Through months of stalemate on the state's ever-growing fiscal crisis, Gov. Arnold Schwarzenegger and legislative leaders maintained a fairly cordial relationship – but the gloves came off Thursday as the governor issued much bigger budget deficit numbers and gave lawmakers a private tongue-lashing.
Schwarzenegger bluntly warned Republican and Democratic leaders that without spending cuts and new taxes, the state could not pay employees, contractors, local governments, schools and colleges as soon as February.
"You've got to work now," Schwarzenegger told reporters later, insisting that he was "just trying to bring everyone together." Last month, he compared legislators to a group of quarrelsome kindergartners.
However, neither the new forecast of deficits reaching beyond $40 billion during the next 18 months, thanks mostly to sharp declines in revenues, nor the prospect of running out of money appeared to soften the stalemate over spending cuts, taxes and Republican demands for easing business regulation.
A visibly angry Dave Cogdill, the Senate Republican leader, emerged from the brief "Big 5" session with the governor to denounce the process as having "lost all its credibility" because of leaks to the media and to insist that GOP lawmakers would not retreat on opposition to new taxes.
Democratic leaders were only slightly less peeved. Assembly Speaker Karen Bass and Senate President Pro Tem Darrell Steinberg said they'd push floor votes on more taxes, and Bass said she might lock up the Assembly during Christmas week to bring more pressure on Republicans.
Schwarzenegger dropped big hints Wednesday about worsening numbers. His budget chief, Mike Genest, released them Thursday as the governor was meeting with legislators, clearly to heighten the sense of urgency.
Genest said that without rapid action on spending cuts and taxes, the deficit in the 2008-09 budget adopted in September would reach $14.8 billion and grow to $39.8 billion, plus a $2 billion reserve, by the end of the 2009-10 fiscal year.
More ominously, Genest said the state would run out of cash, even money borrowed from internal sources, sometime in February and be $5 billion in the hole by March, raising the specter of stiffing creditors or issuing IOUs.
However, if anything, the worsening situation may have hardened beliefs of partisan warriors that as the state treasury empties and some kind of shutdown, at least of payments to those dependent on the state, looms in a matter of weeks, they can force rivals to give ground.
It's a situation that Schwarzenegger, earlier in the week, likened to a game of chicken in which each side is waiting for the other to blink.
A final note: The governor's plan, if adopted, would cover only half of the new deficit number, leaving a roughly $20 billion hole still to be filled. And no one knows whether the deficit will grow even larger as the economy continues to deteriorate.
Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.
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