like the idea of dividing up the Golden State, with 71 percent disapproving of a north-south divide and 82 percent opposing an east-west split.
Find the statistical tabulations here.
Of course, opinions vary by region. A full 61 percent of Bay Area denizens cited the state among the best places to lives.
Only 37 percent of Los Angeles residents said that. That's what we Bay Area baseball fans like to call the Dodger blues...
HUGS ALL AROUND: OK, so former Assembly Speaker Bob Hertzberg isn't likely to be tapped as the next leader of the Central Intelligence Agency.
But the Los Angeles Democrat is the replacing Leon Panetta as co-chair of California Forward, the governmental reform group.
BIRTHDAYS: Assemblyman Charles Calderon, D-Whittier, turns 59 today.
Former state Sen. Mike Machado, the Linden Democrat who was recently appointed to the board of directors of the State Compensation Insurance Fund, turns 61.
The nonpartisan Legislative Analyst's Office will release a new report today on the impact of the federal stimulus plan on California.
The LAO's take is significant as the state's fiscal gurus weigh whether there is enough money to avoid pulling the trigger on higher taxes and deeper cuts (totalling $2.7 billion).
The complex budget deal enacted last month said the state had to receive at least $10 billion from the feds to avert the taxes and cuts.
Last week, the Schwarzenegger administration estimated there would not be enough stimulus funds, but state Treasurer Bill Lockyer has not taken a public position.
On Monday, the left-leaning California Budget Project said there was more than enough federal money.
The Assembly Budget Committee will meet today to discuss the issue, with Legisaltive Analyst Mac Taylor set to testify.
The specific taxes and cuts at stake: An additional 0.125 percent on every income tax bracket in 2009, equal to $1.8 billion in higher taxes. Also on the chopping block would be adult dental services and podiatry, $100 million for higher education, reductions in monthly SSI/SSP grants for low-income disabled and elderly residents by 2.3 percent and monthly grants for welfare families by 4 percent.
POLLING GAY MARRIAGE: Here's a shocker: Californians remain divided over gay marriage.
The latest Field Poll shows voters split on same-sex marriage 48 percent to 47 percent. Voters narrowly voted to ban such marriages via Proposition 8 last fall.
The interesting tidbits are in the exclusive statistical tabulations.
The base of support for gay marriage remains in the Bay Area (64 percent), young people (55 percent among those 18-39) and non-religious types (81 percent).
Opposition is centered among the elderly (34 percent support among those 65 or older), men (43 percent) and the Central Valley (36 percent).
GOVERNOR 2010: San Francisco Mayor Gavin Newsom takes his town hall tour to Oakland today.
Politics is a back-scratching business. And after last month's budget vote, there's a lot of itching going around the Capitol.
On Thursday, Senate President Pro Tem Darrell Steinberg rearranged offices in the upper house (made necessary by Sen. Dennis Hollingsworth's selection as GOP leader). Not surprisingly, Sen. Dave Cogdill, the ousted Republican chief who voted for the budget, didn't end up in the smallest of digs.
That honor went to Sen. George Runner, an outspoken member of the anti-tax faction of the caucus.
Cogdill also was handed the chairmanship of a select committee on surplus property this week.
We're hearing that more changes (likely favorable to other GOP voters Abel Maldonado and Roy Ashburn) could be in the pipeline...
Over at the Assembly, Republican Anthony Adams stuck his neck out to vote for the budget. Now, conservative forces are plotting a recall attempt.
So next month Gov. Arnold Schwarzenegger will thank the Hesperia Republican by attending a district fundraiser tentatively scheduled for early April.
There's punishment, too, as meted out by Assembly Speaker Karen Bass when she stripped three then-committee chairmen of their posts.
THE ARNOLD CLASSIC: Schwarzenegger will be spending the weekend in Columbus Ohio, attending the annual Arnold Sports Festival bodybuilding competition, as he does every year.
The last time Schwarzenegger was in Ohio, he headlined a rally for presidential candidate John McCain.
"He needs to do something about those skinny legs," Schwarzenegger teased now-President Barack Obama. "We're going to make him do some squats. And then we're going to give him some biceps to beef up those scrawny arms. If only we could do something about putting some meat on his ideas."
NO, WE'RE NOT KIDDING: The McGeorge School of Law holds a conference on governmental ethics. Former San Francisco Mayor and Assembly Speaker Willie Brown will be the luncheon speaker.
BOXER ON TOP: Voters aren't particularly inclined to reelect U.S. Sen. Barbara Boxer, with 42 percent in favor and 43 percent opposed, according to the Field Poll.
But California's junior senator does much better when lined up against her potential challengers.
Boxer: 54 percent
Schwarzenegger: 30 percent
and
Boxer: 55 percent
Former HP CEO Carly Fiorina: 25 percent
In the hypothetical GOP primary, Schwarzenegger finishes first, but by a small margin:
Schwarzenegger: 31 percent
Fiorina: 24 percent
Assemblyman Chuck Devore: 9 percent
Undecided: 36 percent
Without the governor, Fiorina leads DeVore 31 percent to 19 percent -- but with half the electorate undecided.
Find the exclusive statistical tabulations on Capitol Alert.
Photo: Sen. George Runner, R-Lancaster, and then-Senate Republican leader, Dave Cogdill, R-Modesto, confer on the Senate floor on Sept. 8, 2008. Credit: Brian Baer/ Sacramento Bee.
Photo: Gov. Arnold Schwarzenegger congratulates Arnold Classic winner Dexter Jackson on March 5, 2005. Credit: Jay LaPrete/Associated Press.
The state Department of Finance has posted a more complete summary of the budget package that Gov. Arnold Schwarzenegger and legislators completed late last month.
"Due to timing constraints, we were able only to post a fairly stripped-down summary of the main provisions of the enacted budget when it was signed on 2/20," DOF spokesman H.D. Palmer said. "Now that our staff have been able to regain some sense of a normal circadian rhythm, we've now finished the more traditional summary with an overview, summary tables, and more narrative on the key spending and revenue provisions."
The revised summary is available here.
A new Field Poll shows that California voters are dissatisfied (55 percent) with the state budget passed by the Legislature last month. Those likely to vote in the May 19 budget special election are even more unhappy (65 percent).
The plan contains a broad swath of tax hikes and deep spending cuts.
Come to think of it, who are the 45 percent of the people satisfied with that budget?
The same poll shows initial support for all six items on that ballot.
Of course, support for Proposition 1A, the spending restriction measure which would extend the life of the tax increases, plunges by 23 percent when voters are told about the tax provision.
Lawmakers must have accidently left that out.
That's not what the odd-couple of the month -- the conservative Jon Coupal of the Howard Jarvis Taxpayers Association and the liberal Anthony Wright of Health Access -- think. They teamed together Monday to sue to change the ballot summary for the measure.
They even got a letter of support from UC Berkeley professor George Lakoff, he of Don't Think of an Elephant fame.
"In each case, the language prejudices voters towards passage of the proposition and toward the political and economic views of the proponents of the proposition," Lakoff wrote in a letter accompanying the suit.
Umm, wasn't that the point?
We've posted each of the propositions' polling numbers . And, as usual, Capitol Alert has the Field Poll's exclusive statistical tabulations.
Other poll highlights: 18 percent of voters think the state is headed in the right direction. The same percentage approves of the job the state Legislature is doing. Schwarzenegger's approval held steady at 38 percent since last September. The open-primary ballot measure on the 2010 ballot gets first-blush support from 58 percent of voters.
Meanwhile, it's election time in Los Angeles.
An itsy-bitsy fraction of the city's electorate will head to the polls today, when Los Angeles Mayor Antonio Villaraigosa is expected to waltz into a second term.
Post your guess as to the specific date he announces his bid for governor (if he does) in the comments section. Leave your real name and we'll give you a shout-out if you're right when (and if) the time comes. Or say if you think he won't run.
EVENT: Oscar-winner Sean Penn will be in San Francisco with Sen. Mark Leno and Assemblyman Tom Ammiano to press for passage of a bill to create Harvey Milk Day, named after the slain SF supervisor Penn played in the film Milk. Schwarzenegger vetoed the bill last year.
BIRTHDAY: Assemblyman Paul Cook, R-Yucca Valley, turns 66 today.
Photo: Gov. Arnold Schwarzenegger signs the budget plan in his office on Friday Feb. 20, 2009. Credit: Brian Baer/Sacramento Bee.
The budget plan adopted by the Legislature last month sent six different budget-related measures to the May 19 special election ballot.
The Field Poll asked voters their initial position on each of the measures. Below are the results:
Proposition 1A (Spending cap/tax extension)
Registered voters
Yes: 54 percent
No: 24
Likely voters in May special election
Yes: 57
No: 21
Proposition 1B (Education funding)
Registered voters
Yes: 59
No: 27
Likely voters
Yes: 53
No: 30
Proposition 1C (Lottery)
Registered voters
Yes: 48
No: 37
Likely voters
Yes: 47
No: 39
Proposition 1D (Early childhood services funding (Prop. 10))
Registered voters
Yes: 62
No: 20
Likely voters
Yes: 54
No: 24
Proposition 1E (Mental health funding(Prop. 63))
Registered voters
Yes: 61
No: 23
Likely voters
Yes: 57
No: 23
Proposition 1F (No raises for officials in deficit years)
Registered voters
Yes: 74
No: 17
Likely voters
Yes: 77
No: 13
State Treasurer Bill Lockyer voiced a fear that many Democrats hold privately -- that the high price paid to corral the final GOP vote for the budget could set a poor precedent for future negotiations.
"Frankly, I think this is just the beginning of serious budget holdups in the future," Lockyer, a Democrat and former Senate leader, told Greg Lucas of California's Capitol. "If you're willing to rewrite the constitution to get a needed vote, the antes will only keep going up.
That's a reference to deciding Republican vote, Sen. Abel Maldonado, who received a constitutional amendment on a future ballot to rewrite the state's elections law.
Lockyer, the state's banker, also spoke about the state's bond rating. California has the lowest such rating in the nation, which he blames, in part, on Wall Street.
"The fact is our rating is the lowest of all the states. It's not fair but it's the rating we've got. I've argued with the rating agencies on that but they claim their ratings are being responsive to investors," he said. "If they're being responsive to investors then they want us to have a bad rating so the investors get a better yield. They're helping rip us off, in effect."
Secretary of State Debra Bowen has posted draft copies online of all the ballot arguments -- both for and against -- Propositions 1A through 1F for public review.
(Proposition 13, not the famous one and not related to the budget package, will also be on the May 19 ballot. Its title, summary and arguments are also posted.)
Find them all here.
Rep. Tom Campbell may not have attended last weekend's Republican Party convention in Sacramento, but the former state budget director is still making his case in his underdog bid for governor.
Campbell wrote on Fox and Hounds that passing the tax-and-cuts budget package was "the right thing to do."
"There was no realistic possibility of a budget deal coming entirely from cuts in spending within one year," Campbell said. "When someone hoping to serve in public office says something like that, however, he leaves himself open to opportunistic criticism. It's already started."
That's a reference to would-be GOP rivals, Insurance Commissioner Steve Poizner and former eBay chief Meg Whitman, who have blasted the budget.
