CALIFORNIA GOVERNOR SIGNALS KEY BUDGET CONCESSION ON EDUCATION CUTS: Schwarzenegger sees possible compromise + GOVERNOR BACKS OFF PLAN TO SUSPEND PROP 98

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Gov. Arnold Schwarzenegger said Friday he is willing to reconsider his most recent proposal to help close the state's $26.3 billion budget shortfall by suspending state constitutional rules that control education spending in order to make deep cuts in school funding.  View Larger Image

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Sat Jul 4, 2009 3:56pm EDT

By Jim Christie - Reuters

SAN FRANCISCO, July 4 (Reuters) - Governor Arnold Schwarzenegger, optimistic California can finish its budget negotiations in a few days, is willing to reconsider his proposed cuts to education in hopes of averting a cash crisis, the San Francisco Chronicle said on Saturday. (ARTICLE FOLLOWS)

A compromise between the Republican governor and Democratic lawmakers may help clear the way for an agreement on an overdue state budget and avert a cash crisis for the government of the most populous U.S. state. California already is issuing billions of dollars in "IOUs" and, without a deal, is on track to run out of cash this month.

The San Francisco Chronicle reported that Schwarzenegger, in a Friday meeting with its editorial board, said he would be willing to reconsider his proposal to help reduce California's $26.3 billion budget deficit with cuts to school spending that would require suspension of constitutional rules on education expenditures.

"We are not stuck ... about the suspension," Schwarzenegger said during the meeting. "We've got to analyze all this."

He said budget negotiations are moving fast. "I think if we continue this way we can get this done in the next few days," he said.

Backing off on education spending cuts would go a long way with Democrats who control the state legislature.

On Thursday Democrats said they would no longer hold out for increasing taxes to help raise revenues to fill the budget gap. That was a major concession to Schwarzenegger and Republican lawmakers, who had opposed tax hikes and pressed for balancing the state's books with deep spending cuts.

That helped Republicans gain confidence that a budget deal could be reached soon.

"I think there is at least a 50-50 chance that we'll find a solution that is acceptable to all parties within a week," Assembly Republican Leader Sam Blakeslee said.

Democrats see backing off on education spending cuts as an important concession by Schwarzenegger.

"While taxes may be off the table, education cuts also have to be off the table," Democratic state Senator Leland Yee told Reuters.

GRIM REVENUE OUTLOOK

Lawmakers failed to agree on balancing the state's budget on Tuesday and the state government began its fiscal year on Wednesday without a spending plan in place.

In response, state finance officials began issuing "IOUs" in lieu of payments for tax refunds owed to taxpayers to preserve cash from higher prior payments, including payments to investors holding the state's debt. They warned that local agencies overseeing health programs and a variety of recipients of state financial aid, including the disabled and college students, could be in line for IOUs.

The state controller plans to issue more than $3 billion this month in registered warrants promising payments if Schwarzenegger and lawmakers fail to agree on a budget.

California is experiencing a severe revenue downturn as a result of the recession, rising unemployment and the lengthy housing downturn that will leave the state's government with an austere budget. It likely will force additional spending cuts throughout the fiscal year.

"The reality is that the revenues are not looking good," Yee said. "We just simply don't have the money to keep up the pace of services we're providing."

California finance officials hope a budget deal is reached soon so they can stop their IOU effort, which aims to reassure the municipal debt market that the state will honor its bond payments ahead of nearly all other obligations.

Finance officials also want to reassure the market in anticipation of having to sell short-term debt for cash-flow purposes once a budget deal is reached.

California's budget turmoil has made Wall Street nervous. Standard & Poor's warned in a statement on Wednesday that if California's budget is not settled soon, the state's A-credit rating, already the lowest of any of the 50 states, is at risk of falling.

 

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GOVERNOR BACKS OFF PLAN TO SUSPEND PROP 98

Matthew Yi, sAN Francisco Chronicle Staff Writer

Saturday, July 4, 2009 -- Gov. Arnold Schwarzenegger said Friday he is willing to reconsider his most recent proposal to help close the state's $26.3 billion budget shortfall by suspending state constitutional rules that control education spending in order to make deep cuts in school funding. That concession may help him avoid a political battle with the influential California Teachers Association. Although the powerful union has been largely quiet during budget talks, it could sway lawmakers who are desperately needed to pass a budget. A source told The Chronicle on Friday that the union is preparing a statewide television advertising campaign to fight any attempt to ignore the education spending rules that voters passed in 1988 as Proposition 98.

