A State Without a Budget: Day 62 - SENATE TO MEET DAILY UNTIL BUDGET DONE

Sac Bee Capitol Alert | posted by Shane Goldmacher

August 30, 2008 - 5:46 PM -- Senate President Pro Tem Don Perata announced Saturday that the Senate will convene every day - including weekends -- until lawmakers pass a state budget, which is now 61 days overdue.

"Under the emergency circumstance, for us to be anywhere but here, on the floor, prepared to take up a bill would be wrongheaded, and we won't do it," Perata said.

The Oakland Democrat put a Democratic-backed budget up for a vote of the full Senate for the first time on Friday. Perata said he was "disappointed" that Gov. Arnold Schwarzenegger had not done more to corral support for the package from lawmakers from his own party.

"He has not been willing to talk to any of my Republican colleagues, apparently," Perata said.

The Friday budget vote failed with no GOP support. At least two Republicans in the Senate must support a spending plan for it to pass with the necessary two-thirds supermajority.

The rare Saturday legislative session brought other new developments in the budget impasse, though little progress.

Legislative Republicans unveiled the broad outline of a budget plan for the first time, one they say would balance the budget without new taxes.

Howard Jarvis Taxpayers Association President Jon Coupal quickly issued a statement saying the plan "will force the Legislature to stop their reckless overspending once and for all."

But Schwarzenegger was more critical, calling the plan "not fiscally responsible" in his own statement.

"I applaud the Republicans for proposing a budget and moving the debate forward. That said, their budget is not fiscally responsible because it simply pushes our problems to next year. We were sent to Sacramento to solve problems once and for all - not kick the can down the alley for others to deal with in the future," the governor said.

Perata has promised a floor debate for any Senate GOP proposal, though it could take Republicans a week to finalize a spending plan.

At the close of session, Republican Sen. Jim Battin rose to challenge Perata's decision to hold session daily, asking why Democrats haven't met every day for the last two months.

"That was then, this is now," Perata replied.

Battin then said of any Republican budget plan in the Democratic-controlled Senate: "My expectation is it will fail."

"Then what happens?" questioned the Inland Empire lawmaker.

"Let's not prejudge," retorted Perata, saying Republicans could unveil a spending plan that "might knock our socks off."

Battin chuckled. Kind of.

But daily sessions might not be so funny for the eleven Republican state lawmakers, including Battin, who are delegates or alternates at the Republican National Convention set to begin on Monday in St. Paul.

Read Capitol Alert's story on that here.

WILL HURRICANE GUSTAV, CALIFORNIA BUDGET CRISIS SPOIL GOP CONVENTION?

By Mary Anne Ostrom and Lisa Vorderbrueggen | Bay Area News Group | San Jose Mercury-News

Click photos to enlarge

Republican Alaska Gov. Sarah Palin delivers her speech as Republican... ( Kiichiro Sato )

31 August 2008 -- BLOOMINGTON, Minn. - The Republicans are heading into a national political convention without a script.

Will the convention be overshadowed and even canceled because Hurricane Gustav is barreling down on the Gulf Coast? If it goes on, will Gov. Arnold Schwarzenegger and state legislators stay cooped up in Sacramento or skip it?

A party still in surprise mode over the Sarah Palin pick now faces the prospect of a major natural disaster, spoiling a convention 18 months in the making.

Saturday evening, John McCain suggested it would be insensitive to hold the quadrennial event if the hurricane, which is being compared with Hurricane Katrina of three years ago, continues on its destructive path.

He told Fox News in a taped interview for Sunday morning, "It wouldn't be appropriate to have a festive occasion while a near tragedy or a terrible challenge is presented in the form of a natural disaster."

California officials and delegates arriving at the state's official delegate hotel Saturday afternoon said there was not much to do except wait for word from convention officials.

"We can't control an act of God," said Rosario Marin, former U.S. treasurer under Bush who serves as Schwarzenegger's housing secretary.

The California delegates already in Minnesota headed out Saturday evening for a Tiki Party, complete with a roasted pig and boat rides.

Hector Barajas, spokesman for the California GOP, said Saturday that national convention officials told him that after 18 months of planning they hoped the convention gavel would still begin Monday. Even if it does, it's unclear if any of the featured speakers, including President Bush, will go on.

The White House is carefully tracking the storm. The hurricane is predicted to hit the Gulf Coast late Monday, just as Bush is scheduled to give his final address as president to a GOP convention.

Privately, Republicans are wringing their hands. They want to avoid happy convention scenes as mandatory evacuations were beginning Saturday night. More than 1 million people already have been told to move away from the Gulf Coast.

Scenes of damage from Hurricane Katrina already have been playing on television marking the deadly storm's third anniversary, an unhappy reminder of the Bush administration's handling of the disaster response.

There are media reports that the convention officials and McCain officials could change the emphasis on Monday's planned schedule, and instead focus on an effort to raise money for storm-stricken areas. The original Monday schedule calls for Bush, Vice President Dick Cheney and Schwarzenegger to speak.

But budget negotiations in Sacramento are not faring well either.

Saturday afternoon, Schwarzenegger issued a statement calling a budget proposal by legislators in his own party "not fiscally responsible." Spokesman Aaron McLear called the negotiations "a fluid process" and said Schwarzenegger is sticking to his vow: no budget, no convention. That also probably means several legislators who serve as delegates and State Sen. Abel Maldonado R-San Luis Obispo, who is scheduled to speak Wednesday, will be delayed, if they make the convention at all.

Although the approaching storm was dampening some spirits, the buzz still continued around Palin, McCain's vice-presidential pick.

"When we heard it was Sarah Palin, we cheered and clapped until it hurt," said McCain delegate Jill Buck of Pleasanton, who heard the news at a GOP Rules Committee meeting in St. Paul. "She got a standing ovation and she wasn't even here."

A State Without a Budget: 63 Days and counting: Video - GOVERNOR SAYS BUDGET IS NO. 1 PRIORITY

Raw Video | August 30: Governor Says Budget No. 1 Priority KCRA TV/Channel 3 | Sacramento

A State Without a Budget: Day 62 - THE MUSH IN CALIFORNIA's MIDDLE

By George F. Will - The Washington Post

Sunday, August 31, 2008 — If John McCain becomes president, he will be confronted by a Congress with significantly larger Democratic majorities than today's -- majorities furious about high hopes dashed by an eighth Republican victory in 11 presidential elections. And if the normal pattern of off-year elections holds in 2010, those majorities will expand. So McCain would have to deal with a hostile legislature for four years, as Arnold Schwarzenegger has done for almost five years. For that reason, and because these two self-styled post-partisan, reach-across-the-aisle mavericks admire one another it is pertinent to survey Schwarzenegger's governorship of one-eighth of America's population.

Becoming governor in 2003, when Gov. Gray Davis was recalled, Schwarzenegger promised frugality. But even adjusting for inflation and population growth, spending has increased 20 percent under Schwarzenegger. The $102 billion general fund budget is $15 billion in deficit. This year Sacramento will swallow 9.58 percent of personal income, up from 8.78 under Davis, who was recalled because . . . does anyone remember?

In January, Schwarzenegger proclaimed: "I will not raise taxes on the people of California." Then he proposed raising the state's sales tax -- the nation's highest (7.25 percent statewide with local additions) -- a full penny on the dollar, unless (mostly low-income) Californians vastly increase the amount of money they squander on the state's poorly performing lottery, thereby enabling the state to borrow against projected future lottery earnings. Now Schwarzenegger favors a "temporary" sales tax increase.

Schwarzenegger began governing as a Republican, but public employees unions easily defeated his four principled proposals -- reform of public employees' pensions, merit pay for teachers, automatic spending cuts when the budget is not balanced and redistricting to be done by retired judges. So he made a Democratic operative his chief of staff and has governed accordingly.

He said he would support relaxing term limits on state legislators only if they promised to support transferring their redistricting power to nonpartisan retired judges. The legislators broke their promise, but he still favors relaxation.

When he ran for governor, desperate conservatives rallied 'round, reassured by reports that he had read Milton Friedman. But his governance has been, as populism usually is, both incoherent and predictable, a product of his gut and gusts of popular opinion.

When funding stem cell research was the indicator of advanced thinking -- nothing ages faster than intellectual fads -- he helped burden the state with $6 billion more in bond costs (including $200 million a year in interest for 30 years) to fund it. In 2003, Davis signed a law requiring employers with 20 or more workers to provide them with health insurance or pay into a state fund that would. Citizen Schwarzenegger called it a "job-killing health-care tax" and supported the referendum that repealed it. But Gov. Schwarzenegger, scrambling aboard the "universal coverage" bandwagon, proposed a pay-or-play mandate on employers with 10 or more workers: Provide insurance or pay a 4 percent payroll tax. Because imposition of new taxes requires a two-thirds legislative majority, Schwarzenegger called his proposed $12 billion in new taxes (including those on the gross revenue of doctors and hospitals) "levies" or "fees."

"It's not a tax" because "you take it for health care," not general revenue. Those from whom it would have been taken did not appreciate the distinction. Real Republicans helped killed the plan.

Today, politicians attempt to prove their gravitas and virtue by trying to fine-tune the planet's thermostat, so Schwarzenegger favors loading the state's sputtering economy (its 7.3 percent unemployment rate is 28 percent above the national rate) with taxes, fees and regulations. Nevada and Arizona thank him for the businesses he drives their way.