Campbell goes on to defend his own fiscal record and closes with this:
"One last thing -- to fellow Republicans. No party is in healthy condition when it directs all its energy to attacking its own members. Republicans can be the party of low taxes, but we must be the party of fiscal responsibility first."
Photo: Tom Campbell as he is announced as the new director of the Department of Finance at a Capitol press conference on Thursday, Nov. 4, 2004. Credit: John Decker/Sacramento Bee.
Categories: Governor 2010, Meg Whitman, Rep. Tom Campbell, State budget, Steve Poizner
Every May, the governor unveils what those in the Capitol call, ungrammatically, the "May revise" of the state budget, which sets the stage for final efforts to enact a new spending plan for the forthcoming fiscal year that begins on July 1.
This year, however, Gov. Arnold Schwarzenegger and legislators have already enacted a 2009-10 budget, so the May revise might be anticiimactic, or perhaps not.
State law would have required the revised budget to be delivered to the Legislature by May 14, but much of the budget is contingent on several ballot measures being approved at a special election. The election was going to be held June 2, so a bill was drafted to delay the revision until "June 8, 2009, or six calendar days after the next statewide election, whichever is later..." and that legislation has been signed.
However, at the last minute, the governor and legislators decided to shift the special election to May 19, coincident with a city election in Los Angeles, so now the revision of the revision is out of whack, since "six calendar days after the next statewide election" would be May 25.
"Given that the enacted language doesn;t sync neatly with the changed election date, we'll be discussing the delivery date with the Legislature," Finance Department spokesman H.D. Palmer said today after the issue arose during an administration press briefing.
The political establishment is already starting to gear up for the budget-centric special election on May 19.
Here are the budget measures that will be on that ballot:
Proposition 1A: Implements a spending cap based on the rate of growth from the last 10 years. If approved, it would extend the length of the taxes approved by the Legislature.
Proposition 1B: Changes the state's education funding law -- Proposition 98 -- for supplemental education payments to local districts due to recent budget cuts.
Proposition 1C: Borrows from future lottery earnings.
Proposition 1D: Takes money from the First 5 Commissions -- aka Proposition 10 funds -- to help balance the budget.
Proposition 1E: Takes money from the Mental Health Services Act -- aka Proposition 63 funds -- to help balance the budget.
Proposition 1F: Prevents state-level elected officials from receiving pay raises in years when the state is running a deficit.
Gov. Arnold Schwarzenegger hosted a D.C. steakhouse fundraiser Monday. The money went to Schwarzenegger's California Dream Team PAC, which is gearing up its fundraising operation for the budget special election.
A $25,000 ticket bought a seat at the head table with the governor, according to the Associated Press, while $10,000 paid for "preferred seating" and photos. Cheap seats were available for $2,500.
GOVERNOR 2010: Speaking of money, Meg Whitman has floated a dollar figure for what she might spend while running for governor: $150,000,000.
WIGS OPTIONAL: A coalition of left-of-center and good government groups are sponsoring a Sacramento summit today on whether the time has come for a California constitutional convention.
That's an actual possibility afforded under state law that would allow the state to, in essence, chuck a good chunk of its constitution and start over.
As the Bay Area Council, which initially spearheaded the effort, says, "We believe it is our duty to declare that our California government is not only broken, it has become destructive to our future. It is time to repair our system of governance."
COMMITTEES: With the budget no longer looming over the Capitol, policy committees will begin a slew of informational hearings.
Today's lot include everything from the Senate transportation panel considering how to lower greenhouse gas emissions through parking policy to an Assembly Water committee hearing on what to do next with the Delta.
Gov. Arnold Schwarzenegger, on the final day of his Washington D.C. swing, took a swipe at the state Republican Party and defended those GOP lawmakers that sided with him and majority Democrats in backing last week's budget.
"I think that they've done a terrific job and they should pay very little attention to what the party says," Schwarzenegger said.
The Bee's Rob Hotakainen has more from the governor:
"First of all, I would not be too concerned about that if I would be those candidates because the Republican Party has no money anyway. That is number one. Number two, I think that those six that have come in and voted for the budget are great public servants because they have done in the end what was best for the people of California and what was best for the state rather than what was best for their party ideology. So they are in my opinion great heroes and I will always support them."
Schwarzenegger has long had a cool -- if not downright icy -- relationship with the Republican Party apparatus in California. The party is far more conservative than the moderate governor, who has embraced fighting climate change as a top issue and higher taxes to balance the budget.
In 2007, Schwarzenegger chastised the state GOP in a convention speech, saying, "in movie terms, we are dying at the box office. We are not filling the seats."
In 2008, he said in an interview with Der Speigel that the Republicans running the party are "just so out there."
"Think about the Republicans from California that are running the party. I have almost no contact with them. None -- because they're just so out there," he told the magazine.
Schwarzenegger skipped the party convention in Sacramento last weekend for his East Coast trip.
We have a winner in the Capitol Alert (mid-year) budget pool. His guess was off by less than six hours.
Bob Ham, the director of intergovernmental relations for Imperial County, takes home the grand prize of $25 worth of Starbucks gift cards.
Ham said he "basically manages the effort of lobbying in Sacramento and Washington" for Imperial, the county located in the south-easternmost corner of California. A past resident of Sacramento for 25 years, Ham said he's worked in and around the Capitol community since 1980.
Ham chose 12:15 p.m. on February 19th as his budget guess. The budget bill cleared both houses at around 7 a.m. that morning.
Ham was one of nine people who guessed the budget would pass last Thursday, but every other entrant was for later in the afternoon and into the evening.
Ham said he had entered Capitol Alert's budget pool last summer -- and was too optimistic by several weeks.
This time, he said, he went in with warranted pessimism. "I was more skeptical that they would get it done," Ham said.
That seemed to be a safe bet -- and this time it paid off.
Thanks to everyone else who entered.
Photo: Gov. Arnold Schwarzenegger signing the state's budget on Friday, February 20, 2009, in Sacramento, California. Credit: Brian Baer/ Sacramento Bee
Read the governor's vetoes and the budget summary here.
Gov. Arnold Schwarzenegger today will sign the budget package that the Legislature passed early Thursday morning.
Then comes the list of line-item vetoes.
Of course, as Jim Sanders reports in today's Bee, more money woes could be in the state's future as the economy continues to falter.
"If I could tell you what revenues are going to be in May, I would not be making this call from Sacramento -- I'd be making it from Las Vegas," quipped H.D. Palmer, a spokesman for Schwarzenegger's Department of Finance.
I'd bet the under on that.
The real drama of the weekend will be at the California Republican Party's convention, which descends on Sacramento this evening.
In terms of budget fallout, there's the pending resolution to censure every Republican lawmaker who voted for taxes.
But there's also early jockeying in the 2010 governor's race between Meg Whitman and Steve Poizner.
Both candidates have been very critical of the budget deal struck in the Legislature.
(Speaking of sharp words from gubernatorial candidates, check out Lt. Gov. John Garamendi say this week, "We have an infection here. And it's a Republican infection, and it's really spreading across this nation.")
Among the speakers at the GOP confab: Rep. Darrell Issa speaks tonight as does 2002 GOP nominee for governor Bill Simon.
On Saturday, former Hewlett-Packard CEO Carly Fiorina (and talked-about 2010 U.S. Senate candidate) does breakfast on Saturday. Ex-Mass. Gov. Mitt Romney will introduce Meg Whitman at lunch. Rep. Tom McClintock and Insurance Commissioner Steve Poizner will be the dinner speakers.
On Sunday, Assemblyman (and 2010 U.S. Senate candidate) Chuck DeVore takes the stage.
VICTORY LAP? Schwarzenegger, meanwhile, won't be anywhere near the GOP activists. The governor is off to Washington this weekend, in preparation for next week's National Governors' Association conference.
He'll also appear on at least two Sunday talk shows -- ABC's "This Week with George Stephanopoulos" as well as CNN's Sunday show.
FURLOUGH FRIDAY: Believe it or not, it's been only two weeks since the first state worker furlough.
Well, today marks day No. 2. Keep up with your state employee news at The State Worker blog.
BIRTHDAY: Republican Sen. Dave Cox, who flirted with the possibility of being the critical 27th budget vote earlier this week, turns 71 today.
Photo credit: After the Legislature approved the state budget, Gov. Arnold Schwarzenegger removed the numbers from the "deficit clock," outside his Capitol office on Thursday, Feb. 19, 2009. Credit: AP Photo/ Rich Pedroncelli.
Republican Assemblyman Anthony Adams cast his "aye" budget vote at dawn today with full knowledge that, as he has said, "this will probably be the end of a political career for me."
But that doesn't mean the Hesperia Republican plans to go down without a fight. The second-term assemblyman spent much of Wednesday trolling the Capitol corridors, folder in hand, gathering endorsements from his caucus for his 2010 reelection.
"I think it's important that people know that my caucus is supportive -- that I'm not making any decision lightly," Adams said on his way into a GOP member's office Wednesday. "I'm also not making a decision outside the realm of our caucus. I'm not out there by myself or trying to engage in something that does not have the support of my caucus."
This morning, Adams joined Assembly GOP leader Mike Villines and Assemblyman Roger Niello, R-Fair Oaks, as the three GOP votes needed, along with every Democrat, to pass the $40 billion budget deficit package in the lower house. The plan includes $15 billion in spending cuts, $12.8 billion in temporary tax increases, and $11.4 billion in borrowing.
By the time of the vote, Adams had gathered signed 2010 endorsements from every single Republican in the Assembly.
"While all the members may not feel the same way that I do about the matter, they are still very supportive of me and know that I'm doing this on principle and not for some giveaway or something like that," Adams said.
A recall effort against him is already afoot.
The 38-year old lawmaker has been in anti-tax advocates' crosshairs ever since a Sacramento Bee story on Jan. 22 and an appearance later that day on the John and Ken radio show in Southern California. The shock jocks were blasting Republicans, including Adams, for telling The Bee that taxes were on the table in budget talks.
"I dare with the full knowledge that this will probably be the end of a political career for me," Adams told the radio duo. "But the fact of the matter is California is in a place where they need people who are willing to sacrifice their own personal agenda for what's right."
The radio hosts responded by posting an image of Adams' decapitated head on a stick on their Web site.
There's been talk in GOP circles of recruiting a Republican primary challenger to Adams in 2010.
After the longest continuous floor session in California history (45-plus hours), the state Senate is taking a long weekend.
Hours after the $40 billion-plus budget package passed this morning, Greg Schmidt, secretary of the Senate, sent out a notice to lawmakers' offices that read:
"In consideration of the fact that the Senate closed its protracted budget session at 6:30 a.m. this morning, the President Pro Tem has announced today, February 19th, and tomorrow, February 20th, will be Senate holidays. Capitol offices will be closed. Schedules for the District Offices are subject to the discretion of each Senator."
The Senate met continuously from Tuesday morning through Thursday morning. There was another all-night session from last Saturday evening through Sunday.
Assembly Republican leader Mike Villines and ousted Senate GOP chief Dave Cogdill have published an op-ed in the Fresno Bee on why they supported -- and negotiated -- this budget.