On Wednesday, Schwarzenegger had proposed suspending Prop. 98, which among other things requires that school funding be based in part on what was spent the previous fiscal year. The requirement can make it difficult, if not nearly impossible, to make large cuts in education - an expense that makes up about half of the state's discretionary spending.

Such cuts became even more inevitable when the state's gaping deficit grew overnight by $2 billion because the Legislature failed to approve a budget fix by midnight Tuesday, the end of the 2008-09 fiscal year.

Still, the governor, who has proposed cutting this year's education spending by $3 billion, said he was willing to consider other solutions.

"We are not stuck ... about the suspension" of Prop. 98, he said in a meeting Friday with The Chronicle's editorial board. "We've got to analyze all this. ... We have to figure out how to deal with it."

Democratic lawmakers said they are encouraged by Schwarzenegger's willingness to reconsider the Prop. 98 issue. Yet Senate President Pro Tem Darrell Steinberg quickly pointed out that the issue would have never surfaced had the governor on Tuesday supported three budget bills that would have saved $3 billion.

"This problem was completely avoidable. The administration is stuck because of its own ... strategy," said Steinberg, D-Sacramento.

The governor has refused to support partial budget fixes. But the budget impasse has caused a cash crunch that on Thursday forced the state controller to begin issuing IOUs to some taxpayers, businesses and creditors.

That impasse would become even more complicated by an enraged California Teachers Association and other education groups.

"They had not declared war on this governor who had made billions of dollars in cuts to education in his budget proposals ... and to have additional rounds of cuts proposed by him on top of the huge reductions they've already made have gotten them very, very upset," said Kevin Gordon, an education lobbyist.

Gordon noted that the California Teachers Association, which led the effort to torpedo Schwarzenegger's ballot measures to reform government in 2005, had supported the governor's budget-related ballot measures that failed in the May 19 special election. That could spell trouble for the governor, who is one of the biggest proponents of next year's ballot measure that would create an open primary system.

Telephone calls to CTA representatives were not returned Friday.

Nevertheless, despite this new wrinkle in the budget negotiations, Schwarzenegger said talks with Democratic legislative leaders have been progressing and he's hopeful that a resolution is near.

The governor said there has been a greater sense of urgency since Tuesday. Since then, the bulk of the budget negotiations have centered on how much to cut spending in health and human services.

"There's more willingness to look at our proposals more seriously - to look at reforms more seriously ... and to look at cuts more seriously," said Schwarzenegger, who has backed away from outright elimination of popular state programs such as health care for poor children, a welfare-to-work program for single mothers, and in-home support services for the elderly and the disabled.

The governor said "there's movement" in budget negotiations. "I think if we continue this way we can get this done in the next few days."

THE MAY 19 BALLOT MEASURES

The State Legislative Analyst’s Office has prepared a summary and analysis for each of the six measures.

The Secretary of State has now posted the ballot summaries, arguments for and against, and other information.

LAUSD BUDGET UPDATE AS OF 2/18/09

Subject to change based on updates from the State

from the office of superintendent Ramón C. Cortines

OVERVIEW

1. Based on current projections from the State, our projected district shortfall is between $600 and $700 million and the prospects do not look any brighter for future years. We also do not know if we will have class size or categorical flexibility, so we must prepare for the worst case scenario.

2. My philosophy for moving forward will be the same as the 2000 Plan adopted by the Board

a) Central offices are to be right-sized and to focus on core operations, monitoring and oversight

b) The local districts are to provide support and service to schools

c) The schools are the heart of our District and are where teaching and learning takes place

3. Federal Stimulus money will provide some temporary relief, since the money is for one time expenses (spread over two years). Flexibility and use of this money still has not been determined.

a) Although the stimulus money has yet to be finalized, I will recommend that the majority of any unrestricted resources to be set aside to protect the schools.

CENTRAL – RIGHT-SIZED

We will be streamlining the central office to ensure the majority of our resources are at the school site.

1. I have recommended a 30% reduction in most central offices. We are in the process of reviewing the budgets and discussing how to implement our decentralized governance model.