California Republicans have lost seven consecutive U.S. Senate races, hold only 19 of 53 congressional seats, have not controlled the state Senate since 1970, have controlled the assembly for just one year (1996) since 1970, and have bleaker prospects today than when they plighted their troth to the action hero who says: "Look, I cut to the chase. I know what the Democrats like, and I know what the Republicans like. So, I say let's meet somewhere in the middle." But Gov. Weather Vane, as the Orange County Register calls him, usually finds the middle in the middle of the Democrats' legislative caucus.

The other seven-eighths of the American population should understand that what Californians are enduring has a name: "post-partisanship." Somewhere, Gray Davis is smiling.

●●smf's 2¢ — Anybody who watched the Democratic convention on Thursday evening saw him there. And he was smiling!

A State Without a Budget: Day 62 - STATE BUDGET STILL STUCK, GOP OFFERS PLAN

• They propose to collect almost $2 billion next year by selling bonds based on future lottery revenues.
• Republicans also will raise another $349 million by raiding local city redevelopment funds for long-unspent money previously ear-marked for housing construction.
• The GOP plan also would balance the budget by trimming or eliminating programs and agencies that Republicans have been trying to dump for years.

John Wildermuth, San Francisco Chronicle Staff Writer

Saturday, August 30, 2008 - 18:34 PDT SACRAMENTO -- California's long-running budget battle is virtually guaranteed to set an unwanted new record for delay after Senate Republicans today put out a new budget plan that won't be ready for a vote until later this week.

"We can't have this done by 9 a.m. (Sunday)," Senate GOP leader Dave Cogdill, R-Modesto, told a floor session of the Senate today. He said it will take several days to prepare the full proposal.

The state budget already is 62 days overdue, which ties the record set in 2002, when the Legislature approved the budget on Aug. 31. A proposal by Senate Democrats fell three votes short of passage on Friday, and there is no indication that there are the six Republican votes in the Assembly needed to give any budget plan the two-thirds majority needed for passage.

Don't expect Senate President Pro Tem Don Perata, D-Oakland, to celebrate the Legislature's dubious new accomplishment.

"The state is inching its way toward insolvency because we couldn't reach an agreement," a glum Perata told reporters. "That's what history will say."

Perata blamed Gov. Arnold Schwarzenegger for the most recent budget delays, complaining that the governor has been unable or unwilling to convince any Republicans to support a Democratic budget plan based largely on the governor's own proposed compromise.

"It's very difficult when a two-thirds majority requires Republican votes that a Republican governor can't get," Perata said. "This is a compromise, but (Schwarzenegger) is going to have to enforce that compromise."

Schwarzenegger, however, would like to see his own budget plan put up for a vote, without the alterations made by Perata and the Democrats.

"Since Senator Perata's budget failed and the Republican budget is likely to fail, leaders in both parties should put the governor's compromise budget up for a vote," said Lisa Page, a spokeswoman for Schwarzenegger. "It is a fair, middle-of-the-road compromise and he would sign it today."

But Republican legislators have been adamant that they won't vote for any budget proposal, even the governor's, that includes new taxes.

Their new tax plan avoids Schwarzenegger's call for a temporary one-cent boost in the state sales tax that would raise $4 billion dollars next year and $105 million in other taxes called for in the Democratic version of Schwarzenegger's budget.

Instead, they propose to collect almost $2 billion next year by selling bonds based on future lottery revenues. Unlike the governor's plan, which would require a ballot measure and not make money available until 2009-10, Cogdill said this new plan could be done without a statewide vote and raise money immediately.

Republicans also will raise another $349 million by raiding local city redevelopment funds for long-unspent money previously ear-marked for housing construction.

The GOP plan also would balance the budget with a variety of other cuts, trimming or eliminating programs and agencies that Republicans have been trying to dump for years.

The plan, for example, would eliminate the Agricultural Labor Relations Board, which Republicans have opposed since it was started in the 1970s. The UC Labor Institute, another GOP target, would be blue-penciled, as would the biodiversity conservation programs.

The plan also calls for cuts in welfare and health spending, a cap that would limit future state spending to some combination of population growth and the rate of inflation, gives the governor the right to make mid-year program cuts if the budget is out of balance and would prevent the Legislature from adjourning until a budget is passed.

Many of the suggestions, such as changes in overtime regulations, more public-private partnerships and runaway production tax credits, are straight out of a GOP wish list and are unlikely to get much Democratic support.

Even Republican Assembly Leader Mike Villines, R-Clovis, admitted that the Democrat-run Legislature wasn't likely to pass a GOP budget bill.

"But this shows you can do a budget without taxes that's responsible," he said. "It's the basis for a very good compromise in the next step."

The GOP budget plan received an immediate thumbs-down from Assembly Speaker Karen Bass, D-Los Angeles.

"The Republican proposal isn't a plan, it's a blueprint for economic disaster," she said in a statement. "Two billion in borrowing from a phony lottery scheme and $1.5 billion in cuts to the safety net for our most needy citizens ... are not reflective of California values."

Perata also was skeptical about the GOP budget plan, suggesting that the attempt to change the lottery finances without a public vote could be illegal.

But he told Senate Republicans that he wanted to see a complete budget proposal and then would allow them to bring it up for a full floor debate.

But even after the Legislature ends its session tonight, the Senate will continue to meet daily in special session until there's a budget, Perata said.

"For us to be anywhere but here, ready to take up a budget bill, would be unwise," he said. "I won't do it."

A State Without a Budget: Day 61 - TWO FROM THE SAC BEE — It may all come down to a whole lot of borrowing – again + Democrats' shift could crack budget impasse

It may all come down to a whole lot of borrowing – again

Democrats' shift could crack budget impasse

By Dan Smith - Capitol Bureau Chief - The Sacramento Bee Saturday, August 30, 2008 –Politicians at the Capitol like to say budgeting for the state is no different from budgeting for a household: In tough times you either have to raise more money or cut expenses. But in the end, they do what a lot of families do. They run up the credit card. Deadlocked a record 61 days over a proposed $103.4 billion general fund that is at least $15.2 billion in the red, legislators once again are tempted to borrow. They are privately discussing taking as much as $2.5 billion from cities, counties and transportation projects this year, despite voter-approved rules that require repayment within three years, with interest. "The people of my district don't want tax increases," said Sen. Abel Maldonado, R-Santa Maria. "Of course, they don't want to cut education either." "So they want what we've been doing for the last four or five years – they want us to borrow," said Maldonado, whose house defeated a budget proposal Friday that would have raised taxes and disappointed education advocates. "I'm for looking at restructuring our debt and borrowing. I think it's the way to go. I think it's a way for us to move forward and come back next year." Gov. Arnold Schwarzenegger has called the idea "fiscally irresponsible," saying it would do nothing to narrow the state's ongoing gap between spending and taxing. But even his plan, which raises the state sales tax for three years, includes about $741 million in other borrowing from special state funds. And in February, he and lawmakers agreed to sell the remaining $3.3 billion in "economic recovery bonds" approved in 2004 to close part of the budget gap. In the Legislature, discussions over borrowing local government and transportation money seem to have been born of political necessity. Democrats are seeking permanent tax increases. Schwarzenegger has offered his temporary tax increase followed in three years by a tax cut. Legislative Republicans have shown little willingness to vote for any tax increase, permanent or temporary. Assemblyman Roger Niello, R-Fair Oaks, acknowledged the borrowing plan is "in the discussion," but is not favored by Republicans. "It is absolutely not our first option," he said. "We don't want to do it. But the budget has to be resolved." Advocates for road-builders, construction unions and local governments say the plan would cripple road projects and probably force local governments to borrow from banks at interest rates driven up by the credit crunch. Moreover, new payback rules approved by voters would force the state to repay the principal and all the interest within three years, creating a looming bill that exacerbates the state's ongoing budget problems. "It's a legal approach, but from a financial and political standpoint, it's totally irresponsible," said Paul McIntosh, executive director of the California State Association of Counties. Cities and counties, he said, may have to pay as much as 19 percent interest on bank loans to cover their losses. All of it would have to be made up by the state. Transportation projects would slow, leaving more construction workers unemployed in an economy that is already struggling, said Jim Earp, executive director of the California Alliance for Jobs, a coalition of infrastructure construction companies and related labor unions. "By taking that money out of circulation, we've created a huge funding hole and thrown a lot of people out of work," Earp said. "All they're really doing is driving themselves deeper into debt without taking care of the structural deficit." The borrowing program under discussion envisions the state repaying the money from higher lottery proceeds, based on predictions that modernization of the games will increase interest and the state's take. Schwarzenegger's proposal, meanwhile, would borrow against future lottery proceeds, using the money to repay current debt. Other budget proposals under consideration also amount to borrowing, if somewhat indirectly. Republicans and Democrats are considering a plan to restrict the losses businesses can write off for two to three years, but it would include a method for the companies to recoup the losses – and then some – in later years. Schwarzenegger's plan also would essentially borrow from taxpayers by raising the sales tax by 1 cent on the dollar for three years, and then paying them back by reducing it by 1.25 cents permanently. In both cases the state would gain revenue in the short term, but lose money in future years. Lawmakers also have pondered borrowing more money from two funds voters set aside for mental health programs and early childhood education and health. Those measures, however, have tighter restrictions that would probably require voters to sign off on any borrowing. Local government and state budgets have been intertwined for decades. But the idea of the state using local coffers to escape budget messes took hold in 1993, when Gov. Pete Wilson and lawmakers shifted billions in local property taxes to schools from cities, counties and special districts. The fiscal gymnastics allowed the state to meet its legal obligation to schools by using what was essentially local money. After more raids on their funds, local government advocates teamed with Schwarzenegger in 2004 and agreed to a ballot measure that would block the takings but allow limited borrowing. Voters in 2002 approved a special transportation fund fueled by the sales tax on gasoline for road projects, but lawmakers twice borrowed from it to cover other state expenses. In 2006, voters tightened the loophole, requiring repayment with interest. Schwarzenegger supported both measures to tighten the rules, and he remains opposed to any talk of borrowing from local government and transportation this year. "It is like a family taking credit cards and overextending and then getting another one to pay all of the debt off," the governor said last week. "It doesn't solve any problems. It isn't a solution. It is a disaster."

