California Insider

I am hearing that an agreement is imminent on the first pieces of a budget recovery plan: a $15 billion bond and a constitutional amendment to establish a rainy day reserve. Details are sketchy at this point but it sounds as if the deal will follow the framework of a proposal first offered by a group of moderate lawmakers led by Assembly members Keith Richman and Joe Canciamilla. The reserve would be established by setting aside a portion of state revenues beginning with one percent in 2006-07 and eventually climbing to three percent, with the reserve itself allowed to build to 10 percent of the general fund. Half the reserve each year would be applied to debt repayment. The measure would also require a balanced budget and create new rules for reducing spending mid-year. Members of the Assembly and Senate have been advised by the leadership to be ready for session by 11 am Thursday.

When Gov. Arnold Schwarzenegger awoke this morning, this is what he faced:

--Stories in the morning papers accusing him of going back on his promise not to cut spending on the schools, based on his comment Tuesday that he might consider suspending Proposition 98.
--Protests from local governments accusing him of reneging on his promise to make cities and counties whole for the money they lost when he rolled back the car tax – and stories in papers across the state describing the budget cuts faced by individual jurisdictions.
--A libel lawsuit by a woman who was slimed by his campaign after she accused him of lewd conduct on a movie set.
--Complaints from women’s groups about his decision to forgo an internal investigation about the accusations of improper behavior toward women over the past 30 years.
--A massive demonstration planned by advocates for the developmentally disabled and others fighting his proposed spending cuts.
--Another downgrading of the state’s credit rating, this time by Moody’s.

Meanwhile, Schwarzenegger was said to be in the final stages of a second round of negotiations with lawmakers to determine whether Californians will vote in March on a bond to refinance the state’s debt and a spending limit or reserve requirement designed to prevent a recurrence of the state’s current fiscal problems. The governor’s office and negotiators from the Assembly appeared close to an agreement that would require the state to set aside a growing portion of its general fund revenues each year into a rainy day fund that could only be spent in a fiscal emergency. Some of those close to the talks believe it’s possible that Schwarzenegger will accept such a mandatory reserve and drop his demand for a formula-driven limit on the size of state government.

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Keep your eye on Gavin Newsom, who was elected mayor of San Francisco Tuesday. He made his name couragously battling leftist dogma about homelessness, arguing for programs that provide shelter and drug treatment rather than just handouts. But he has a long list of other reforms that also go against Democratic Party orthodoxy, and he is anxious to push them. If he succeeds in San Francisco, Newsom, who is only 36, could be a rising star in the party.