2. Further, I am considering a recommendation to reduce the work year for most non-school based employees. Besides providing substantial savings, it will emphasize that our highest priority is support of the local school.

3. We are also reviewing outside contractors with the goal of substantially reducing costs and administered accounts.

LOCAL DISTRICT OFFICES SUPPORT AND SERVICE TO SCHOOLS

Via the decentralization of the central office, the local district offices will be responsible for working with their schools to ensure each school receives the service and support they need.

1. However, I am recommending that local district offices be cut up to 50%. I will expect my leaders in the local districts to work smarter to target services to the schools that need the most support.

2. While we have benefited from many ancillary programs that support our student population, we must now cut some of these programs to focus our limited resources on our core instructional program.

LOCAL SCHOOLS – WHERE TEACHING AND LEARNING TAKES PLACE

My approach is to build a school district from the classroom out, so that we can minimize the impact on teachers. The percentage of cuts will be the lowest at the school level, but given the cumulative size of our school budgets, the dollar amount will be large.

1. Since we don't have all of the necessary budget information from the State, we must be conservative by noticing a potentially larger number of certificated employees on March 15^th

a. All certificated administrators will be notified

b. Since central and local district certificated employees have rights to the classroom, we will need to notify some permanent teachers.

c. To ease the impact on our novice teachers, we have implemented an aggressive early retirement incentive program (ERIP)

NEXT STEPS

February 26^th: 2009-10 Budget Development process with recommendation for March 15^th letters

March –June: Hold public reviews of the budget to ensure we all agree on our priorities

Council of Great City Schools – Update on Stimulus Package 2/17/09

Disclaimer – details have not been finalized on how and when the funds will be allocated to LAUSD, especially the State Fiscal Stabilization funds

Overview of Federal Stimulus Package - Jeff Simmering

Five major types of aid to be expended over a 2 yr period (potential for flexibility to spread over 3 yrs)

1. Non Categorical Aid – State Fiscal Stabilization: $40B for education (broadly defined)
   1. Proportionally allocated based on split b/w K-12 and higher education state reductions
   2. Distribution of funds will vary state by state, but can be used to backfill state cuts
   3. Distributed on per capita basis
   4. Use of funds are based on ESEA, IDEA, Perkins, School modernization or repair
2. Categorical IDEA: $12.2 B ($11.3B traditional part B, $400M early Childhood, $500M infant and toddler)
   1. 50% of funds can be used to offset Spec Ed use of General Funds
3. Categorical Title I: $13B ($10B Regular, $3B School Improvement)
   1. Allocated by targeted and equity formulas
   2. 95% will be passed through to LEAs
   3. 1% used for State Administration
   4. 4% school improvement activities
4. Secretary Bonus or Incentive: states that have made good progress will be awarded $5B ($2.5 allocated on basis of Title I)
   1. Progress defined as states that are increasing equitable distribution of teachers, improved data systems, and improved assessments
5. School Construction Bonds - $22B tax subsidizes or bonding authority
   1. After you sell your bonds the interest that you pay will be given a tax credit
   2. Can be used as new construction and land acquisition

Council of Great City Schools estimate of stimulus for LAUSD (over two years)

- Title I: $398M

- IDEA: $168M

- Ed-Tech: $9.7M

- State Stabilization has not been determined

Key Takeaways for LAUSD

1. We will need to be flexible in our projections until we receive the final allocations from the State

2. We need to be conservative with our projected use of our funds, because we do not know the magnitude of the cuts that from the State

3. Stimulus funds are one time funds, so we can not rely on using them to cover ongoing expenses

4. Depending on the cuts from the State, we will use the majority of the funds to help schools offset some of their reductions

Day 106 | 6:17 AM: SENATE APPROVES BUDGET PLAN!

Senate approves budget plan

The state Senate voted early Thursday to approve a massive budget package of tax increases, spending cuts and borrowing to close a $40 billion deficit after granting major concessions to one holdout Republican senator.
Read More

 

• Maldonado's price for budget vote: 3 constitutional amendments

STATE HELD HOSTAGE

Sacramento Bee cartoonist Rex Babin

AM Alert - REPUBLICAN SENATORS FIRE THEIR LEADER: Hollingsworth in, Cogdill out

The Sacramento Bee CapitolAlert

Senate Republicans have a new leader today after the caucus ousted Sen. Dave Cogdill and replaced him with Sen. Dennis Hollingsworth shortly after midnight.