By Dan Walters - SACRAMENTO BEE COLUMNIST Saturday, August 30, 2008 – The near-record political stalemate over the deficit-ridden state budget may – repeat, may – have moved a notch closer to resolution Friday even though the Senate rejected a new Democratic version. The new version is based on Republican Gov. Arnold Schwarzenegger's latest proposal and hinges on a 1-cent increase in the state sales tax for three years. But Republicans continued to oppose it unanimously, and any budget needs votes from at least two GOP senators. Despite being rejected, it represents major movement by Democrats because it embraces – at least momentarily – Schwarzenegger's "reforms" to prevent future budget problems, including his authority to cut spending in midyear that Democrats dislike. The chief difference between the Democratic senators and Schwarzenegger now appears to be the form of the sales tax boost. The governor wants to not only end it after three years but then reduce the sales tax slightly below the current level so that it constitutes a long-term tax cut. Democrats would merely end the 1-cent increase after three years. Pointedly, when asked about the Democratic move during an appearance in San Diego, Schwarzenegger described it as "very courageous" and urged Republicans to vote for it, although his aides said later he was not endorsing it as a final budget. Republican senators, however, denounced the budget. Tom McClintock of Thousand Oaks quoted Democratic presidential nominee Barack Obama's promise that "I will cut taxes … for 95 percent of all working families, because, in an economy like this, the last thing we should do is raise taxes on the middle class." But another Republican, Bakersfield's Roy Ashburn, hinted anew that he might vote for a sales tax-based budget if, as Schwarzenegger's can, it could be viewed as a long-term tax cut. It's widely believed that Ashburn and Santa Maria Republican Abel Maldonado could be persuaded to vote for such a budget if Democrats are willing. All in all, therefore, the Senate may be edging toward some budget deal that could then be dumped on the Assembly, where Republican opposition to any kind of new taxes appears stronger. Democratic senators have been openly worried that a "borrowing budget" – one that relies on shifting funds from local governments and transportation funds rather than taxes – might emerge from the Assembly and put them on the spot. Schwarzenegger uttered his praise of the Senate Democrats' budget while appearing with local government officials to denounce more borrowing. "Let's fix the budget problem once and for all," Schwarzenegger said. The budget machinations are occurring as the Legislature churns toward what had been scheduled to be its annual adjournment Sunday, the constitutional deadline for most legislation to be passed. The budget, however, is not subject to that deadline. If there's no breakthrough this weekend, the multi-sided stalemate will continue indefinitely.

Senate Compromise Fails

Bowen: Deadline has passed for fall ballot

Capitol Alert/ Sac Bee  | Published 4:29 PM Friday, August 29, 2008 by Shane Goldmacher

Secretary of State Debra Bowen declared Friday that it is now too late to add any more measures to the November ballot, saying "any more changes would seriously jeopardize the integrity of the election." ... (more)

Budget vote fails

Capitol Alert/ Sac Bee | Published 1:29 PM Friday, August 29, 2008 by Shane Goldmacher

Though the tally isn't final yet, the state Senate budget vote failed along party lines, with 24 votes in favor and 15 against.
The lone abstention was moderate Democratic Sen. Lou Correa of Orange County.
See sacbee.com for more. ... (more)

Perata's floor speech

Capitol Alert/ Sac Bee | Published 12:48 PM Friday, August 29, 2008 by Amy Chance

Here's what Senate President Pro Tem Don Perata had to say about the budget he put up on the Senate floor this morning. ... (more)

A State without a Budget: Day 60@11:49AM - GOVERNOR PRAISES NEW DEMOCRATIC BUDGET

CAPITOL ALERT/SAC BEE: Posted by Dan Walters on August 29, 2008 11:49 AM

August 29, 2008 - Gov. Arnold Schwarzenegger today praised a new Democratic version of the state budget as "very courageous" and urged Republican senators to vote for it.

Schwarzenegger was 500 miles away in San Diego, campaigning against any budget that relies on borrowing money from local governments and transportation funds, as the Senate began debating the new Democratic version. He issued his words of praise in response to a reporter's question.

The new Senate Democratic version is based on Schwarzenegger's own latest proposal to break a near-record-long stalemate, with its centerpiece being a one-cent increase in the state sales tax for three years. Its chief difference is that Schwarzenegger would reduce the sales tax below the current after the three-year period while Democrats would merely end the extra penny without a further decrease.

Schwarzenegger stopped short of saying he would sign the new version.

 

Urgent Alert -- Senate Vote this morning will make deeper cuts -- Call Legislators Immediately to Oppose the Senate Proposal

A message from 4LAKids the California State PTA  and The Education Coalition.

The Senate has announced a budget vote for 10 am Friday -- at stake are deep cuts to vital services for all Californians, both now and into the future.

The Assembly may vote shortly thereafter.

CALL YOUR 2 LEGISLATORS THIS MORNING -- and forward this message on!

1.  Call 1-888-268-4334, the "Cuts Hurt Hotline"  (Special hotline provided by CTA, as we need action now!)

2.  Press 1, to be connected directly to your Senator

3.  Tell your Senator:

"OPPOSE the Senate budget proposal because:

-- it makes MORE cuts to our schools, hospitals, and communities, now and into the future

-- it does NOT include the responsible, stable revenues needed to prevent deeper cuts and invest in the future."

4.  Call again, pressing 2 to be connected directly to your Assembly member and tell them of your opposition to the Senate Budget Proposal.

Thanks to those of you who have called so many times already this very important (and very long) budget season.  Why call again NOW?  Two reasons:

· First, this weekend is the final deadline for any budget deal that would include items for the November 4th ballot, so the pressure is high for a final deal to be struck. 

· Second, it's clear that all your calls, visits, letters, and direct actions in districts across the state have made a difference in holding the line on cuts to vital services and forcing reasonable revenue proposals into the conversation.

Now, our Senators and Assembly members must lead the charge to pass a responsible, compassionate budget.  Let them hear from you NOW!

The somewhat latest budget news.

Day 60: CALIFORNIA SENATE DEMOCRATS TO INTRODUCE BUDGET PLAN: The proposal includes a sales tax increase and controls on future state spending.

It is unclear whether the proposal has the support of any Republicans.

By Evan Halper, Los Angeles Times Staff Writer

August 29, 2008 -- SACRAMENTO -- -- Democrats in the state Senate said they would attempt to break the budget impasse today by offering their own spending plan for a vote.
It would be the first floor vote on the budget in that house since the fiscal year began 60 days ago.

The plan Democrats are offering is rooted in a proposal Gov. Arnold Schwarzenegger unveiled this month. It includes a temporary sales tax hike and controls on how much the state could spend in the future.

It is unclear whether the proposal has the support of any Republicans. A budget cannot pass the Senate without at least two GOP votes. Senate Leader Don Perata (D-Oakland) suggested the governor may be able to persuade some Republican lawmakers to support the plan.

"If the governor can get a couple of votes, then we will have a budget," he said.

If the plan were to pass, it would go to the Assembly, where it would need at least six GOP votes.

Assembly Democrats are working on an alternative plan -- one that would allow them to raise taxes without the required two-thirds majority vote, according to people involved in confidential negotiations.

The plan would attempt to exploit a legal loophole by eliminating a tax cut that was put in place several years ago. Legislative lawyers have suggested it could be approved without Republican votes.

Breaking News: California Senate to Vote on Compromise Budget Tomorrow (Thursday Aug 29) Morning at 10 A.M

 

Details of Proposed Compromise Emerging

By Frank D. Russo - California Progress report

Thursday Aug 28 7PM - Word has just been received that Democratic President pro Tem Don Perata has scheduled a vote on a compromise proposal to end the budget stalemate that has California on the verge of setting a record for the longest delay beyond the fiscal year for passing a budget. The vote is scheduled to take place tomorrow morning, August 29, at 10 a.m.

I do not believe this vote has been scheduled unless there are indications that there are at least two Republican Senators ready to vote for the budget so that it will secure the necessary two-thirds vote, or unless the governor believes he can deliver these votes.

A document which is not yet available on the net entitled “Governor’s Budget with revisions: August 2008-09 Update Proposed Compromise” is not available on the internet. It details how the proposal differs from that recently put forth by Governor Schwarzenegger and also how it differs from the one passed out by the joint legislative conference committee on the budget.

 

Update: 8/29: Governors Budget with revisions: August 2008-09 Update Proposed Compromise   - Available Here

Budget reform and securitization of the California lottery is part of the package.

It says that a total of $12.0 billion or 51% of all solutions are revenue solutions. These include a temporary sales tax increase of 1%, not to apply to the sale of motor vehicles and motor fuel. There is also the sale of $3.3 billion of economic recovery bonds and loans of $714 million from special funds, revenue acceleration involving suspending net operating losses for two years, an amnesty of personal income tax and corporate income designed to speed up payments owed the state, and the accrual of personal income tax and corporate income tax estimated payments.