To be sure, the budget the Legislature passed was very difficult to negotiate and includes some items we strongly disagree with, particularly taxes. If Republicans were the majority party and could control the budget, there would be no talk about raising taxes, period. Republicans would be working to lessen the tax burden on hard-working Californians. But Republicans don't control the budget process; Democrats do.
So we had a choice. We could continue to say no and refuse to negotiate, facing the real prospect of enough lawmakers agreeing to pass a budget without Republican input. That budget would have surely included massive tax increases and overspending, with no reform.Or we could negotiate a budget compromise with Democrats on a budget that saves California from the brink of insolvency, gets hard-working taxpayers their long overdue tax refunds, helps to get our economy growing again and includes long-term fixes to our budget problems. We chose the latter course.
This close of the piece sounds like is came straight from the keyboard of the governor's speechwriters: "There is no doubt that this budget is a true compromise. No one got everything they wanted and everyone will have to sacrifice to get us back on track. In the end, Democrats and Republicans came together to do what's right and finally get California on the road to recovery."
By Kevin Yamamura
It's almost done.
State senators were approving a deal to close the state's $40 billion budget deficit this morning after agreeing to give Sen. Abel Maldonado, R-Santa Maria, most of the changes he demanded in exchange for providing the crucial 27th vote.
Here's what he got:
* A constitutional amendment establishing an open primary system.
The measure will place on the June 2010 ballot an open primary proposal affecting congressional and state races in 2012 and beyond.
Under the plan, the top two candidates in a primary would face off in a general election. Candidates would not participate in partisan primaries, but they would be able to retain their party labels on the ballot.
* A constitutional amendment banning legislative pay increases during deficit years. This measure is intended for a May 19 special election ballot, along with measures to make changes to the California lottery and establish a "rainy day" fund.
Legislative leaders rejected Maldonado's proposal to eliminate legislative pay altogether when the budget is late, arguing the idea was unconstitutional.
* Elimination of the 12-cent additional gas tax, which was estimated to bring in $2.1 billion through June 2010. The money will be replaced with a 0.25 percent increase in the state income tax, federal stimulus dollars and more than $600 million in line-item vetoes.
* Finally, he succeeded in his personal crusade to eliminate $1 million in funding for state Controller John Chiang to pay for new work stations.
Maldonado said the expenditures were wasteful, but Chiang's office said the money, previously approved by lawmakers, was being spent to consolidate staff in one location and save future costs.
The changes are headed to the Assembly, where members were waiting for the Senate to finish up before sending the package to Schwarzenegger.
Sen. Abel Maldonado, R-Santa Maria, said he's ready to vote for the budget after scoring major concessions from legislative leaders as part of a plan to bridge a $40 billion deficit. The only remaining question is whether two-thirds of both houses will provide enough votes to give Maldonado what he wants.
As part of Maldonado's negotiated package, lawmakers will place on the June 2010 ballot an open primary proposal intended to favor more candidates such as him. The proposal would impact congressional and state races in 2012 and beyond. Under the plan, the top two candidates in a primary would face off in a general election. Candidates would not participate in partisan primaries, but they would be able to retain their party labels on the ballot.
Maldonado will be termed out of the state Senate in 2012. He is rumored to be considering a run for state controller in 2010, though he said he has not yet decided his political plans.
Leaders also agreed to Maldonado's demand to eliminate the 12-cent additional gas tax, which was estimated to have brought in $2.1 billion through June 2010.
As part of the changes, a 5 percent surtax on income taxes will be replaced by a 0.25 percent boost in each income-tax bracket. That increases the state's highest income tax rate from 9.3 percent to 9.55 percent (actually 10.55 percent for millionaires with the Proposition 63 mental-health tax). If the state receives at least $10 billion in federal stimulus money, that surcharge would drop to 0.125 percent. The new formula would raise about $400 million more in income taxes than the previous proposal.
The rest of the lost gas-tax revenues will be replaced by federal stimulus money and $600 million to $700 million in Schwarzenegger line-item vetoes.
"Right when we're trying to move California forward, people are paying more in gasoline, and I made a request," Maldonado said.
Maldonado also won a constitutional amendment to prohibit legislative raises in deficit years, which would appear on the May 19 special election ballot. But legislative leaders refused to grant him his proposal to eliminate legislative pay altogether when the budget is late. They believe that idea is unconstitutional, though Maldonado disputed that notion.
"The choices were hard," Maldonado said. "Do I want to make my home state solvent? Do I want to protect education? Do I want to keep it from going off the cliff? Or do I want to continue to vote 'no' and run this state in the wrong direction? I'll tell you something, I'd like to have seen somebody else vote for this budget. And it would have been easy for me to cast a 'no' vote. But during difficult times, you need to step up to the plate."
He won one more request: eliminate $1 million in funding for state Controller John Chiang to pay for new workstations. Maldonado said the expenditures were wasteful, but Chiang's office said the money, previously approved by lawmakers, is being spent to consolidate staff in one location and save future costs.
Sen. Mark DeSaulnier, D-Concord, feared that lawmakers might be setting a bad precedent by giving into Maldonado's extensive demands.
"I do think there's an important integrity issue that a deal's a deal and continuing to leverage for more, at some point, is just rewarding bad behavior on our part," DeSaulnier said.
The deal provided a lesson in how budget leverage works.
Sen. Dave Cox, R-Fair Oaks, was widely expected to provide the 27th Senate vote on Saturday, but he objected to the deal and voted against it. Cox has been critical of the state's First 5 early childhood development programs, funded by cigarette taxes, and he has sought to take as much of its funding as possible for other General Fund programs. But with Cox not voting for the budget, Democrats slipped in a bill slightly reducing the amount of money that the First 5 programs will lose.
Lawmakers are considering a last-minute change in the budget package that would eliminate the 12-cent per gallon tax on gasoline as part of negotiations to secure the final vote in the Senate from Sen. Abel Maldonado, R-Santa Maria. The tax was expected to raise $2.1 billion through June 2010.
Legislative leaders are examining various ways to make up the difference, including a greater reliance on federal stimulus funds, line-item vetoes by Gov. Arnold Schwarzenegger and a change in the 5 percent income tax surcharge, sources said.
Maldonado has demanded three constitutional amendments to secure his vote for the budget. He wants a ban on legislative raises during deficit years, no pay for lawmakers once a budget is late and a switch to a statewide open primary comparable to the top-two system that local governments use.
There appears to be support for the ban on legislative pay raises, but it remains unknown whether legislative leaders have secured enough votes for the open primary change or the elimination of pay during a late budget.
Senate President Pro Tem Darrell Steinberg, D-Sacramento has been meeting with Assembly Speaker Karen Bass, D-Los Angeles, Assembly Republican Leader Mike Villines, R-Clovis and Schwarzenegger legislative secretary Chris Kahn throughout the night to determine whether there are sufficient votes to move the package this morning. Maldonado emerged from a meeting in Schwarzenegger's office around 1 a.m.
The state Senate is scheduled to return at 1:30 a.m.
Update (1:40 a.m.): Session has been moved to 2:15 a.m. Schwarzenegger is expected to find $600 million to $700 million in line-item vetoes to make up part of the gas tax revenue. Legislative leaders plan to reject Maldonado's proposal to eliminate pay during late budgets because they believe it is unconstitutional.
Republican Sen. Roy Ashburn of Bakersfield is invoking the memory of the man conservative love to idolize -- Ronald Reagan -- as he prepares to vote for a budget package that includes more than $14 billion in new taxes.
"In 1967, when the state faced a similar budget situation, he proposed the largest tax increase in the history of California," says Ashburn in an AP interview. "I know Ronald Reagan meant it when he said 'limited government and no tax increases,' but politics is politics and governing is governing."
Read the AP story.
"Who signs first... Manny Ramirez or Abel Maldonado?" courtesy of MIke Madrid at California City News.
From Shane Goldmacher
Sen. Abel Maldonado said in a brief interview Wednesday that there was "a good chance" for a budget vote tonight and that he wants all three of the wish-list items he has put forth to secure his budget vote.
Asked if he would settle for one or two, he said, "I'm asking for all three," before rushing into a meeting with Assembly GOP leader Mike Villines. "We're very close on the details, and I just want to leave it at that."
Asked who he was close with, Maldonado said, "Darrell (Steinberg) and the governor and I -- I think we're close."
Maldonado, R-Santa Maria, could provide the crucial 27th vote necessary to pass a budget package that has been stalled since Saturday. In a lunch meeting at Spataro with Gov. Arnold Schwarzenegger, Maldonado asked for ballot measures to create an open primary system, prohibit legislative pay raises in deficit years and stop legislators from receiving salaries if they do not pass a budget on time.
Find more on Maldonado's demands at sacbee.com.
Are you getting exclusive Capitol Alert e-mails? Sign up here.
In his press conference this afternoon, Gov. Arnold Schwarzenegger took issue with new GOP Senate leader Dennis Hollingsworth's stance that the budget could be balanced without new or higher taxes.
"Anyone that runs around, I think, and says that this can be done without raising taxes, I think has not really looked at it carefully to understand this budget or has a math problem and has to get back, as I said, and take Math 101," Schwarzenegger said.
Schwarzenegger said he hadn't spoken to Hollingsworth, R-Murrieta, since his selection as leader last night. Hollingsworth told Capitol Alert this morning that he opposed new taxes to balance the budget.
"I just don't think it's necessary. ... Why is it that everybody else has to tighten their belt and state government is able to go back and, in effect, take money out of people's pockets in order to try to fix that problem," Hollingsworth had said.
The governor also threw cold water on Hollingsworth's idea to reopen budget talks with the legislative leaders, though Schwarzenegger said he remained open to tweaking the package to secure the last vote needed for passage.
See the story on sacbee.com for more.
Newly minted Senate GOP leader Dennis Hollingsworth said Wednesday morning that he opposes balancing the state's books with any new taxes and that he would like to reopen budget talks.
But there is no sign that other parties to the deal -- Democrats and Gov. Arnold Schwarzenegger -- will accede to that demand or that the GOP senators likely to vote for the package are influenced at all by Hollingsworth's position.
"I hope that the new leader of the Republican caucus can produce his budget plan within the next, let's say, three to four hours, and have it drafted and ready to go for debate on the floor of our respective houses," Senate President Prom Tem Darrell Steinberg, D-Sacramento, said. "We're sticking to the bipartisan negotiated budget that took 60 days to get to and we're going to get that one vote (for it to pass)."
Hollingsworth, R-Murrieta, whose caucus ousted ex-leader Dave Cogdill late last night, said his "hope is that this deal doesn't make it through."
"The vast majority of my caucus does not want to see a budget passed with a tax increase," Hollingsworth said. "To the extent that that requires the budget negotiations to be reopened, then that may be necessary."
Democratic leadership and Gov. Arnold Schwarzenegger have been steadfast in their opposition to reopening talks on the $40 billion-plus package, which includes $15.8 billion in spending cuts, $14.3 billion in tax hikes and $10.9 billion in borrowing.