Despite speculation that Senate Republicans may ask to reopen budget talks, Senate President Pro Tem Darrell Steinberg insisted the change has absolutely no effect on his strategy to break the budget deadlock this week.

"We're going to maintain our focus towards solving the problem of getting one vote regardless of who the leader is," Steinberg said after his house took a recess around 1 a.m. "Leadership doesn't change the fact that there is no other idea put forward that would take $41 billion out of a budget deficit. And so, for me, it doesn't change anything."

After the Senate failed to approve the contentious tax hike bill, Steinberg made good on his threat to keep his members locked in for the night. He said he plans to resume talks later Wednesday with Sen. Dave Cox, R-Fair Oaks, and Sen. Abel Maldonado, R-Santa Maria, to see if either one will back the budget package.

"I would describe it as a bit of a discouraging day," Steinberg said of Tuesday. "Despite a lot of effort, and a lot of work today by our office, the governor's office, they're not there. But they have to be there eventually."

Schwarzenegger flew home to Brentwood around 9 p.m., a sign that the budget deal remained elusive Tuesday. His spokesman, Aaron McLear, said the governor plans to continue speaking to Cox and Maldonado on Wednesday.

Hollingsworth, an ardent tax opponent, made it clear that he continues to oppose the budget. When asked whether he wants to reopen the "Big 5" negotiations, he said he'd take a wait-and-see approach.

"I think the majority of my caucus doesn't want to see a tax increase passed in this particular package," Hollingsworth said. "But we'll see what happens in the next few minutes, the next few hours, the next few days."

THREE TOUGH STEPS TO FISCAL SANITY IN CALIFORNIA

George Skelton, Capitol Journal | LA Times

February 9, 2009  -- From Sacramento -- California state government is collapsing. It has been for years, actually. Something needs to change drastically.

As President Obama remarked last week at a congressional Democratic retreat: "If you're headed for a cliff, you've got to change directions."

Sacramento is sliding fast toward the cliff's edge.

The state can't pay all its bills. Can't sell bonds to finance public works. Can't even afford, Gov. Arnold Schwarzenegger says, to keep most of its doors open two Fridays a month.

The chief culprit: The Legislature's inability to pass a state budget on time. Frustrated local governments and schools can't plan. Private vendors selling to the state get stiffed. Worst of all, the Capitol politicians ultimately panic, punt the state's fiscal mess into the future and pass a fraudulent budget.

Rather than cutting spending and raising taxes slightly to escape a looming deficit, the lawmakers have passed gimmicky budgets with cooked numbers that soon dig the state into an even deeper hole. And that's where we are today: in a $42-billion pit. Even with a recession, that's ridiculous.

I've harped on this for years, thinking that surely one day California would wake up.

The Legislature can't produce an on-time budget -- honest or phony -- because of the archaic requirement for a two-thirds majority vote of each house. Only two other states, Arkansas and Rhode Island, have such a monstrous hurdle. And, unlike California's, their legislatures are lopsidedly dominated by one party.

The California Legislature requires some minority party votes for a budget -- currently three Republicans in each house. And virtually all Republicans regard a vote to raise taxes as ideological blasphemy. More important, they consider it potential political suicide, fearing they'll be challenged from the right in a primary election.

So give the Republicans a break. Relieve them of any responsibility to vote for budgets and taxes that rip their souls and imperil their careers.

Here's my solution to the budget procrastination:

* Lower the vote requirement for a budget to 55%. That's still a supermajority, but one that's practical given California's increasing diversity of people and interests represented in Sacramento. A budget then would need 44 votes in the Assembly and 22 in the Senate, rather than 54 and 27. Democrats normally could handle that by themselves.

* Also drop the two-thirds vote requirement for taxes to 55%, with one caveat: All the new revenue must be used to help balance a status-quo budget -- not a penny for spending increases above inflation and population growth.

* If they still don't pass a budget by the July 1 start of the new fiscal year, the lollygagging lawmakers forfeit their pay and per diem for every day the spending plan is late. For most, that would be a hard hit. Legislators make $116,208 a year; house leaders get $133,639. Per diem is $173 tax-free each day -- even weekends -- while the Legislature is in session.