There is additional non-tax increase revenue involving Franchise Tax Board and Board of Equalization collection efforts, additional Tideland revenues, and transfer of $141 from ten different special funds.

A total of $11.3 billion or 49% of all solutions represent reductions in program costs.
The document quoted verbatim below appears to be changes made to the proposal the Governor made last week (dubbed by some the "August Revise") with items crossed off and language added. Hence it tracks some of the preferatory remarks about what the Governor has said and the like.

The introduction of the document contains the following:

“California's budget problem has reached crisis proportions. After months of negotiation, the Administration and the Legislature have yet to agree on a plan for solving the state's budget shortfall this year, eliminating its long-term structural deficit, and reforming the budget process to prevent such a crisis from recurring.

The Governor believes that to solve the budget crisis and move forward, the state needs to do all of the following:

Make major reductions in programs to bring spending in line with a realistic long-term revenue projection.

Provide for a temporary increase in revenues to see the state through the next several years of anticipated slow economic growth.

Modernize the state's lottery and securitize expected increased revenues to pay off General Fund debts or contribute to the "rainy day fund" (Budget Stabilization Account) to help see the state through the next three years.

Enact major budget reform that will prevent future legislatures and governors from committing temporary surges in revenues to ongoing program expansions or tax cuts, and that will provide a rainy day fund and mid-year cut authority to address future downturns in revenues.

The last two components of this plan both must be enacted by the people. Budget reform can only be achieved with a constitutional amendment, and lottery reform requires amending both the Constitution and an initiative enacted by the people in 1984.

In the absence of these two components, the only alternatives to solving the state's budget problems will be massive program cuts and/or major tax increases. The Compromise reflects lessons learned after months of negotiation with legislative leaders of both parties. It is a plan that has components that are objectionable to all parties—including the Governor.

Downside Risks to Economic and Revenue Forecasts

Since the May Revision, the economic news has worsened and many forecasters are predicting a slower return to normal growth rates. If, in fact, the economy does not grow at the rates forecast in the May Revision, revenues could decline significantly in 2008-09 and 2009-10, possibly on the order of $5 billion over the two years. This downside risk to the forecast is all the more reason to enact a balanced budget that does not rely on borrowing from local governments or transportation funds.

Outline of the Plan

Figure INT-01 represents the Governor's proposed Compromise which includes General Fund spending of $103.4 billion in 2008-09. This reflects virtually no increase from the previous year and only a 2-percent increase as compared to 2006-07. However, as compared to a workload budget, that is the projected costs of maintaining state programs at their current levels, it reflects a reduction of $9.9 billion, or 9 percent.

The figure also shows that the Compromise is balanced, not only in 2008-09, but into 2009-10 as well. In fact, the Compromise would allow the state to begin rebuilding its rainy day fund in 2009-10, thus setting the stage for achieving structural balance in the future….

The May Revision identified $24.3 billion in solutions needed to address the projected shortfall at the end of 2008-09 and leave a reserve of $2 billion. The Compromise proposes a reserve of $1.1 billion and therefore proposes solutions totaling $23.3 billion. Figure INT-02 displays how the proposed solutions in the Compromise are divided among various categories, with cuts accounting for the largest contribution to solving the budget problem.

Proposed Compromise Compared to the Conference Committee Report

The proposed Compromise includes $2 billion in additional spending reductions beyond the $9.3 billion in reductions adopted by the Conference Committee. Specifically, the Compromise maintains funding for public transit at the 2007-08 level for savings of $317 million, suspends the federal cost of living adjustment for SSI for savings of $109 million in 2008-09 and $218 million in 2009-10, achieves $210 million in savings from temporary Medi-Cal provider rate reductions, temporarily shifts $228 million in funding from local redevelopment agencies to schools, suspends homeowner assistance programs and reduces senior's property tax relief for savings of $56 million, saves $150 million by deferring "settle up" payments and makes reductions of $50 million to various health and human services programs. The Compromise provides $57.8 billion tofund the Proposition 98 guarantee, $1.1 billion less in funding than what was proposed by the Conference Committee and X1.2 billion above the 2007-08 level. Lastly, the Compromise proposal restores 101 million in funding for local public safety programs.

The Conference Committee Report included $9.7 billion in revenue increases and accelerations, including $6.6 billion in ongoing tax increases. These ongoing tax increases included higher personal income taxes and higher corporate taxes. If enacted, these tax increases would increase the volatility of California's revenue structure and target specific sectors of the state's economy. Recognizing a temporary decline in revenues and the need for a balanced approach to address the budget shortfall, the Compromise includes a three year, one-cent increase in the state sales tax that will be repaid by a permanent 1/4 cent decline in the sales tax. Given higher gas prices, the increase exempts gasoline, diesel and jet fuel from the proposed increase. In addition, the Compromise modifies the tax amnesty proposal included in the conference report to target the proposal to truly non-compliant taxpayers, it suspends the Net Operating Loss deduction for 2 years instead of three years, and it does not require Limited Liability Corporations (LLCs) to pre-pay their fee.

Budget Reform

California's fiscal strength and security hinges on fixing our broken budget system.

In his State of the State speech, Governor Schwarzenegger proposed a constitutional amendment to address two shortcomings in the state budget process: volatile revenues and over-spending. This Compromise would achieve both of these goals, by building on a proposal made by the Legislative Analyst and negotiated with the Legislature.

The Compromise strengthens Proposition 58 by increasing the size of the Rainy Day Fund from 5 percent to 12.5 percent, capturing unexpected increases in revenues following passage of the budget, and ensuring annual transfers to the reserve occur. Specifically, it ensures annual 3-percent of General Fund revenue transfers into the Budget Stabilization Account (BSA), except in years when the reserve exceeds 12.5 percent of General Fund revenue or in years in which revenues are low enough to allow for transfers from the BSA. Transfers from the BSA back into the General Fund would only be allowed when revenues are insufficient to cover baseline spending increases (i.e., the current level of spending as reflected in the annual Budget Act adjusted by the Gann Limit adjustment factors). Lastly, it ensures that one-time revenues available when the reserve has reached the cap are only available for one-time purposes, including paying off state bonds, making pre-payments for the health benefits of retirees, or granting tax rebates. The Compromise proposal would not impact Proposition 98. These Constitutional amendments would take effect in 2010-11 in order to give the state time to recover from the current cyclical downturn in the economy.

This Compromise also proposes a statutory change that would grant the Governor the power to reduce spending on state operations by 7 percent and to suspend implementation of cost of living adjustments or rate increases whenever a budget deficit developed after the enactment of the annual budget.

Proposed Compromise Compared to the Conference Committee Report

The proposed Compromise includes $2 billion in additional spending reductions beyond the $9.3 billion in reductions adopted by the Conference Committee. Specifically, the Compromise maintains funding for public transit at the 2007-08 level for savings of $317 million, suspends the federal cost of living adjustment for SSI for savings of $109 million in 2008-09 and $218 million in 2009-10, achieves $210 million in savings from temporary Medi-Cal provider rate reductions, temporarily shifts $228 million in funding from local redevelopment agencies to schools, suspends homeowner assistance programs and reduces senior's property tax relief for savings of $56 million, saves $150 million by deferring "settle up" payments and makes reductions of $50 million to various health and human services programs. The Compromise provides $57.8 billion to fund the Proposition 98 guarantee, $1.1 billion less in funding than what was proposed by the Conference Committee andj1.2 billion above the 2007-08 level. Lastly, the Compromise proposal restores $101 million in funding for local public safety programs.

The Conference Committee Report included $9.7 billion in revenue increases and accelerations, including $6.6 billion in ongoing tax increases. These ongoing tax increases included higher personal income taxes and higher corporate taxes. If enacted, these tax increases would increase the volatility of California's revenue structure and target specific sectors of the state's economy. Recognizing a temporary decline in revenues and the need for a balanced approach to address the budget shortfall, the Compromise includes a three year, one-cent increase in the state sales tax that will be repaid by a permanent 1/4 cent decline in the sales tax. Given higher gas prices, the increase exempts gasoline, diesel and jet fuel from the proposed increase. In addition, the Compromise modifies the tax amnesty proposal included in the conference report to target the proposal to truly non-compliant taxpayers, it suspends the Net Operating Loss deduction for 2 years instead of three years, and it does not require Limited Liability Corporations (LLCs) to pre-pay their fee.

Budget Reform

California's fiscal strength and security hinges on fixing our broken budget system.

In his State of the State speech, Governor Schwarzenegger proposed a constitutional amendment to address two shortcomings in the state budget process: volatile revenues and over-spending. This Compromise would achieve both of these goals, by building on a proposal made by the Legislative Analyst and negotiated with the Legislature.

The Compromise strengthens Proposition 58 by increasing the size of the Rainy Day Fund from 5 percent to 12.5 percent, capturing unexpected increases in revenues following passage of the budget, and ensuring annual transfers to the reserve occur. Specifically, it ensures annual 3-percent of General Fund revenue transfers into the Budget Stabilization Account (BSA), except in years when the reserve exceeds 12.5 percent of General Fund revenue or in years in which revenues are low enough to allow for transfers from the BSA. Transfers from the BSA back into the General Fund would only be allowed when revenues are insufficient to cover baseline spending increases (i.e., the current level of spending as reflected in the annual Budget Act adjusted by the Gann Limit adjustment factors). Lastly, it ensures that one-time revenues available when the reserve has reached the cap are only available for one-time purposes, including paying off state bonds, making pre-payments for the health benefits of retirees, or granting tax rebates. The Compromise proposal would not impact Proposition 98. These Constitutional amendments would take effect in 2010-11 in order to give the state time to recover from the current cyclical downturn in the economy.