Steinberg said this morning he is "focused on gaining the one additional vote" needed to pass the plan. Legislative leaders say passage from the Assembly is assured with three GOP supporters, while it has fallen one vote short in the Senate.
Cogdill, the removed Republican leader, supports the package he negotiated, as does Sen. Roy Ashburn, R-Bakersfield.
California is one of three states that requires a two-thirds majority to pass a budget, greatly empowering the Republican minority.
Hollingsworth's ascent is widely viewed as an effort to steer the already conservative GOP caucus further to the right.
Asked by a reporter if he would be "willing to budge at all" on the tax issue, Hollingsworth replied, "I just don't think it's necessary...why is it that everybody else has to tighten their belt and state government is able to go back and, in effect, take money out of people's pockets in order to try to fix that problem."
"We think that, yeah, there ought to be a balanced solution, but one of the things that ought to be off the table is those tax increases," he added, though it's unclear what kind of balanced solution would not increase tax hikes.
Still, the possibility remains that one more Republican will stray from the GOP pack.
Sens. Abel Maldonado of Santa Maria and Dave Cox of Fair Oaks remain the chief targets of the governor's and Democrats' attention.
"That's something Sen. Maldonado is going have to decide," Hollingsworth said. "We're hopeful that he doesn't do that. We're hopeful that everyone will come together in our caucus and decide that raising taxes is not a good idea in this (economic) climate."
The state Senate reconvened Wednesday morning and lifted the call on the tax-hike part of the legislative puzzle.
The roll was called and the votes remained unchanged around 8:30 a.m. 23 ayes. 12 noes.
Senate Democrats immediately called for a private caucus off the floor.
Senate President Pro Tem Darrell Steinberg, in a brief interview, reiterated that the Democrats' strategy remains the same, despite the ousting of GOP leader Dave Cogdill late last night.
"The question is does this mean we go back to square one and start over? Absolutely not," the bleary-eyed Sacramento Democrat said.
He is "focused on gaining the one additional vote" needed to pass the budget, he said.
Republican Sen. Abel Maldonado, a potential vote who was critical of the GOP leadership change, echoed those comments.
"I don't want to call it a step back, it's a bump on the road," said Maldonado, who has given the Democratic leadership a list of a demands. "You've got to keep working. I mean we haven't stopped."
Maldonado said Steinberg "with all sincerity, has been working" with his wish list.
"We've got some stuff in leg counsel," Maldonado said, referring to the legislative bill drafting shop.
Steinberg defended the lockdown of the Senate, though he said there had been no shift overnight.
"No one likes the inconvenience," Steinberg said of the lockdown. "But I'll tell you it is a minor inconvenience compared to the plight of real Californians who will be profoundly affected if there isn't another Republican senator who is willing to put his state above any other interest."
California is set to halt more than 270 infrastructure projects across the state in the next 24 hours, should lawmakers fail to reach an accord.
Here's Bee cartoonist Rex Babin's latest take:
By Kevin Yamamura and Shane Goldmacher
Senate Republicans have a new leader today after the caucus ousted Sen. Dave Cogdill and replaced him with Sen. Dennis Hollingsworth shortly after midnight.
Despite speculation that Senate Republicans may ask to reopen budget talks, Senate President Pro Tem Darrell Steinberg insisted the change has absolutely no effect on his strategy to break the budget deadlock this week.
"We're going to maintain our focus towards solving the problem of getting one vote regardless of who the leader is," Steinberg said after his house took a recess around 1 a.m. "Leadership doesn't change the fact that there is no other idea put forward that would take $41 billion out of a budget deficit. And so, for me, it doesn't change anything."
After the Senate failed to approve the contentious tax hike bill, Steinberg made good on his threat to keep his members locked in for the night. He said he plans to resume talks later Wednesday with Sen. Dave Cox, R-Fair Oaks, and Sen. Abel Maldonado, R-Santa Maria, to see if either one will back the budget package.
"I would describe it as a bit of a discouraging day," Steinberg said of Tuesday. "Despite a lot of effort, and a lot of work today by our office, the governor's office, they're not there. But they have to be there eventually."
Schwarzenegger flew home to Brentwood around 9 p.m., a sign that the budget deal remained elusive Tuesday. His spokesman, Aaron McLear, said the governor plans to continue speaking to Cox and Maldonado on Wednesday.
Hollingsworth, an ardent tax opponent, made it clear that he continues to oppose the budget. When asked whether he wants to reopen the "Big 5" negotiations, he said he'd take a wait-and-see approach.
"I think the majority of my caucus doesn't want to see a tax increase passed in this particular package," Hollingsworth said. "But we'll see what happens in the next few minutes, the next few hours, the next few days."
BIRTHDAY: Assemblyman Jared Huffman, D-San Rafael, turns 45.
EVENTS: State Superintendent of Public Instruction Jack O'Connell will speak to a conference of the California County Superintendents Educational Services Association, or CCSESA as people who like long acronyms call the group.
Sen. Barbara Boxer, a Democrat, and Rep. Dan Lungren, a Republican, will be in town today. The congressman and the state's junior U.S. senator will be part of a large panel this morning talking about how to spend the federal stimulus money headed toward California.
Boxer is also slated for a press conference Darrell Steinberg and Karen Bass on the topic.
GOVERNOR 2010: Former eBay chief Meg Whitman gave her first speech as a candidate for governor on Tuesday.
"I love California too much to let it fail, and I refuse to sit by and watch it happen," Whitman said.
She promised the creation of 2 million jobs by 2015.
Ok, so Whitman may be new to running for office, but that's some classic campaign-style promising. 2015 just happens to be a full year after a potential first term would end...meaning there's no way for voters to judge the success of the pledge.
Whitman will give another speech in Irvine today. She's also expected to announce the endorsement of Rep. Ed Royce.
After debating the tax-hike legislation, the state Senate recessed early this afternoon before actually voting.
That's where the upper house has been ever since, with session now scheduled to resume at 10 p.m.
That toothbrush may come in handy, after all.
Photo: With a sleeping bag under his arm, state Sen. Lou Correa, D-Anaheim, walks onto the Senate floor on Tuesday, Feb. 17, 2009. Credit: AP Photo/ Rich Pedroncelli
The Bee's Phillip Reese has created a handy tax calculator for you to roughly determine what the tax hikes being considered by the state Legislature would mean for your wallet.
From Shane Goldmacher
Some lawmakers took Senate President Pro Tem Darrell Steinberg's toothbrush warning more seriously than others.
Assemblyman Bill Emmerson, R-Redlands, an orthodontist, handed out a free toothbrush and toothpaste to every member of the Assembly on Tuesday to ensure good hygiene - and good breath - during the standoff and any long-winded floor speeches.
"I hope this small tube is enough to get you through these trying budget negotiations," Emmerson wrote in a note accompanying the dental gifts, which he left on members' desks on the floor.
At least on the Assembly side, they won't be needing it as the speaker adjourned session until tomorrow, but could reconvene tonight if events warrant.
The state Senate today finally debated the single most controversial element of the package designed to close the state's $40 billion budget deficit -- a $14.4 billion melange of income, sales and gasoline taxes -- but retired to private meetings before calling for a vote.
After a week of backroom negotiations, the final Republican vote needed to enact the new taxes remains elusive. Senate President Pro Tem Darrell Steinberg has pledged to keep the Senate in session around the clock, if necessary, to get the job done. The Assembly adjourned until Wednesday but could reconvene tonight if events warrant.
It's generally assumed that Republican leader Dave Cogdill and Bakersfield GOP Sen. Roy Ashburn are committed to vote for the tax bill if a third GOP senator joins them. Most of the pressure has been directed at GOP Sens. Abel Maldonado of Santa Maria and Dave Cox of Fair Oaks.
Speaking to reporters, Maldonado said negotiations for his vote and perhaps those of other Republicans were "close" to bearing fruit, but declined to offer specifics.
In today's debate, Democrats urged approval to keep the state solvent and Republicans argued that new taxes would be economic poison during a severe recession.
Cox described the new taxes as an economic "straw that broke the camel's back." He said lawmakers should focus on a short-term fix that does not involve tax increases but generates enough cash flow to keep the state paying its bills.
Kevin Bassett, Cox's chief of staff, said Cox wants the tax package reduced and Democrats to reconsider loosening workplace rules, a GOP demand that was rejected in negotiations with the governor and legislative leaders.
The tax measure is the centerpiece of a 27-bill package aimed at closing a projected $40 billion budget deficit over the next 17 months. The Legislature has been in session night and day since Saturday, approving some of the bills, stalling on others, while legislative leaders and Gov. Arnold Schwarzenegger tried to nail down the three Republican votes in both houses needed for passage.
The three votes have been nailed down in the Assembly but the third GOP vote in the Senate has proven elusive with the largest tax increase in California history the most controversial element. Anti-tax groups and conservative talk show hosts have thundered against the increase while Democrats and groups with stakes in state spending have urged its passage.
Both the key swing Republican budget votes in the state Senate -- Abel Maldonado and Dave Cox -- had fundraisers scheduled for today. Both canceled them.
Maldonado, R-Santa Maria, said he was "still working with Darrell" Steinberg, the Democratic leader of the state Senate, on his position on the budget.
As the state Senate debates the tax-hike component of the $40 billion budget deficit plan, bingo sheets are circulating around the back of the chamber of that august house.
With no end in sight for the budget stalemate, some staff -- many of whom worked
through the night over President's Day weekend -- crafted a budget version of the age-old game.
For those who missed fifth grade, you get to fill in a bingo square every time a state senator says a word on the card. Our personal favorite square is "cliff" as in -- all those members warning the state is "going off a cliff."
The budget remains a single Republican supporter shy of passage in the Senate.
Aroundthecapitol.com has posted the full language of the package of state budget bills.
Check it out here.
A hopeful Senate leader Darrell Steinberg said he met with Sen. Dave Cox for an hour this morning and delayed a critical budget vote until noon based on "conversations" that could produce the elusive final vote to bridge California's budget gap.
But, Steinberg also acknowledged, he came to the Capitol today with a tube of toothpaste, shaving cream and an extra pair of socks just in case he has to carry out his promise to keep the upper house locked down overnight.
"We're going to get there today," Steinberg predicted. "I can't tell you exactly who (will vote for the budget package). We all know who the candidates are. ...Today has to be the day."
Steinberg and his fellow Democrats have spent three days trying to woo one Republican -- either Cox, R-Fair Oaks, or Sen. Abel Maldonado, R-Santa Maria, to cast the decisive vote that would close the gap with cuts borrowing and about $14 billion in tax increases.
They and Gov. Arnold Schwarzenegger's administration have warned that hundreds of millions in public construction projects will shut down if there is no deal by Wednesday. The administration sent 20,000 layoff notices to state employees today.
Steinberg did not elaborate on his meeting with Cox, who was once thought to be the deciding vote but has since said he could not in good conscience vote for the tax increases.
"Dave and I have known each other for almost 20 years, and we have always had a good relationship," Steinberg said.
On Monday, Steinberg first said he would put up the tax bill at 10 a.m. this morning and keep the roll open -- for hours, if necessary -- to pressure the final vote.
"There are caucuses and conversations that led me to hold off until noon," he said.