Sever the governor's pay, too, although Schwarzenegger is so wealthy he doesn't take his $212,179 salary. He does, however, mooch off special interests for Sacramento lodging, as have previous governors. That's because California doesn't provide an official governor's residence. Pretty tacky.

The concept of prodding lawmakers in the wallet is endorsed by Schwarzenegger. "If the people's work doesn't get done, I think the people's representatives shouldn't get paid," the governor said in his State of the State speech.

That should ensure an on-time budget.

I'm not totally convinced it would be good public policy. It would be unfair to legislators who vote for budgets and aren't rich. Moreover, we shouldn't be blackmailing lawmakers to pass bad budgets just to keep their pay.

But it's time to be drastic. And I am convinced it would be good politics. It could be just the inducement the electorate needs to approve a ballot measure finally eliminating the unworkable two-thirds vote.

A similar ballot measure, without the tax limit caveat, was killed in 2004 by a nearly 2-to-1 vote. But since then, the voters have become more acutely aware of Sacramento's ineptness. They may be ready to rethink the notion.

As reader Andrea e-mailed me last week: "Soon people will take to the streets with pitchforks and torches if these clowns don't get to work."

A recent statewide poll by the Public Policy Institute of California found, for the first time, that a majority of likely voters -- 53% to 41% -- think it's a good idea to lower the budget vote threshold to 55%. The poll also found that only 9% approve of how the Legislature is handling the budget-tax issue; 84% disapprove.

Some GOP leaders have said privately that they could support a majority-vote budget rule if the two-thirds requirement remained for taxes. Then Democrats alone would be accountable for spending priorities, giving the GOP a potential election issue.

Yes, it's time to let the majority party rule and to end gridlock.

Sen. Mimi Walters (R-Laguna Niguel) has proposed a constitutional amendment that would revive a pre-1962 law: A budget could be passed on a majority vote if it didn't increase spending by more than 5%. That would amount to a spending cap.

Sen. Abel Maldonado (R-Santa Maria) has introduced a measure that decrees: "No budget, no pay, no per diem." He knows it will never pass the Legislature.

"It's the only bill where I get bipartisan opposition," he says. "If you want the Legislature to work together, you put in a bill that cuts their pay."

Cut off their allowances if they don't do their chore? Yeah, that is treating them like children. But like many parents with undisciplined kids, we're at the end of our rope.

First, however, we should make the chore doable.

CALIFORNIA’S @ ROCK BOTTOM: If California wants its share of federal largesse, Sacramento had better get its act together, fast.

Editorial From the Los Angeles Times

February 6, 2009 -- California is now the Wile E. Coyote of states. Our governor and lawmakers have dickered and dawdled all of us off a cliff, but we're trying desperately to resist the realization that there is no ground beneath us. Our legs  are pumping and our eyes are on Obama administration stimulus packages and bailout money on the far, sunny slope, and we might just reach them if we don't acknowledge that the bridge is out, or that we've run off the road, or that our Acme wings have failed. Once we notice that we're hanging in midair, we'll fall.

Too bad for us, but Standard & Poor's has already noticed. It said this week that California is a monumentally bad bet for investors, presumably because the state lacks both the will to adopt a budget and the ability to raise enough tax money to guarantee it will pay back all those bonds voters keep approving; S&P now ranks California 50th among states in credit ratings.

If ratings agencies recommend California as the last choice for bond buyers, how attractive could the state look to Washington? President Obama and Congress want federal dollars to go to work immediately, so they hardly could be blamed for guiding those dollars to states with governments that pay contractors with Federal Reserve notes rather than IOUs, with budgets that balance, with governors who lead and legislatures that function. Take a look -- that's not us.

Gov. Arnold Schwarzenegger has identified "shovel ready" projects lined up for federal cash. But they will fall behind similar projects ready to go in states where governors and lawmakers are not arguing about permits and approvals, and where state treasuries are solvent so state dollars can go to work. The State Children's Health Insurance Program, reauthorized and expanded and signed by Obama on Wednesday, means $1.5 billion in funding for California's much-needed Healthy Families program only if the state is functioning sufficiently to run it. Federal aid for Medi-Cal will be wasted if California fails to produce its state match.