This Compromise also proposes a statutory change that would grant the Governor the power to reduce spending on state operations by 7 percent and to suspend implementation of cost of living adjustments or rate increases whenever a budget deficit developed after the enactment of the annual budget.

Lottery Securitization

The Lottery remains a greatly underutilized state asset. Because of constraints that prevent California's lottery from performing like those in other states, it produces revenues that are only about half of the national average. This compromise proposes to place a ballot measure before the people to modernize the Lottery and authorize a securitization of the resulting increased revenues. The modernization would allow an increase in game payouts and provide more administrative flexibility. These modest changes are expected to improve the Lottery's performance significantly.

The compromise further proposes to use Lottery revenues to the benefit of the General Fund and to compensate education for the loss of these revenues by an equal increase in the Proposition 98 minimum guarantee and the base budgets of higher education.

Revenues from the modernized lottery would be available to pay down General Fund debts or to augment the state's "rainy day fund" (BSA). It is further proposed that a portion of the revenue stream from the lottery be securitized to provide $5 billion in 2009-10 to be used for these purposes.

Program reductions include the following description:

“PROPOSITION 98

Proposition 98 Guarantee

As a result of these actions in the special session, and the revised revenue estimate being proposed in the Compromise, the Proposition 98 General Fund appropriations for 2007-08 are now approximately $41.6 billion, which is $187.3 million lower than the minimum Proposition 98 Guarantee. Total Proposition 98 funding for 2007-08 is $56.6 billion.

The Proposition 98 Guarantee for 2008-09 is projected to grow to $57.8 billion of which $41.8 billion would be from the General Fund. While the Compromise fully funds the Proposition 98 Guarantee, and provides a $1.2 billion year over year increase, it does not fund the cost-of-living adjustments required under current law. This level of funding is higher than the amount necessary to fund Proposition 98 programs, including Special Education, Class Size Reduction and Child Nutrition, at their 2007-08 base program levels.

2008-09 Proposition 98 Guarantee Program Savings:

Cost-of-Living Adjustment: $2.9 billion savings: The Budget does not provide Proposition 98 programs with the statutory 5.66 percent cost-of-living adjustment resulting in a $2.9 billion savings, including $353.9 million from Community Colleges.

Community College Growth: $58 million additional savings are realized by reducing new enrollment growth from 3 percent to about 2 percent resulting in a total Proposition 98 expenditure level of $4.46 billion for the community colleges.

Redevelopment Agency: 5 percent or $225 million savings: The Budget also proposes a shift in the amount of funding provided by local redevelopment agencies (RDA's) to local schools and community colleges in each county. For 2008-09 through 2010-11, RDA's will be required to shift the greater of (a) five percent of their tax increment revenue, or (b) $225 million, to the Education Revenue Augmentation Funds (ERAF's) in their respective counties. For 2008-09, the Budget assumes that $228 million in additional local revenue will be passed on to schools and community colleges, which in turn reduces the state's Proposition 98 General Fund contribution by an identical amount.

2009-10 Proposition 98 Guarantee: Increase $1.1 billion: Under the Lottery proposal, commencing with the 2009-10 fiscal year, the Proposition 98 Guarantee would be increased to reflect a shift of $1.1 billion, which is the amount that was dedicated to K-14 education programs from the Lottery in 2008-09. The University of California, California State University and Hastings College of Law, will receive non-Proposition 98 General Fund in 2009-10, in place of the amount they would have otherwise received from Lottery proceeds.

Proposition 98 Settle-Up Payment: $150 million deferral. The Budget proposes to defer the annual $150 million settle-up payment. Proposition 98 appropriations for fiscal years 1995-96, 1996-97, 2002-03, and 2003-04 are $1.4 billion below the amounts required for those years. Chapter 216 of the Statutes of 2004 annually appropriates $150 million beginning 2006-07 to repay prior-year Proposition 98 settle-up obligations.

Home to School Transportation Reimbursement from Public Transportation Account: $1 billion savings over two years: The Special Session authorized up to $409 million in Proposition 98 General Fund expenditures for the Home-to-School Transportation Program for the 2007-08 fiscal year to be reimbursed from the Public Transportation Account (PTA). Similarly, the Budget Act includes $592.9 million from the PTA to reimburse the General Fund for the 2008-09 cost of the Home to School Transportation Program, including Special Education transportation (reflected in the totals for General Government).

HIGHER EDUCATION (NON-PROPOSITION 98)

Savings of $486 million are realized for higher education segments (excluding community colleges) resulting in a $7.1 billion General Fund expenditure level. Major reductions include $233.4 million for UC and $215.3 million for CSU from the workload budget level. The savings include unallocated reductions of $201.1 million and $172.1 million for UC and CSU, respectively, and 10 percent reductions to Institutional Support of $32.3 million for UC and $43.2 million for CSU. One-time savings of $24 million were realized in the Student Aid Commission budget due to a one-time fund shift to the Student Loan Operating Fund for a portion of CalGrant payments.

HEALTH AND HUMAN SERVICES

Department of Health Care Services

As part of the 2008 Third Extraordinary Legislative Special Session, legislation was enacted to reduce expenditures by authorizing a ten percent reduction in payments to Medi-Cal fee-for-service and managed care Medi-Cal providers/programs, inpatient care payments to hospitals that do not contract with Medi-Cal, as well as provider payments for the California Children's Services (CCS) program, the Child Health and Disability Prevention (CHDP) program and Genetically Handicapped Persons Program (GHPP). This Compromise retains these reductions until March 1, 2009, which will save $505.4 million General Fund in 2008-09.

Department of Social Services

Current law suspends provision of the June 2008 State Supplementary Payment (SSP) COLA until Oct 2008. Permanent suspension of the June 2008 SSP COLA would result in General Fund Savings of $198.3 million in 2008-09.

Suspension of the June 2009 SSP COLA would result in General Fund Savings of $48.9 million in 2008-09.”

That is all for now.

Posted on August 28, 2008

Everything - or more than- you ever wanted to know about the budget impasse: ON THE ROCKY ROAD TO THE 2008-09 BUDGET

by Dan Walters from the Sacramento Bee - published Wednesday, August 20, 2008 ...and still true today

• Why does California seem to struggle with its budget every year?
• Is state spending really out of line, as Republicans suggest, or are Democrats right when they say we need more revenue?

Dan Walters walks us through some key mileposts on the road to this year's state budget stalemate, and offers some key statistics to help you get to the bottom of the debate.

GENERAL FUND SPENDING

2002-03: $77.5 billion

2007-08: $103.5 billion

Increase over those five years: $26 billion (+33 percent)

Increase tied to inflation: $13.2 billion (+17 percent)

Increase tied to population growth: $5.4 billion (+7 percent)

Spending growth beyond inflation and population growth over those five years: $7.4 billion (+9 percent)

IS STATE SPENDING OUT OF CONTROL?

One way of measuring state spending is by looking at its relationship to the overall economy. In the last five years, general fund spending has increased from 6.75 percent of Californians' personal income to 6.82 percent.

Fiscal year general fund spending* as a percentage of personal income:

1981-82: $21.7 billion (6.78%)

1985-86: $28.8 billion (6.43%)

1990-91: $40.3 billion (6.21%)

1995-96: $45.4 billion (5.93%)

2000-01: $78.1 billion (7.07%)

2002-03: $77.5 billion (6.75%)

2005-06: $91.6 billion (6.08%)

2007-08: $103.5 billion (6.82%)

*Not adjusted for inflation.

BIGGEST CONTRIBUTORS TO SPENDING GROWTH

PRISONS: Spending jumped nearly 75 percent, from $5.8 billion a year to $10.1 billion, thanks not only to an 11,000-inmate increase in prison populations but sharply higher salaries for guards and other prison workers.

VEHICLE LICENSE FEES: Gov. Arnold Schwarzenegger cut the car tax but promised to pay local governments who use the money from the state treasury anyway. State payments to local governments rose about $3 billion over the period, to $6.1 billion per year, as more cars hit the road and their value increased.

EDUCATION: The biggest dollar increase has been in state support of K-12 education, from $28.8 billion in 2002-03 to $42.1 billion in 2007-08, but $6.1 billion of that increase was from shifting the method of reimbursing local governments for losses of vehicle license fee revenues. The real increase for schools was $7.2 billion, or 25 percent. Inflation during the period was 17 percent, and school enrollment was relatively flat, so inflation-adjusted per-pupil spending by the state did rise by approximately 8 percent.

OTHER FACTORS: Spending on Medi-Cal also outstripped population growth and inflation due to increased health care costs. Increases in most other major state expenditures were in line with inflation and population growth.

30 YEARS OF BUDGET PROBLEM MILEPOSTS

1978: Before 1978, fashioning a state budget each year was a fairly routine task. But passage of Proposition 13 in June 1978, which slashed local property taxes, began a radical budgeting makeover. General fund spending jumped as the state assumed greater responsibility for schools and local services.

1979-1990: After Proposition 13 passed in 1978, its co-author, Paul Gann, sponsored a 1979 measure to limit government spending increases to inflation and population growth, with excess revenues rebated to taxpayers. The measure limited state spending increases in the 1980s, and mandated one rebate, but was loosened in 1990 as part of deal between Republican Gov. George Deukmejian and Democratic legislators on a boost in gas taxes. The Gann Limit has never been a factor in the state budget since, but Republicans are now demanding that it be revived.