After a marathon weekend, including an all-night session beginning on the evening of Valentine's Day, passage of the roughly $40 billion plan remains one vote short.
With the budget stalled, Gov. Arnold Schwarzenegger will send out layoff notices to 20,000 state workers today.
In his second emotional speech on the Senate floor in as many days, Senate President Pro Tem Darrell Steinberg announced Monday that the upper house will take up the controversial tax-hike legislation this morning at 10 a.m.
And if, as expected, the bill does not pass he will lock down the Senate.
"We will stay on this floor until we get it done," Steinberg declared just before 8 p.m. Monday. "Bring a toothbrush, bring whatever necessities you need to bring."
Republicans bristled as a sharp, partisan debate ensued.
"You're not going to go back to people's pocketbooks to fuel that spending," snapped Sen. Dennis Hollingsworth, R-Murrieta.
The tense floor session capped a whirlwind weekend that will continue into the week.
Way back on Saturday evening, Democratic lawmakers went into session with high hopes that the six necessary Republican votes were in hand.
Democratic Sen. Lou Correa ultimately sided with his fellow caucus members after a measure to give Orange County an extra slice of the state budget pie was included in the budget.
Three GOP votes seemed assured in the Assembly. (With a little sweetener of a tax break to provide the Glendora Community Redevelopment Agency with millions of additional dollars beginning this year. That just happens to be in the district of Republican Assemblyman Anthony Adams.)
But the vote stalled in the Senate, with only GOP leader Dave Cogdill going up on an initial piece of the budget puzzle and Sen. Roy Ashburn, R-Bakersfield, abstaining.
That's pretty much where the budget process still stands -- one vote short.
Oh, lawmakers in both houses stayed past sunrise, as the 27th vote focus shifted from Sen. Dave Cox, R-Fair Oaks, to Sen. Abel Maldonado, R-Santa Maria.
(Watch Capitol Alert's video highlights of the all-nighter.)
Maldonado was a particularly curious case. Early Sunday morning, he told the San Jose Mercury News, "There's nothing they can give me that would make me vote for this budget."
He snapped at Schwarzenegger: "Where was he when I needed him?" -- a reference to his 2006 primary loss in which he hoped for the governor's endorsement. And he took a swipe at Cogdill, saying "There's a difference between managing a caucus and leading a caucus."
But hours later, he told The Bee, "I'm very concerned with the tax package...We're still working on that. Everything's fluid... I don't want my state to go off the cliff, OK? I don't want that."
By Monday, Maldonado enumerated a list of four demands...
Maybe closing this package will take a miracle-worker...speaking of which...Captain Chesley Sullenberger, he of the famed Hudson River plane landing last month, will be in the Capitol today.
Schwarzenegger and first lady Maria Shriver will host a celebration honoring Sullenberger in the Capitol rotunda at 11:30 a.m.
WEDDING: Not everyone was trapped under the Capitol dome all weekend. Hector Barajas, communications director for the California Republican Party, was in Hawaii where he got hitched to his fiancé Miryam.
GOVERNOR 2010: Former eBay chief Meg Whitman will begin outlining what exactly she would do if she were governor.
The ex-tech tycoon will deliver what her campaign is billing as a "vision" speech at the Tech Museum of Innovation in San Jose today.
San Francisco Mayor Gavin Newsom will be in Santa Cruz for another town hall.
Insurance Commissioner Steve Poizner will visit with The Bee Capitol Bureau today, as well. We'll bring you the highlights later today.
GAY LOBBY DAY: Equality California, a gay-rights group, organizes its annual lobby day today, expecting more than 2,000 to attend.
The group will have a rally on the West steps just after noon and attend two hearings tentatively scheduled in the Assembly and Senate on resolutions (SR 7 and HR 5) that would declare the Legislature's opposition to Proposition 8, the gay marriage ban.
Of course, the big looming fight is before the California Supreme Court, which will hear arguments for and against the validity of Proposition 8 on March 5.
Photo: Sen. Abel Maldonado, R-Santa Maria, talks to the media about his budget vote outside his office on Monday Feb. 16, 2009. Credit: Brian Baer/Sacramento Bee.
The first GOP leadership challenge resulting from the budget negotiations came and went Saturday night as Assemblyman Chuck DeVore, R-Irvine, moved unsuccessfully to unseat Assembly GOP leader Mike Villines.
In a closed-door Republican caucus before the marathon floor session, DeVore made a motion to remove Villines as GOP leader (known as "vacating the chair" in Capitol-speak). None of the other 28 Republican Assembly members seconded the motion.
"The discussion was a credit to the caucus. Nobody raised their voice, everything was logical, people made their case and I lost," said DeVore, who is plotting a 2010 run for U.S. Senate.
DeVore's motion was not seconded despite the fact that 25 of his all of his Assembly GOP colleagues have endorsed him* in his bid to unseat Sen. Barbara Boxer, including Villines himself.
*UPDATE: DeVore wrote in to say that every Republican Assembly member has endorsed his U.S. Senate campaign.
The leadership challenge came a day after a supposedly private e-mail from DeVore to Villines was publicized on the John and Ken radio show in Los Angeles.
In the e-mail, DeVore wrote that "for the caucus, for the party and for the upcoming elections, if this is the final (budget) deal and you believe it to be good...then I think you need to resign or be replaced the day of the vote," according to the radio show.
DeVore confirmed the authenticity of the e-mail, though he denied that he leaked it to the conservative radio shock jocks. Only a day earlier, John and Ken had blasted DeVore on air for not challenging Villines' leadership more directly.
How then would a private e-mail between the two become public?
DeVore said he had forwarded the e-mail to "some of my members, colleagues" -- at their request -- "because it contained kind of a logical rundown of why I thought what we were about to do was in error."
"Clearly, I should not have sent that to anyone else other than Mike Villines, because obviously the last paragraph was kind of a bombshell," he said, suggesting someone else forwarded the e-mail to the radio hosts.
In the end, instead of Villines resigning, DeVore did.
California's massive $40 billion-plus budget plan stalled in the state Senate early Sunday morning, as it became clear the three needed Republicans in the upper house were unready to support the plan.
In a preliminary roll call on Saturday night, Senate GOP leader Dave Cogdill was the only Republican to cast an "aye" vote on a key piece of the budget puzzle. Sen. Roy Ashburn, R-Bakersfield, abstained, while every other Republican senator opposed the budget bill. Ashburn is expected to support the budget plan once a third GOP vote emerges.
Sen. Dave Cox of Fair Oaks, widely viewed as a potential third vote in the Senate, voted no. He was heavily courted by Republican Gov. Arnold Schwarzenegger and Senate President Pro Tem Darrell Steinberg, D-Sacramento, throughout the night, having been called into private meetings in both officials' offices late Saturday night and early Sunday morning.
Cox emerged from Steinberg's office past 1 a.m. and pronounced that he was a no vote, saying he didn't need any more information.
Senate Democrats believe a new $10,000 state tax credit for homebuyers is enough to sway Ashburn to provide the second Senate Republican vote for the plan, however.
Less controversial parts of the package were winning passage with relative ease and little debate in both houses. But the most contentious measure, a bill that would increase a variety of taxes by a total of $14.3 billion, had not been taken up.
Support for the tax-hike package is believed to be set in the state Assembly, but Republican lawmakers in that house were unwilling to support the plan without assured passage in the Senate.
Floor sessions remained in effect in both houses, though senators were allowed to retreat to the relative comfort of their personal offices. An all-night Valentine's Day session that could stretch into the morning remains a possibility as Democrats and Schwarzenegger scramble to corral a final GOP vote.
Kevin Yamamura and Dan Walters contributed to this report.
Happy Valentine's Day.
Yes, it's Saturday, and yes, you're getting an AM Alert. That's because the Legislature is set to vote today on a huge package -- a 17-month budget fix that includes $15.8 billion in cuts, $14.3 billion in tax increases, and $10.9 billion in borrowing.
Both houses of the Legislature have floor sessions set for 5 p.m.
What happens next is still in the air.
Due to the two-thirds vote requirement in the Legislature, three GOP votes will be needed in both the Assembly and the Senate if every Democrat supports the budget package.
"I expect all the Democrats to vote for the budget. Absolutely. No exception," Senate President Pro Tem Darrell Steinberg declared earlier this week.
That means you, Lou Correa.
Conventional wisdom around the Capitol is that the bigger battle will be in the Senate, where Capitol Alert outlined the GOP landscape on Friday.
One other thing to watch during session is who goes up first.
As in, if Correa does support the budget, will he vote before his GOP colleagues? Likewise, would any Senate Republican cast an "aye" before Correa? And would Assembly Republicans cast votes for taxes before Senate passage is assured?
All good questions; no clear answers.
What is clear is that Senate Republicans are divided.
On Friday morning, the Senate Republican Caucus sent out a press release with a collection of quotes from editorials, a business leader -- and even one union head -- essentially characterizing the deal as a necessary evil.
Sabrina Demayo Lockhart, a spokeswoman for Senate Republican leader Dave Cogdill, said the release "should have gone out under the leader's e-mail, not the caucus e-mail."
Hours later, a second release came, titled, "More Budget Comments."
It contained quotes from GOP senators blasting both taxes and the current budget deal.
"We just wanted to clarify what other members of the caucus had stated publicly," Lockhart said.
NOTE: In Wednesday's AM Alert, we reported that 12 lawmakers had fundraisers scheduled. Well, the number should have been only 11. Assemblyman Jerry Hill had canceled his until after a budget solution is reached.
Photo: Senate President Pro Tem Darrrell Steinberg, D-Sacramento, rubs his eyes during a call to a lawmaker concerning the state budget at his Capitol office in Sacramento, Friday, Feb. 13, 2009. Credit: AP Photo/ Rich Pedroncelli
The field of potential Republican votes for the budget compromise in the Senate -- widely viewed as the most challenging caucus to corral support -- has narrowed so significantly that only three members have yet to throw cold water on the tentative deal.
That happens to be the bare minimum of Republican votes needed to pass the $40 billion-plus budget plan.
Those three are Senate Republican leader Dave Cogdill, Sen. Dave Cox of Fair Oaks and Sen. Roy Ashburn of Bakersfield.
Cogdill, who negotiated the package on behalf of his caucus, said Wednesday, "I think it doesn't get any better," though he said he was reserving judgment until bill language had been drafted.
Ashburn and Cox, in interviews published in today's Bee, left open the possibility of supporting the package. (See details of the plan.)
Sen. Dave Cox, a Fair Oaks Republican who remains noncommittal, said through a spokeswoman that "we must solve" the multibillion-dollar budget mess but that "details matter."
Sen. Roy Ashburn, R-Bakersfield, said whatever stand he ultimately takes won't stem from political pressure.Legislators should "exercise their best judgment and vote on behalf of the people of this state, not on behalf of some caucus," Ashburn said.
Ashburn is termed out in 2010, Cox in 2012.
Of the rest of the GOP senators, either in published comments or when queried by Capitol Alert, nine said they either are a certain "no" vote, two appear all but certain to oppose the deal, and one said he's currently opposed, but due to a specific appropriation.