1988: The budget continued to balloon as the state assumed more burdens previously borne by property taxes. In 1988, a coalition led by the California Teachers Association persuaded voters to pass Proposition 98, aimed at giving schools a guaranteed portion - 40 percent or more - of the state's revenues.

1991: The end of the Cold War and the rapid drop in military spending plunged the state into the worst recession in a half-century. General fund spending was virtually frozen at about $40 billion for several years as GOP Gov. Pete Wilson battled with Democrats and the CTA. They balanced the budget by raising income and sales taxes, cutting some state spending and forcing local governments to shoulder some of the impact. A temporary sales tax increase was later made permanent, with approval of voters, to make up some of the losses to local governments.

1999-2000: A new economic surge, centered on the high-tech industry, flooded state coffers. Revenues - mostly income taxes - skyrocketed to $75.7 billion in 2000-01. Under Wilson and then-Democratic Gov. Gray Davis, spending also jumped sharply for schools and health care for the poor. Republicans demanded and got billions of dollars in corporate and individual tax cuts, including a two-thirds cut in property taxes that motorists paid on their cars, known as vehicle license fees or the car tax.

2001: The surge of revenue from high-tech stock transactions was a one-time windfall. As the dot-com bubble burst, revenues dropped to $62.7 billion in 2001-02, leaving the state with a $14 billion operating deficit that year. Thus began a cycle of deficits that has plagued the state ever since. The gap narrowed somewhat mid-decade as the state's economy picked up again, but has worsened since the housing industry's meltdown.

2003: As the state's deficit worsened, Davis reinstated the car tax to ease the impact on the general fund. The move added fuel to a drive to recall him. Actor Arnold Schwarzenegger made restoring the tax break a cornerstone of his campaign, a promise he fulfilled in his first act as governor, even as he promised to end "crazy deficit spending."

2004: Schwarzenegger persuaded voters to approve $15 billion in bonds to refinance short-term debt the state could not repay. Repaying those bonds has become a multibillion-dollar bite on the general fund, worsening the deficit. His aides contend that the repayments should not be counted as spending increases on his watch, since they covered deficits run up during the Davis years. Overall, however, general fund spending has outstripped population growth and inflation during Schwarzenegger's five years as governor. Gaps have been covered largely by borrowing, including raids on special funds, and accounting maneuvers, such as shifting liabilities to the next fiscal year.

2008: Schwarzenegger has pegged the 2008-09 deficit at $15.2 billion plus another $2 billion he says the state needs as an emergency reserve. He initially proposed borrowing against the state lottery's future profits, as well as making some spending cuts and accounting maneuvers to close the gap. Recently he has proposed a temporary one-cent increase in the state sales tax, which would raise about $6 billion a year - about what the car tax cut costs the state.

Sources: California Department of Finance, Legislative Analyst's Office, Bee research by Dan Walters

Day 59½ - LAIRD ANSWERS THE QUESTION: 'WHY CAN'T WE GET A STATE BUDGET?'

 

By John Laird
Chair
Assembly Budget Committee

FROM THE CALIFORNIA progress report

Aug 28 /1PM - The state budget is now nearly two months late. Republican legislative leaders refuse to offer a budget for consideration, let alone level with California about the need to increase revenue in order to prevent very deep, draconian cuts.

At more than $15 billion, the budget shortfall is breathtaking and the only way to bridge the gap is through a balanced mix of responsible cuts and new revenues—Democrats in the legislature have proposed billions in difficult cuts coupled with raising taxes on the wealthiest Californians and closing tax loopholes.

Even Governor Schwarzenegger has reversed his pledge against tax increases and has come to understand that the alternative to a tax increase is devastating cuts to education, healthcare, environmental resources and public safety.

Republican legislators have come to the table with just one thing: signed pledges not to raise taxes. How is it possible that a minority in the legislature can hold up the state budget while not even proposing how to end the stand-off? The two-thirds budget approval requirement in the state constitution.

California is one of three states with a two-thirds requirement—joining Rhode Island and Arkansas. And it's not just the two-thirds; it's the resulting unique budget culture that is also the problem.

The first issue is party discipline. After a 2001 budget in which four Assembly Republicans joined all Democrats in approving a budget, for various reasons not one of those Republican legislators returned after the next election. That experience hangs over every budget.

The second issue is leverage. This past spring, Republican legislative leaders indicated they wanted to slow down implementation of AB 32, California's popular anti-global warming law, as a condition of budget approval. The two-thirds requirement gives them the leverage to attempt this. Some Republicans are even seeking to expand this leverage power by insisting on a two-thirds vote at every procedural level. This would only further undermine efforts for responsible budgets.

The third issue is transparency. Not since the 2003-04 legislative session has there been a public budget proposal from the Republican side. Each year, the budget is delayed with no public alternative proposal in play. When the final budget is negotiated—generally, out of the public eye—advocates for health care, transit, education and local government find out just before a public vote what was on the table at the end—generally too late to influence it.

Two months into the budget stand-off, the Democratic legislative committees and the Governor have long-since proposed balanced budgets with some new taxes and targeted cuts—none of these proposed budget have included borrowing. And, if by the time you read this, there is borrowing in the budget—it is not what the Governor or a majority of the legislature wanted. It will be the two-thirds requirement that will have leveraged it in so the budget process can end.

To add insult to injury, often the very interests that leverage borrowing into the budget won’t actually vote for the budget—leaving it to the rest of us to approve a budget that includes things we find distasteful.

While any list of necessary state reforms should include campaign finance, the initiative process, redistricting and term limits—at the top of the list should be the legislative two-thirds budget approval requirement.

It’s said the two-thirds requirement protects fiscal responsibility. I think the opposite is true. We got where we are now with the two-thirds requirement. This is no way to run the government of the eighth largest economy in the world. This needs to be changed. There's a reason forty-seven other states do not do this—and that their budgets are adopted on time.

For more about the state budget crisis, go to www.assembly.ca.gov/laird.

Assemblymember John Laird (D-Santa Cruz) is chair of the Assembly Budget Committee

A State Without a Budget: Day 59 - CALIFORNIA BUDGET BATTLE GOING NOWHERE FAST

By Dan Walters - Sacramento Bee Columnist

August 28 - So where is the state of California's struggle with a long-overdue, deficit-ridden state budget headed?  Nowhere fast.

Sometime this week, perhaps already, the drop-dead date for placing measures on the November ballot passes, thus adding another level of complexity to the multi-sided political struggle over whether the $15.2 billion deficit in the 2008-09 budget will be closed by new taxes, spending cuts, more loans or some combination thereof.

Although Secretary of State Debra Bowen refuses — somewhat faintheartedly — to impose a hard deadline, local election officials are scheduled to mail ballots to overseas voters next week.

It would be virtually impossible for politicians to add more measures, even though certain aspects of any budget deal probably require voter approval, without disenfranchising soldiers in combat and embarrassing themselves even further.

Gov. Arnold Schwarzenegger, meanwhile, is driving his political credibility even lower, if that is possible, by saying he'll sign some legislation to revise the $9.95 billion bond issue for high-speed rail that's already on the ballot.

Schwarzenegger had pledged not to sign any bill until a budget is passed, including the rail bond measure, but now says he will.

It's not the first time that Schwarzenegger has drawn a line in the political sandbox, promising to do or not do something, and then reneged.

He did it, for instance, when he endorsed a measure to modify legislative term limits after saying he wouldn't do it unless it was paired with redistricting reforms.

More recently, he's backtracked on his pledge to balance the state budget without new taxes and is now pushing a sales tax boost.

Every time Schwarzenegger does one of these political flips, his political credibility sinks a little lower, making it that much more difficult for anyone to take any of his pronouncements seriously and that much more difficult for him to broker a budget deal.

Politics may be an unseemly trade at times, but among politicians themselves, there's a certain code of honor about keeping one's word.

Schwarzenegger violates that code as casually as he changes his socks.

The issue isn't whether some new taxes of some kind aren't needed to close the budget gap; they most certainly are. But that's been known for months, and Schwarzenegger shouldn't have taken the no-new-taxes pledge if he wasn't prepared to honor it.

Even more curiously, Schwarzenegger's flip-flop on taxes isn't really advancing the cause of responsible budgeting.

His proposed new taxes, as well as other revenue proposals, would be in effect for only a few years, after which the state's structural deficit would return — but by then it would be another governor's problem.

It's becoming evident that Schwarzenegger will say and do anything — as well as sign anything — to slide through the remainder of his governorship, and then dump his mess in someone else's lap.

He's rapidly approaching buffoonery.

A State Without a Budget: Day 58 - SCHWARZENEGGER COULD BE NO SHOW AT GOP CONVENTION

By JULIET WILLIAMS – Associated Press

August 27 - SACRAMENTO, Calif. (AP) — When the Republican convention opens Monday night, its prime-time lineup could be missing one of its biggest draws: California Gov. Arnold Schwarzenegger.

Shackled by the mundane business of state government, Schwarzenegger is vowing to remain in California if lawmakers fail to reach agreement on a state budget, now two months overdue.

"The work for the people of California, and to solve this budget problem, is the most important thing right now for me," Schwarzenegger said Wednesday during a news conference in Los Angeles.

<— Gov. Arnold Schwarzenegger buttons his jacket as he walks to a news conference to unveil his new compromise state budget at a Capitol news conference in Sacramento, Calif., Wednesday, Aug. 20, 2008. Schwarzenegger's plan calls for a temporary 1 percent sales tax increase and additional spending cuts to close the $15.2 billion deficit.(AP Photo/Rich Pedroncelli)

A budget deal by showtime seems unlikely at this point, potentially costing Schwarzenegger a national platform and Republican candidate John McCain a high-profile supporter who has been popular with the kind of independent voter McCain hopes to attract.

Schwarzenegger's absence also would be a letdown for the TV networks, which would lose one of the biggest potential draws on the convention's opening night. Other speakers scheduled for Monday include President Bush, Vice President Dick Cheney and numerous members of Congress.

Schwarzenegger's failure to commit is proving to be a source of frustration for convention organizers, who like to nail down their programs well in advance. Given the star power of the actor turned politician, they'll still squeeze him into a prime slot if they can get him.

The stalled budget already forced Schwarzenegger to curtail nearly all appearances this summer. His efforts to cajole lawmakers into a compromise have repeatedly fallen flat.

California is the only state with a fiscal year beginning July 1 that has not approved a spending plan.

Lawmakers remain at odds over how to close a $15.2 billion budget gap, with Republicans adamantly opposed to any tax increases and Democrats seeking to avoid massive program cuts.

Most Democratic lawmakers already made the decision to stay home and miss their historic convention in Denver this week. The majority party likely won't be motivated to strike a deal with their Republican counterparts in time for them to attend next week's GOP convention.

Organizers of the St. Paul, Minn., convention still hold out hope that Schwarzenegger will show. Because his speech is scheduled for the Labor Day holiday, he could fly in and out on his private jet without missing any state business.

"We recognize his responsibilities in California and we'll certainly work with him regarding scheduling should that issue arise," convention spokeswoman Melissa Subbotin said.

She declined to say whether organizers were considering another option: a Schwarzenegger appearance by satellite from Sacramento, as Republican Gov. Pete Wilson did in 1992 during a similar budget stalemate.

A State Without a Budget: Day 56 ...and counting - Federal Judge Orders State to Explain Delay in Implementing Order to Restore Medi-Cal Rates

 

California Budget Crisis - Day 56: Federal Judge Orders State to Explain Delay in Implementing Order to Restore Medi-Cal Rates - full article in California Progress Report

A State Without a Budget: Day 56½ - CALIF. SPEAKER CHANGES MIND, RESCHEDULES SESSIONS

The Associated Press | san Jose Mercury News

08/25/2008 12:15:42 PM PDT -- SACRAMENTO—Assembly Speaker Karen Bass has abandoned her plan not to hold sessions on Tuesday, Wednesday and Thursday, a move that would have freed fellow Democrats to attend the party's national convention in Denver.

Bass announced last week that the Assembly wouldn't meet those three days, despite the lack of a state budget and an end-of-session agenda loaded with hundreds of bills awaiting votes.

Her spokesman, Steve Maviglio, says now the Assembly will meet every day but Tuesday this week. He says Bass decided to add the Wednesday and Thursday meetings because bills that were bottled up in the state Senate are "trickling out."

Lawmakers are supposed to wrap up their 2009 session by Sunday, but they're likely to be stuck in Sacramento until there's a budget deal.

Calif. speaker changes mind, reschedules sessions - San Jose Mercury News

A State Without a Budget: Day 56 - WHY ARNOLD SCHWARZENEGGER SAID YES TO TAXES

The LA Now Blog in the LA Times -- from Veronique de Turenne

 10:55 AM, August 25, 2008 -- Tick-tock, tick-tock -- 56 days and counting without a state budget. Our own George Skelton sits down with California's governor to talk money, politics and (in the nicest way) says "I told you so" about raising taxes.

Here's a snippet:

I'd asked the governor how he could explain his new advocacy of a sales tax increase to Republican voters who had supported his reelection two years ago after he promised not to raise taxes. Many still believe the state can make ends meet merely by cutting spending.

"You can't cut the whole $15 billion," Schwarzenegger said, referring to the gaping hole in a $102-billion general fund.

"You'd have to severely cut into education, which I don't think is the right thing. You would severely cut into health care, which is not the right thing to do. You would severely have to cut into prisons, and we can't do that."

A good Republican trade-off for a one-cent-on-the-dollar sales tax increase for three years, he asserted, would be a long-term budget fix: A constitutional amendment requiring the state to transfer 3% of its annual revenue to a rainy-day fund until it grew to 12.5% of the general fund. The kitty could be tapped only in a fiscal emergency.

Also, if the state were heading into a hole in midyear, the governor could unilaterally pare spending up to 7% on state operations and deny cost-of-living adjustments.

"Fix the budget system once and for all so this will never, ever happen again," he asserted. "Do a compromise where you make the Democrats do something they never would have done and make we Republicans do something we normally would never do."

He added: "I just think the wisest thing to do is to go to the people and say, 'Look, I know I've said no taxes. But now we are in a situation where we have to do that temporarily . . . I need your help.' "

Meanwhile, back at the Capitol, Republicans are looking for loans while Democrats are still pushing the budget they came up with. Gridlock, anyone? George Skelton's full column follows.

 

Confronted by realities, Schwarzenegger turns to tax hike: With the state budget 56 days overdue, the governor explains his shift on taxes.

 

George Skelton, LA Times

Capitol Journal

August 25, 2008 -- SACRAMENTO -- It can't be done, Gov. Arnold Schwarzenegger was insisting, staring at me over a table in his office. You can't have a responsible, honest state budget without a tax increase.
Not this year.

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The governor wasn't trying to convince me. I've been singing that tune every budget since he took office. This was a new song for him.

I'd asked the governor how he could explain his new advocacy of a sales tax increase to Republican voters who had supported his reelection two years ago after he promised not to raise taxes. Many still believe the state can make ends meet merely by cutting spending.

"You can't cut the whole $15 billion," Schwarzenegger said, referring to the gaping hole in a $102-billion general fund.

"You'd have to severely cut into education, which I don't think is the right thing. You would severely cut into healthcare, which is not the right thing to do. You would severely have to cut into prisons, and we can't do that."

A good Republican trade-off for a one-cent-on-the-dollar sales tax increase for three years, he asserted, would be a long-term budget fix: A constitutional amendment requiring the state to transfer 3% of its annual revenue to a rainy-day fund until it grew to 12.5% of the general fund. The kitty could be tapped only in a fiscal emergency.

Also, if the state were heading into a hole in midyear, the governor could unilaterally pare spending up to 7% on state operations and deny cost-of-living adjustments.

"Fix the budget system once and for all so this will never, ever happen again," he asserted. "Do a compromise where you make the Democrats do something they never would have done and make we Republicans do something we normally would never do."

He added: "I just think the wisest thing to do is to go to the people and say, 'Look, I know I've said no taxes. But now we are in a situation where we have to do that temporarily . . . I need your help.' "

But he's getting few takers in the Legislature.

The budget proposal Schwarzenegger outlined last week also calls for $2 billion in additional program cuts, including $1.1 billion in education. He'd raid $567 million in public transit money. And he'd steal federal cost-of-living adjustments for the aged, blind and disabled. Democrats object to all that.

They're also not wild about his budget reforms. "We don't want to exchange multi-year spending cuts for a one-year budget," says Assembly Budget Committee Chairman John Laird (D-Santa Cruz).

So you'd think this would be a good bargain for Republicans: a temporary tax increase in return for long-term spending restraint. But they don't think the restraint is strong enough -- not strong enough to overcome their hatred and fear of taxes. Practically all have signed pledges not to vote for a tax increase.

"We Republicans have all been united in our belief that the state has a spending and not a revenue problem," declared Senate GOP Leader Dave Cogdill of Modesto, echoing what also used to be Schwarzenegger's mantra. "It is so discouraging to see the governor walk away from these core principles."

That comment fired up Schwarzenegger.

"I have people's principles," he told me. "I want to be a public servant, not a party servant. I mean, I'm a supporter of my party and I'm a Republican. But we're supposed to serve the people, not the party."

He's frustrated at the Republicans' unwillingness to bend and deal.

"Look," he said, "I hate tax increases. But I'm willing to go beyond my beliefs and ideology to make a compromise. It's the only way we can solve this budget problem."

Last week, GOP leaders were trying to devise a no-tax budget that relied on widespread borrowing -- dipping into state money jars, including local government and public transportation accounts. The money would have to be repaid at steep interest rates. Assembly Speaker Karen Bass (D-Los Angeles) even seemed willing because more borrowing would mean less cutting.

But borrowing is partly what got Sacramento in trouble. One of Schwarzenegger's first acts as governor, in 2004, was to lead the charge for voter approval of $15 billion in bonds to cover everyday state expenses. He and the Legislature also dipped into various state kitties that they're still replenishing.

Enough's enough, Schwarzenegger now says.

"When I stepped into this mess we had to borrow," he contended. "But that hasn't even been paid off. You can't have a loan out that you haven't paid off -- can't even find a way to pay it off -- and you say, 'Let's borrow more.' That is terrible business. That's what gets people into trouble with their credit cards. All of a sudden they're in bankruptcy.

"Just bite the bullet and get the revenue from the temporary sales tax increase."

In fact, Schwarzenegger vowed to veto any bill that relied heavily on borrowing -- any gimmicky "get-out-of-town" budget. He'd call the Legislature back into special session to do it again.

"I don't want to go and sign a budget that borrows any more money," he said. "I am very adamant about not creating more debt."

Sunday was supposed to have been the drop-dead day for passing a reform measure in time for the November ballot. Schwarzenegger said he might call a special election next year.