Of course, three GOP votes are needed only if every Democratic senator supports the plan, and Sen. Lou Correa of Orange County remains uncommitted.
"I just don't think it gets out if he doesn't go up on it," Cogdill said
Adding further to the intrigue is the icy relationship between Ashburn and Cogdill, who, ironically, could join hands for the biggest leap of their political careers.
Here's where the rest of the GOP senators stand...
Sen. Abel Maldonado: Widely viewed as the most moderate of the GOPers, he was among the first to thumb down the package, calling it "easy vote 'no.'"
But Maldonado's reasoning wasn't about the size of the tax hikes or spending cuts.
"I cannot go to my constituents and tell them that this is a serious budget when it still funds pet projects like new office furniture for a renovated state office building," Maldonado said in a statement, referring to state Controller John Chiang's office rennovations that he has criticized.
Should that money be removed, Maldonado hasn't publicly ruled out supporting the plan.
The California Chamber of Commerce has endorsed the budget plan -- including four broad new tax hikes -- before the Legislature, urging lawmakers to support the roughly $40 billion plan to "keep our state from going over a financial cliff."
The decision by the state's well-heeled business lobby could give some political cover to Republicans considering supporting the plan.
"While individual pieces of this solution may be difficult to support, we must look at the plan in its entirety; your "aye" vote will keep our state from going over a financial cliff," Chamber President Allan Zaremberg wrote in a letter to state lawmakers.
Zaremberg calls the plan a "balanced approach."
"Importantly, approval of this solution will be stimulative to the economy now by providing the cash for tax refunds, infrastructure projects, critical programs and to pay bills," Zaremberg writes.
His full letter is after the jump:
Sen. Bob Dutton, R-Rancho Cucamonga, has joined a growing list of Republicans to denounce the tentative budget deal reached by legislative leaders and Gov. Arnold Schwarzenegger.
What makes Dutton's decision significant is that, as vice-chairman of the budget committee, he has been widely viewed as a potential supporter of the compromise.
"I, in good conscience, can not look in the mirror and raise the taxes on the average family of four by more than $1,000, as the Howard Jarvis Taxpayers Association has estimated. I can't ask that family to go 10 weeks without groceries," Dutton wrote in an op-ed his office is circulating. "At the end of the day I have to look in the mirror and feel good about what I see. I will be voting no on this budget."
The full op-ed is after the jump.
After anti-tax groups and radio talk-show hosts have bashed Republican legislative leaders nonstop for the tentative budget agreement they reached Tuesday with Gov. Arnold Schwarzenegger and Democrats, Senate Republicans this morning distributed a collection of quotes from editorials, a business leader -- and even one union head -- essentially characterizing the deal as a necessary evil.
It remains uncertain whether Senate Republican Leader Dave Cogdill, R-Modesto, has lined up the necessary three votes in his caucus to approve the budget plan. But sending out the quote collection signals that his members are ready to go up on the budget Saturday while holding their noses.
Of course, the problem may be in the other Senate caucus; Cogdill told Capitol Alert's Shane Goldmacher on Wednesday that no Republican will vote for the budget unless all Democrats do so. Sen. Lou Correa, a moderate Democrat vulnerable to anti-tax criticism because he sits in the Senate's most competitive district, has wavered in his support. But Senate President Pro Tem Darrell Steinberg, D-Sacramento, has vowed to deliver his entire caucus.
Here's the Senate Republicans' morning release:
The Bee's Hudson Sangree tracked down the chief sergeants for both the Assembly and Senate and asked how staff, lawmakers, lobbyists and journalists must co-exist with the bike race around the Capitol during Saturday's scheduled sessions:
Ronald Pane, the Assembly's sergeant-at-arms, said the goal is to get everyone into the Capitol well before the race starts at 1 p.m. and to keep them there until after it finishes at 4 p.m."It's real simple," he said.
Pane and Beard have been coordinating with police to ensure that those involved can reach parking areas if they arrive early enough.
Lawmakers typically park under the Capitol, but if they arrive too late, they may have to park blocks away and walk, just like everyone else, Pane said.
Staffers may encounter their own troubles, said Beard.
"Where it gets weird is if staff determine they're not needed and want to go home," he said. "If you're behind the closed area, you're not going to get out between 1 and 4 in the afternoon.
"I would recommend getting lunch before one o'clock," he said.
Just in case you were wondering, today marks the 100th day since Gov. Arnold Schwarzenegger called a special session to address the budget shortfall. It's also Friday the 13th.
Both houses of the Legislature have scheduled a vote for tomorrow morning.
As The Bee's Kevin Yamamura reports, the Assembly is now scheduled to vote on the state budget plan Saturday morning, just as thousands descend on downtown Sacramento for the Tour of California bike race.
Below is a video of Senate President Pro Tem Darrell Steinberg speaking to the Sacramento Press Club on Wednesday:
If you've been concerned about the secrecy of the Big Five negotiating process, he addresses that at about the 10-minute mark.
He begins to take questions at the 16-minute mark.
Legislative leaders and Gov. Arnold Schwarzenegger did not release details of the tentative budget pact they've struck, though that didn't stop details from leaking out.
The 30,000-foot view: $15.8 billion in cuts, $14.3 billion in tax increases, $10.9 billion in borrowing. And if California gets $10 billion in federal stimulus money, cuts drop by $1.2 billion, borrowing by $5.5 billion and tax increases by $1.8 billion.
Delving deeper, the plan: Gives K-12 education $5 billion less than it was otherwise entitled to.
Eliminates two paid holidays for state workers, with the final number of furlough days per month through June 2010 still subject to negotiation.
Cuts UC and CSU by 10 percent.
Eliminates cost-of-living increases for recipients of CAL-Works and SSI-SSP.
Cuts the corrections department's medical budget by 10 percent.
Eliminates funding for local public transit agencies.
On the tax side, the plan increases sales tax by 1 cent on the dollar, vehicle license fees from current 0.65 percent of vehicle value to 1.15 percent, and gasoline taxes by 12 cents a gallon with proceeds to pay off transportation bonds. Income taxpayers would pay a 2.5 percent surcharge on tax liability - 5 percent if federal stimulus comes in under $10 billion. Reduces tax credit for dependents from $309 to $99.
Taxes would be increased for two years, and an additional one to three years if the spending restriction measure is approved on the ballot.
Other new "revenues" include taking from voter-approved taxes for mental health and early childhood programs.
The whole thing would have to go before voters in a whopping five-measure package: borrowing from the lottery, changing Proposition 98, approving the spending cap, and taking funds from Proposition 10 (tobacco tax for early childhood programs) and Proposition 63 (tax on millionaires for mental-health programs).
That, of course, is if the whole thing passes the Legislature in a vote now scheduled for Friday.
"I'm not guaranteeing any votes," Senate GOP leader Dave Cogdill said Wednesday.
"I felt it was as good as I could get and I was willing to release my members," he said. "It's up to them (his members) to make that decision."
So far GOP Sens. Dennis Hollingsworth, Sam Aanestad, and Abel Maldonado have all publicly said 'no deal.'
Then there's the case of moderate Democratic Sen. Lou Correa.
"I just don't think it gets out if he doesn't go up on it," Cogdill said
Steve Wiegand's January profile of new Assembly members walking a political tightrope is worth a re-read. (On the Democrats-only budget passed in December, none of the four freshman Dems to win in previously GOP-held seats voted. They all abstained. Schwarzenegger eventually vetoed the proposal.)
"A deal is never a deal around here," Republican Sen. Bob Huff warned Wednesday, "until it's in writing, and you're voting on it."
Which could be as early as tomorrow...
As Senate Democrats huddled Monday for a late-night briefing on the budget negotiations, one Democratic senator was missing: Lou Correa.
His absence was no mere happenstance. The Orange County Democrat, who proudly campaigned in 2006 as "a different kind of Democrat," still hasn't committed to Senate President Pro Tem Darrell Steinberg that he'll support a negotiated budget pact with new taxes, according to legislative sources.
And if he doesn't, the whole deal could well fall apart.
Steinberg has met privately with Correa at least three times in the last 24 hours to press his case, twice on Tuesday and already once today.
At the Sacramento Press Club today, Steinberg declared, "I expect all the Democrats (in the Senate) to vote for the budget. Absolutely. No exception."
In large part, that's because legislative Republican leaders have made clear that negotiations with Democrats and Gov. Arnold Schwarzenegger are for the bare minimum -- three in each house -- of necessary Republican votes to pass a budget.
California is one of only three states in the country to require a two-thirds threshold to pass a state budget, greatly empowering the GOP minority.
"I've negotiated it to the point where I think it doesn't get any better," Senate Republican leader Dave Cogdill said today of the budget pact.
But there likely won't be a deal without Correa's support.
"I just don't think it gets out if he doesn't go up on it," Cogdill said. Senate Republicans had discussed the matter in a closed-door meeting last week.
Reached in his Capitol office today, Correa declined to comment on his budget stance.
Sen. Abel Maldonado, who is widely seen as the most moderate Republican in the state Senate, exited a two-hour briefing on the budget pact and said he would cast an "easy vote 'no.' "
"All I can say is that there's still another $1 million for John Chiang for furniture in this budget so it's an easy vote 'no' for Maldonado," the Santa Maria Republican said.
That's a reference to the recent spat between Maldonado and state Controller John Chiang over furniture purchases.
Maldonado accused Chiang of buying new furniture amid a cash crunch that has caused the controller to hold back on non-essential state spending, including a stop on sending taxpayer refund checks.
Chiang's office said the accusation was "pathetic" and that the controller had cut costs on the renovation project by $4 million.
More significantly, if Maldonado sticks to his word (and the appropriation sticks in the budget), the world of potential Senate GOP votes for the budget significantly narrows.
There are only 15 Republican senators, and Maldonado has been widely viewed as among the most likely to support the final negotiated package. At least three Republican votes are needed for passage.
Senate Republican leader Dave Cogdill, emerging from the same meeting, said he was releasing his members to support the budget agreement between the Big Five.
"I've negotiated it to the point where I think it doesn't get any better," Cogdill said.
Many senators leaving Wednesday's GOP caucus remained mum. Those who stopped to answer questions were generally brief.
Sen. Roy Ashburn, R-Bakersfield, concurred that "a framework for an agreement has been reached."
"Now, it will be up to each legislator," said Ashburn, who refused to speculate about how he, or any other senator, might vote.
But Sen. Bob Huff, R-Diamond Bar, had a few words of warning.
"A deal is never a deal around here," he said, "until it's in writing, and you're voting on it."
Photo: Sen. Abel Maldonado, R-Santa Maria, votes no during the floor debate on a Democratic budget plan on Thursday Dec. 18, 2008. Credit: Brian Baer/Sacramento Bee
Emerging from a nearly 2-hour closed-door meeting of Senate Republicans on Wednesday, Senate GOP leader Dave Codgill gave the strongest public word yet that a budget deal has been struck -- but the Modesto Republican still wasn't guaranteeing GOP support.
"My deal, one more time, has always been that I would try my best to get it to a position where I felt it was as good as I could get and I was willing to release my members," Cogdill said in a brief interview in the hallway outside his office. "That's where I am. So I'm not guaranteeing any votes; it's up to them (his members) to make that decision."