"No one here should think that because they go past the deadline that now they've pulled a nice trick," he cautioned. "There will be no budget signed without a good budget reform."

The governor chided Republicans for not producing their own budget. He has. Democrats have.

"Republicans talk about the borrowing scenario and about the cuts," he said. "I'd like to see their budget. Why haven't we seen any numbers? Wouldn't it be wonderful? 'Here are the cuts in education and in healthcare and in prisons and law enforcement.' "

Schwarzenegger expects the fight to drag out a lot longer, even if the budget already is 56 days late. The fiscal year began July 1.

"Lock the building and don't let anyone leave until there's a budget," he declared.

The governor has an anti-borrowing ally in Senate leader Don Perata (D-Oakland). Perata has vowed to spend Thanksgiving in the Capitol negotiating before he'll surrender to more borrowing.

"Oh, we definitely will be here on Thanksgiving," Schwarzenegger said. "That's for sure."

Surely he jests. Surely legislators will see the governor's offer as a realistic basis for compromise.

A State Without a Budget: Day 55 - FIRST 5 PROGRAM THREATENED

Editorial from La Opinión | Translation by La Opinión

Sunday 25 August  7;30 PM -- The Sacramento budget stalemate continues given the Republican refusal to consider a tax increase, whether proposed by the Democrats or the governor himself, as part of the package to address the state’s more than $15-billion deficit.

The Republican minority’s proposal is to cut spending, put the state in debt, and use funds already allocated by voters in ballot initiatives to specific areas—including preschool education—for other purposes. This is the case with the First 5 program.

Research shows that the first years of a child’s life are critical for our future development. First 5 aims to serve the needs of low-income, predominantly Latino children, in terms of health and education. The funds allocated by Proposition 10 to support First 5 are derived from a cigarette tax.

Now, using the deficit as an excuse, this initiative is targeted for elimination by a Republican bill, which would divert part of the First 5 funds to Healthy Families. Another Republican proposal wants to use undisbursed funds from the ballot initiative to cover general spending.

A conservative block in the State Capitol has always rejected the important work of First 5, charging that it aids undocumented children. Now this contention is masked behind the exigencies of the budget’s red ink.

The refusal to increase state revenues has a purpose beyond its purported principles: to serve as a vehicle to force unpopular, detrimental policies on California, such as eliminating a program like First 5, which is building our state’s future. We believe First 5 should continue to be supported.

 

A State Without a Budget: Day 55 - BACK TO SCHOOL: AILING ECONOMY STRAINS STUDENTS, PARENTS

By Kimberly S. Wetzel - Contra Costa Times/San Jose Mercury News

August 25 -- Children across the country will return to school this year to face a money-hungry bully: the unstable economy.

Soaring food prices will extract more lunch money from students, while higher pump prices mean children will either pay more to ride a gas-guzzling bus or won't get a seat at all. Field trips are being reduced or scrapped altogether to save fuel.

It doesn't stop there.

California budget cuts mean students will compete for the attention of fewer teachers. Some electives will be nixed, and booster clubs and education foundations, which raise money for such things as classroom projects, are collecting less as businesses cut back and parents fret over job security.

"I think everybody, if they're not struggling themselves, they're aware that the overall economy is declining and there's just a sense of caution," said Teresa Barnett, an Albany parent and board member of the Albany education foundation SchoolCARE. "Just the basics, the fuel and food prices are enough to be crimping people's budgets."

Gas prices shot up an estimated 35 percent to 40 percent nationwide in the past year, while food costs jumped between 12 percent and 20 percent.

Those grumbling yellow buses — which have 25- to 100-gallon tanks and chug along at seven to eight miles per gallon — can cost as much as $400 to $500 to fill. That has forced schools across the country to make cost-saving shortcuts on service or to charge fees.

Districts in Utah, Rhode Island, Connecticut, Washington, Minnesota, Colorado, Massachusetts and elsewhere have resorted to four-day school weeks or reduced or eliminated bus routes altogether.

The service changes come at a time when many schools are seeing more students at the bus stop because parents no longer can afford the gas used to drive their children to school.

Bay Area school leaders have taken measures of their own. The Fremont school district this week will consider doubling its annual student bus fee to $700; the John Swett district increased bus fees to $300 this year. Contra Costa's Knightsen school district, which used to let students ride for free, now charges $200 annually.

Hayward students may see more localized field trips and fewer buses as the district consolidates routes, said Debi Parker, Hayward Unified's transportation manager.

"We're trying to tighten it up as much as we possibly can," Parker said, noting that the district pays $4.27 for diesel fuel and the cost fluctuates weekly.

Some administrators likened the situation to the oil crisis of three decades ago.

"In the '70s we couldn't get fuel," said Bill Stephens, Fremont's associate superintendent of business services. "Today we can get the fuel, but it's exploding in cost for us."

Pump prices also are driving up food costs, as drivers add fuel surcharges to customer costs. Districts are paying more than ever to stock cafeterias with staples such as milk and they're passing the cost on to students.

A recent survey by the national School Nutrition Association said that 75 percent of responding school districts had either raised school lunch prices or plan to this year.

"We've been dealing with this for quite a few months now," said Stephanie Bruce, School Nutrition Association president and director of food and nutrition services at the Ontario-Montclair school district in Southern California.

"Everything is being passed on, even with the cost of fuel going up, it doesn't just effect food and gas prices, it effects all of our petroleum products, like lunch trays."

The Albany school district increased prices by 50 cents last week; the Antioch, Oakland, John Swett, Dublin and New Haven districts recently raised prices, as well. Students who receive free and reduced-cost lunches will not be charged more.

"It's affecting everyone," said Peggy Stevenson, director of food services for Antioch Unified. "It's affecting restaurants; it's affecting people buying groceries at the store."

California children who escape lunch and bus increases will be bullied by the economy in other ways.

The state's budget deficit necessitated that districts throughout the state cut millions from budgets in the spring, meaning fewer teachers, supplies and class offerings. Children in the Mt. Diablo school district will have fewer electives and larger kindergarten classrooms. West Contra Costa students must make due without some of their favorite secretaries, teachers and other staff members.

Outside the classroom, parents hampered by high costs will have to make difficult decisions during back-to-school shopping trips.

Parents have become used to paying more for things that schools increasingly can't provide, such as sports uniforms, class projects and proms. That's why Hayward High senior Verena Kwan said she was not too concerned about the economy's grip on schools.

"Senior year you kind of expect to fork over a lot of money," she said. "

But Richmond parent Maria Lopez was worried. She watched her grocery and gas bills swell over the past several months, and because of that she had little money to spend on school clothes this year.

"It's difficult right now, definitely," Lopez said. "I worry about how I'm going to get them to school; I worry about how I'm going to pay for supplies. I'm just holding on right now, but I'm afraid it's going to get a lot worse."

Staff writers Linh Tat, Kristofer Noceda, Paula King, Eric Louie, Rowena Coetsee and Shelly Meron contributed to this article.

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Back to school: Ailing economy strains students, parents - San Jose Mercury News

A State Without a Budget: Day 54½ - AMERICAN EXPRESS COULD SUSPEND AmEx CARD SERVICE TO STATE EMPLOYEES IF BUDGET DELAY DRAGS IN

This story is taken from Sacbee / Politics.

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By Andrew McIntosh - Sacramento Bee

12:39 pm PDT Friday, August 22, 2008 - With California's budget impasse approaching its 54th day, financial services giant American Express Co. has warned the state that its workers may have to leave home without their state AmEx travel card if the dispute drags on too long.

"American Express will not suspend state billing accounts at the normal past due interval; however, we reserve the right to suspend service should the impasse become protracted," Doug Browne, an American Express government services manager, told government travel coordinators in a June 12 memo.

Brown declined to discuss his memo, which was obtained by The Bee.

AmEx spokeswoman Janet Lee said the financial services giant does not publicly discuss its corporate accounts.

California is currently not refunding its workers for any travel expenses they incur using their state credit cards, from air fare to car rentals to hotel rooms and conference room rental fees.

Eric Lamoureux, spokesman for the Department of General Services, said AmEx is carrying $10.4 million in unpaid charges on its books that were incurred by state workers and agencies since the new fiscal year began July 1.

Managers and employees have been urged to avoid business-related travel until a budget is passed, Lamoureux said.

"Some staff are choosing to absorb the costs and seek reimbursement later," he said.

Browne also wrote that AmEx would suspend and deactivate accounts and cards that included spending before the state's last fiscal year ended June 30, but which was not paid for in full before its June 25 billing cycle ended.

State workers typically charge government trips or travel expenses directly to their government AmEx cards and later request refunds from their department or agency. No refunds are available now for expenses incurred after the fiscal year began.

In his memo to state travel coordinators, Browne wrote that the conglomerate has some patience for the state's yearly budget feuds because of its long relationship with the state "and history of prompt payment following previous budget delays."

Yet his note suggests that AmEx feels there are limits.

"A budget impasse imposes American Express with a financial liability," Browne wrote, noting that his company has traditionally not charged interest or penalties on overdue state government accounts.

"During our long term partnership we have found ourselves supporting transactions that cannot be paid by the state and supporting state travelers who cannot be reimbursed for travel expenses," Browne added.

Lamoureux of DGS dismissed any suggestion that AmEx is impatient.

"AmEx is demonstrating to us that they want to work with us by agreeing to carry balances without penalty until a budget is signed," he said. "What they aren't willing to do is carry balances that are holdovers from the last fiscal year that should have been taken care of by employees already."

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