"But I've negotiated it to the point where I think it doesn't get any better," Cogdill said.
Asked if he specifically would support the package, Cogdill hedged, "We're waiting to see all the language and all of that so I'm not ready to commit who the votes will be at this point."
Dan Smith reports on sacbee.com that the four legislative leaders and Gov. Arnold Schwarzenegger have struck a tentative budget pact. A vote is scheduled for Friday.
Jim Sanders, Jon Ortiz and Kevin Yamamura had the outline of the agreement in today's Bee.
Dan Walters, in his column today, reports on a corporate tax change that is a sweetener for Republicans. Dan Weintraub looks at the spending cap part of the proposal.
A new study by The Pew Center on the States tags California as a "budget laggard" compared to four states whose structures, the nonprofit says, help "ensure every precious tax dollar delivers maximum value for the public."
The report focuses on four states -- Indiana, Maryland, Utah and Virginia -- as models. Read the report here.
Lumped in with California as budget laggards are New York and Florida.
Details of what's under discussion in the budget talks are slowing trickling out.
To be clear, no deal has been struck and negotiations are continuing (and shifting). But Jim Sanders teased out at least some of the taxes on the table for today's Bee:
• Increasing the state's sales tax by 1 cent on the dollar.
• Increasing gasoline taxes by 12 cents per gallon.
• Raising the state's vehicle license fee from 0.65 percent of a vehicle's value to 1.15 percent, with 1 percent going to the general fund and local law enforcement getting 0.15 percent.
• Increasing the personal income tax across the board, either by assessing a surcharge on tax liability or increasing the tax rate.
The sales, income and VLF components would be in effect for either two years or five years, depending on whether a companion spending cap measure passes.
Sanders reports that if the cap were approved, the tax hikes would last five years. If the cap fails, the taxes would last for only two years. It was not clear Tuesday whether the gas tax hike would be tied to the spending cap measure.
Despite promises for a vote this week, the state Senate announced over the Legislature's speaker system Tuesday that floor sessions for the rest of the week are now "check-in" -- Capitol-speak for not actually meeting.
That could change at the discretion of the leadership. (Get a midday update from Senate leader Darrell Steinberg, who will be the guest at the Sacramento Press Club.)
Where's the action today? The fundraising circuit, of course.
Twelve lawmakers -- exactly one in ten -- are scheduled to fan out across Sacramento today, hat in hand, asking for money from many of the very special interests with skin in the budget game.
"They must be getting ready to vote," said Ted Costa, president of People's Advocate, a political watchdog group, only half-jokingly. More seriously, he said, "It seems to me that they should get this budget thing taken care before they're out there raising money."
Events run from 8 a.m. to 8 p.m.
Those collecting checks today: Elaine Alquist, Charles Calderon, Ron Calderon, Wes Chesbro, Connie Conway, Chuck DeVore, Noreen Evans, Tom Harman, Ted Lieu, Bill Monning, Mary Salas, and Jose Solorio.
OTHER EVENTS: Assembly GOP leader Mike Villines is scheduled to speak to the Contra Costa County Republican Party in the evening, where he'll receive the group's "legislator of the year award."
STUDY: A new report from The Pew Center on the States calls California a "budget laggard."
2010 WATCH: Former Rep. Tom Campbell, who is exploring a run for governor, will be at the Commonwealth Club in Lafayette today. The title of his talk: "Budgeting the Bailout for California and the Country."
Attorney General Jerry Brown will attend a Sacramento luncheon hosted by the California Newspaper Publishers Association, where he'll take questions from Jim Newton, editorial page editor of the Los Angeles Times.
Also today, Insurance Commissioner Steve Poizner will announce a $15 million settlement with a California health insurance company that rescinded coverage of 2,300 customers. The company will have to offer coverage to those customers, reimburse their out-of-pocket costs and pay a $1 million fine.
BIRTHDAY: Assemblyman Joel Anderson, R-Alpine, turns 49 today.
Photo: That's Sen. Darrell Steinberg entering the governor's office for a meeting Tuesday night with a bottle of wine he told the Associated Press was a "peace offering." Credit: Rich Pedroncelli/Associated Press.
Last week, we asked you to send in your guesses as to when the 2009-10 state budget would pass.
At stake? Some pride and a $25 gift card to Starbucks.
Well, the guesses are in, and many of you were optimistic -- often too optimistic.
More than 250 people sent in guesses -- and more than 30 have already passed as negotiations on a budget fix drag on.
All told, the most popular pick was this Friday the 13th, the day before Valentine's Day. Twenty-one of you -- more than 8 percent of all the entries -- picked that day.
Most thought the budget would pass this month, with 169 guesses in February. The next most popular month was March, with 27 guesses.
The most pessimistic person picked tax day -- April 15 -- but in 2010.
Some people picked their own birthday for good luck. One picked their mother's.
Our favorite query: "If I choose "when pigs fly," do I have to include a time of day?"
With that, the entries are on the flip. See how you stacked up (and if you don't see your entry send an e-mail to contest@capitolalert.com
Kevin Yamamura reports, "Gov. Arnold Schwarzenegger will send layoff warnings to at least 20,000 state workers Friday unless he reaches a budget agreement with legislative leaders that precludes the need for such cuts, his office announced Tuesday."
The meat of the story:
The Republican governor intends to eliminate 10,000 full-time positions from the state's general fund, either by job cuts, attrition or transfer to positions funded by special revenue streams, according to Schwarzenegger spokesman Aaron McLear. The layoff notices would go to 20 percent of the least senior workers in each department, initiating a process to eliminate jobs by July 1.
The move would save $150 million in the next fiscal year, and Schwarzenegger already proposed the cuts in his January budget. He is also seeking to save roughly $75 million by eliminating two holidays and overtime pay on other state holidays. McLear said that if legislative leaders can agree by Friday to save $150 million in some way other than job reductions, the governor will not send his layoff notices.Workers who receive layoff notices will not necessarily lose their jobs. Those workers can retain their jobs for 120 days upon receiving a "surplus" notice within the next month, according to state law. But they will be subject to layoff, demotion or transfer thereafter. The governor gave an informal warning to workers in a December letter that they were at risk.
Sen. Bob Dutton, the Republican vice chairman of the budget committee, has penned an op-ed in the San Bernardino Sun today about his stance on the budget.
The key paragraph:
Yes, California is in a crisis when it comes to this budget. But given the current state of the economy, I cannot support the current proposal that has billions in new taxes but no budget reform and nothing to create jobs that will keep this state from repeating the mistakes of the past.
BUDGET: Floor sessions are scheduled in both houses of the Legislature today. No budget vote Is expected..
Senate leader Darrell Steinberg said Monday that the earliest a vote could occur would be Wednesday, "but it may even be a day or two later."
Senate Democrats huddled in an after-hours caucus on Monday night to discuss the latest budget developments.
Gov. Arnold Schwarzenegger and the four legislative legislative leaders are scheduled to continue their closed-door negotiations today.
EVENTS: The California State PTA will rally in Glendale against budget cuts to education. Superintendent of Public Instruction Jack O'Connell is slated to attend.
The Senate Energy, Utilities and Communications Committee will hear legislation by Sen. Joe Simitian to increase the requirement on utilities to provide power from renewable energy.
The current standard is 20 percent of power from renewables by 2010. The Simitian bill would up that to 33 percent by 2020.
PRESSER: The state Assembly will announce plans for the first of its savings by cutting operating costs. Today, the lower house will commit at least $2 million of its own funds to the Employment Development Department.
That's the state unemployment agency swamped with calls as the unemployment rate has jumped to 9.3 percent.
The money is part of the Assembly's pledge to cut 10 percent, or $15.1 milion, from its budget. A whole host of Democrats (Assembly members Juan Arambula, Joe Coto, Noreen Evans, Ted Lieu and Sandré Swanson) will hold a press conferrence to announce the giving.
GOVERNOR 2010: Lt. Gov. John Garamendi will be in Tulare today, pressing for his plan for an accelerated medical school at the UC Merced.
San Francisco Mayor Gavin Newsom will be in San Jose for a town-hall style event.
Los Angeles Mayor Antonio Villaraigosa can't commit to serving a full second term.
And, if you missed all the Meg Whitman coverage Monday, here's a roundup of the Capitol Alert headlines:
Whitman boots up campaign for governor
Ex-Gov. Wilson tops list of early Whitman backers
Poizner's response: 'Welcome' to the campaign
Whitman settles cybersquatter case -- out of court
Hudson files FPPC complaint against Whitman...gets Poizner's support
Cartoonist Rex Babin's take, which was in the Sunday paper:
Believe it or not, it's been 96 days since Gov. Arnold Schwarzenegger called a special session to address California's historic budget shortfall.
The wait for a budget fix continues.
Workers in both houses of the state Legislature have today off, recognizing Lincoln's Birthday a few days early. They'll also have next Monday off for Washington's Birthday.
Leadership says key budget staff will still be working.
CAPTION CONTEST: You have until just before midnight tonight to enter the Capitol Alert caption contest featuring the Dianne Feinstein-Leon Panetta grip-and-grin.
PROPOSITION 11: The state auditor's office holds the second public meeting to get input on its selection process for the Citizens Redistricting Commission. That's the group that will draw California's new political boundaries for Assembly, Senate and Board of Equalization seats following the next census.
2010 WATCH: Lt. Gov. John Garamendi will be in Monterey today, announcing his support for a statewide ban on take-out Styrofoam packaging. He'll be joined by local and environmental officials.
Funny, some other city with a mayor who happens to be exploring a run for governor also banned such to-go containers.
Speaking of big-city mayors who might run for governor, Antonio Villaraigosa of Los Angeles was on NPR's Morning Edition on Friday talking about the federal stimulus package and why money should go directly to cities and not through Sacramento.
"Because when it goes that way you never get your fair share, that's why," Villaraigosa said. "We're 26 percent of the population in California. We often times get 12 percent of the money, sometimes 16, 18 but that's after a fight."
Except, no doubt, when he was the speaker of the Assembly.
Categories: AM Alert, Antonio Villaraigosa, Gavin Newsom, Governor 2010, John Garamendi, Proposition 11, State budget
All of California's living ex-governors -- Jerry Brown, George Deukmejian, Pete Wilson and Gray Davis -- have co-signed a letter to Gov. Arnold Schwarzenegger urging him to withdraw his proposal to eliminate the California Conservation Corps, calling it "one state agency that taxpayers should be proud to support."
In the governor's 2009-10 budget, Schwarzenegger has proposed eliminating the CCC, as the agency is known, saving the state $17 million in the current year.
Future savings would be $24 million annually. California faces a roughly $40 billion deficit.
The California Conservation Corps, signed into law by Brown more than three decades ago, hires typically unemployed young men and women (18-25) to work in the outdoors for a year on state projects.
CCC members also respond to natural disasters, like wildfires.
"We have all seen first-hand CCC crews responding to floods, fire, earthquakes, oil spills and more," the governors wrote to Schwarzenegger.
Capitol Weekly's John Howard had a good story on the program and its proposed elimination in January.
UPDATED: Sandy Cooney, spokesman for the Natural Resources Agency, called to explain the governor's reasoning for making the cut.
"It's not that any one is saying they don't appreciate what the conservation corps is doing, what we're saying is in the face of a $42 billion deficit they are an extremely expensive workforce," Cooney said, estimating the full cost per core member at $70,000.
"Wait a minute" Cooney said, describing the administration's position, "couldn't I use other kinds of labor that is far cheaper to satisfy what I need done?"
He also said the original mission of the CCC was to provide both work experience and education, but "education has all but fallen by the wayside."
Read the letter from the four governors
here.
Photo: California Governor Arnold Schwarzenegger thanks California Conservation Corps members who were working on the levees during storms in front of the Nimbus Dam on Thursday Jan. 5, 2005. Credit: Sacramento Bee/ Brian Baer
And so the furloughs begin.
In case you're confused about all the back-and-forth on the furloughs for constitutional offices, here's the deal:
Employees in the offices of California's statewide electeds are working today.
But Gov. Arnold Schwarzenegger insists he still has the power to furlough them. Both sides are citing the same ruling from a Sacramento Superior Court judge on Thursday.
Long story short: More court battles are likely to follow
Wondering how to spend your furlough day?
Well, the Association of California State Supervisors wants you to head to lawmakers' district offices. "It is vital that your legislators hear from you on this issue, and visiting them in their home offices is one of the most effective ways to approach them," the group wrote to its members earlier this week.
Or you could go skiing.
Squaw Valley USA is offering $30 lift tickets to all furloughed state workers on the first and third Fridays of the month. Just bring your state identification card or a 2009 pay stub as well as a regular ID.
Of course, you can always drink your pay cut woes away. The Rubicon Brewing Company is offering 10 percent off your bill to furloughed statees.
BIRTHDAY: Assemblyman Pedro Nava, D-Santa Barbara, turns 61 today. He's hoping voters give him the gift of becoming attorney general in 2010, after recently filing paperwork to make a run at becoming the state's top cop.
BUDGET UPDATE: The news Thursday was that Senate leader Darrell Steinberg said a vote was upcoming next week. No deal yet, as the negotiations continue behind closed doors.
That secretive process is being pretty well criticized here, here, here, here and here.
Asked if there would be any time for public input before any sort of deal is rammed through the Legislature, Steinberg expounded:
"Certainly, the public has the absolute right to review what we do eventually put forward. And our members certainly do as well. We're going to afford the public, our members that full opportunity," he said. "On the other hand, this is an emergency. We're going to balance those two concerns."
Finally, in Thursday's AM Alert about the Capitol's "wear red day" we reported that Assemblywoman Lori Saldaña, the chair of the Women's Caucus and a sponsor of the heart disease awareness day, would skip town for a La Jolla golf fundraiser.
Turns out, Saldaña skipped her own fundraiser and didn't plan to fly back to her district until this morning.
Photo: Signs advise customers that the DMV will be closed Friday as part of state furloughs ordered by Gov. Arnold Schwarzenegger as a cost savings measure. Photo taken Thursday, Feb. 5, 2009. Credit: Brian Baer/Sacramento Bee
Senate President Darrell Steinberg said Thursday that both houses of the Legislature are planning a budget vote sometime next week, though the Democratic leader was careful to say no final agreement had been reached.
"The process is now coming to a close," Steinberg said, emerging from a closed-door Democratic caucus meeting. "By next week, there will be action on our respective floors."
Steinberg said he did not know on which day a vote would occur.
Steinberg did not directly answer whether any plan put to a floor vote would necessarily pass, or whether the resulting package would be signed by the governor.
A Democratic-backed budget package was vetoed by Gov. Arnold Schwarzenegger last month, while other Democratic plans have been blocked by GOP opposition. Budgets -- and raising taxes -- typically require a two-thirds vote of the Legislature, giving minority Republicans veto power.
But, as a sign of hope, the Sacramento Democrat cited "good-faith negotiations" in the last month that have been characterized by "very little finger-pointing."
"This is a very different circumstance because, frankly, we are at the edge of the cliff," he said of next week's vote, compared to past failures.
"Our very fine staffs are drafting as we speak," he said.
California faces an estimated $40 billion shortfall through July 2010. The state also faces a more immediate cash crunch, as the state controller has begun withholding certain payments to be able to continue to fund schools and pay off bond debts.
Steinberg said the package leading lawmakers and Schwarzenegger are negotiating would attempt to tackle the full shortfall.
"The discussions are continuing downstairs because there is not a deal," he said.
You have until just before noon today to enter our Capitol Alert budget pool.
More budget meetings, but still no budget deal.
Tomorrow is set to be the first furlough day -- when state offices across California will close their doors. Sacbee.com has added a new furlough section to help you stay up to date on the latest furlough news.
(Speaking of which, check out all the state budget news on Capitol Alert in our state budget category.)
Both houses of the Legislature have morning floor sessions scheduled, though little is on the docket.
You may see lots of people around the Capitol wearing red today.
No, it's not to symbolize the state of the state's finances.
The American Heart Association and the California Legislative Women's Caucus is sponsoring a "wear red day" to raise awareness of heart disease in women.
But don't expect the Assemblywoman Lori Saldaña, the chair of the Women's Caucus, to stick around for a full day under the dome.
The San Diego Democrat is hosting a fundraiser at the Buick Invitational Golf Tournament in La Jolla today.
Meanwhile, 2010 is only a hop, skip and a jump away in the political world.
On Wednesday, former Assemblywoman Betty Karnette, D-Long Beach, officially dropped her bid for state superintendent of public instruction in 2010. She threw her support behind Sen. Tom Torlakson, D-Antioch.
And the California Labor Federation already has GOP freshman Assemblyman Danny Gilmore in its crosshairs.
In politics, the next election is never far away.
Today, the California Labor Federation announced a mail campaign targeting GOP freshman Assemblyman Danny Gilmore of Hanford.
Gilmore was the only Republican to win a legislative seat in the 2008 election that was previously held by a Democrat.
The labor-funded attack piece accuses Gilmore of "holding millions of middle-class families hostage to secure a sweetheart budget deal for a few corporate CEOs."
What are they talking about? Well, GOP leaders have been seeking easements for some labor laws during the current budget negotiations in exchange for potentially backing tax hikes.
Labor unions, for obvious reasons, don't support what they term rollbacks of labor regulations.
You can see one side of the mail piece above. Here's the full mailer.
Fun fact: E.J. Schultz of the Fresno Bee reports...
The mailer asks voters to call Gilmore's Hanford district office number at 559-585-7170. But if you called that number early this afternoon, you'd have gotten the Capitol office of a Democrat -- Assembly Member Joe Coto.
Did Gilmore pull a fast one? Apparently not. According to his Capitol office, workers in the Hanford office were in training today and meant to forward calls to Gilmore's Capitol office. But they punched in Coto's number by mistake.
So the state's political leaders have blown past their self-imposed Feb. 1 deadline to reach a budget accord. California has already stopped paying some of its bills. Taxpayer refund checks are on hold. Furloughs are on the horizon.
So when will the Legislature and governor get together and pass a budget package?
Guess right and you could win our Capitol Alert mid-year budget pool (and some free coffee).
Typically our budget pool is reserved for the summer months, as budgetary impasses tend to drag on past the June 15 constitutional deadline for a budget.
Last year was the longest stalemate in California history, which ended as the budget bill cleared both legislative houses after midnight on September 16.
This year, the budget fell woefully out of whack at record speed. The state faces a roughly $40 billion deficit through July 2010.
But Gov. Arnold Schwarzenegger has spied a potential bright side to this mess.
"So now we have a situation where we actually have a chance to have a budget five months before the constitutional deadline and that's what I'm shooting for," he said at the Sacramento Press Club last week.
There will be no tinkering around the edges in this contest. We're looking for the exact date and time both legislative houses have passed the 2009-10 budget bill - one ultimately signed by Schwarzenegger. Entries are due by 11:59 a.m. this Thursday.
It could come within a few days, or a week. Or lawmakers could pass a stopgap measure and hold off on tackling the whole enchilada until the summer months. Or the fall.
Your guess is as good as ours. Except with the possibility of a $25 gift card from Starbucks that we'll hand out to the winner. (Get some inspiration from last year's winner: lobbyist Tim Yaryan)
The contest instructions:
Send in your guess to contest@capitolalert.com. Pick an exact day and time the budget will have passed through both houses of the Legislature. Include your full name. All entries must be sent in by 11:59 a.m. Thursday, February 5. (Click for the full legal rules.)
With that, we'll leave you with Schwarzenegger's own words at the Press Club to guide your guesswork:
This is a problem that is bigger than any problem we have ever had in this state and this is why we should not just approach it by coming up with certain solutions for this fiscal year and then solve, after the May Revise, the next fiscal year but to go and solve the whole $42 billion problem in one shot.Now, what that means, basically, is we will be doing something historic because, as you know, in my State of the State Address I said that the legislators are always late with the budget and that I actually recommend that we should stop paying them for each day they are late and they go past the constitutional deadline and also stop paying and giving them per diem money. So now we have a situation where we actually have a chance to have a budget five months before the constitutional deadline and that's what I'm shooting for. Now, even though everyone says you're crazy and this will never happen but I never go and listen to those kinds of naysayers because I believe anything is possible.
Good luck!
Photo: Senate President Pro Tem Darrell Steinberg and Speaker Karen Bass walk down the hall on the way Gov. Schwarzenegger's office for the Big Five meeting on Monday February 2, 2009. Credit: Brian Baer/Sacramento Bee
Cartoonist Rex Babin's latest take:
California's 58 counties, whose payments are currently being withheld by the state to conserve cash, are beginning to fight back against Sacramento.
In Riverside County, the board of supervisors voted to sue the state to compel billions in payments for county-run social programs that the the state has put a money hold on. If the money doesn't begin to flow, supervisors voted to relieve the county of the legal responsibility to run programs like welfare and mental health services.
The Riverside Press-Enterprise has the details.
"We have been like punching bags and we have just been taking the punches," Supervisor Jeff Stone said. "Our financial integrity in this county is at stake if we don't take this very strong stand and draw a line in the sand to the state. . . . No money, no services."
In Los Angeles, the county is threatening to withhold any county revenues due to the state to fund local health and social services programs.
Great quote in the Los Angeles Times from Supervisor Gloria Molina: "We're declaring our own Boston Tea Party."
The legality of which is in question.
The Schwarzenegger administration, meanwhile, threatened retaliation -- with an even bigger checkbook.
A spokesman for Gov. Arnold Schwarzenegger warned that such a game can be played both ways. If L.A. County holds on to the state's share of taxes, said H.D. Palmer, a spokesman for the state Department of Finance, the state can withhold an equal share of the county's sales tax revenues.
"The state has the ability to compensate for any action that might be taken on the local level," Palmer said.
Given that, Paul McIntosh, executive director of the California State Association of Counties, said, "While I am sure many counties are expressing their frustration and thinking about such steps, when they consider the implication, I do not think any counties will take this action."
The pressure for a budget deal builds...
Categories: State budget