So it's hard not to pretend that Obama will ride to the rescue because of all the campaign fundraising and phone calling by true-blue California Democrats.

A budget vote is set for next week, and with any luck, California will once again join the ranks of functioning states, but powerful people here keep tripping over their own cleverness. Two cases in point: the recent warning by a union official that he will target Democrats for recall if they cut the wrong things from the budget, and the pronouncement by state GOP official and blogger Jon Fleischman that Republicans who vote to increase taxes will be censured. With folks like these pulling the levers of power, the best way out of the recession may be to invest heavily in Acme.

FRIDAY BUDGET UPDATE: The state of emergency in the State of Emergency

From Wikipedia, the free encyclopedia: A state of emergency is a governmental declaration that may suspend certain normal functions of government, alert citizens to alter their normal behaviors, or order government agencies to implement emergency preparedness plans. It can also be used as a rationale for suspending civil liberties. Such declarations usually come during a time of natural disaster, during periods of civil disorder, or following a declaration of war (in democratic countries, many call this martial law, most with non-critical intent). Justitium is its equivalent in Roman law.

from SacBee Capitol Update

Feb 6 -- The news Thursday was that Senate leader Darrell Steinberg said a vote was upcoming next week. No deal yet, as the negotiations continue behind closed doors.

That secretive process is being pretty well criticized here, here, here, here and here.

Asked if there would be any time for public input before any sort of deal is rammed through the Legislature, Steinberg expounded:

"Certainly, the public has the absolute right to review what we do eventually put forward. And our members certainly do as well. We're going to afford the public, our members that full opportunity," he said. "On the other hand, this is an emergency. We're going to balance those two concerns."

THE CONE OF SILENCE

 “The one safe bet seems to be that there will be no public hearings and no opportunity for public input on major decisions that will shape California for years, if not decades, to come.”

Jean Ross | California Budget Project

Wed, 4 Feb 2009 22:34:00  - Some of you may wonder why, and even be frustrated by the fact that, we haven’t been blogging about the status of budget negotiations. That’s because a virtually impenetrable cone of silence has descended upon the Capitol. Secrecy in budget negotiations is nothing new. However, the level of secrecy around budget negotiations that reached a new high last summer has been far surpassed by the lack of information in the current negotiations. While rumors fly daily - often several times a day - as to when a vote on a budget deal may occur, these rumors are neither confirmed nor denied by those truly in the know.

The one safe bet seems to be that there will be no public hearings and no opportunity for public input on major decisions that will shape California for years, if not decades, to come. The taxes and spending cuts that are likely to be included will no doubt be drawn from some combination of the Governor’s proposals and plans supported by Legislative Democrats in late 2008. However, there are increasing signs that additional measures, such as a “hard” spending cap and sizeable tax cuts for the state’s largest corporations, may also be part of the package. The cone of silence has been particularly airtight with respect to “add ons” such as these. No details have been made available to rank and file lawmakers or the public that would enable a critical assessment of the impact they might have on current and future budgets.

 

more from CBP:

• Another Urban Legend

  Posted: Fri, 06 Feb 2009 01:26:40 +0000

  A recent comment on our blog post reminded us of a persistent, but factually incorrect, rumor frequently heard in state policy circles - that rich people are leaving California in droves for states with lower personal income tax rates. Curious to find out whether this was actually true, CBP staff dove into data provided by [...]

 

• The Personal Income Tax Is Not the Problem

  Posted: Wed, 04 Feb 2009 01:16:37 +0000

  One of the frequently cited causes of California’s budget crisis is “revenue volatility” - the fluctuations in state income tax revenues that occur when income tax collections, primarily taxes collected on capital gains, rise and fall during boom and bust periods. In fact, a key goal of the Governor’s Commission on the 21st Century Economy [...]

• Congress Poised To Approve Children’s Health Coverage Bill

  Posted: Sat, 31 Jan 2009 00:13:03 +0000

  After more than one year of waiting - and two vetoes by former President Bush - Congress is poised to approve a bill that will help California significantly increase the number of children with health coverage. The House and Senate have approved bills to renew, or “reauthorize,” the State Children’s Health Insurance Program (SCHIP) with [...]

• A Proposed Hard Cap on Spending Is Misguided

  Posted: Wed, 28 Jan 2009 22:04:48 +0000

  We’ve been swamped lately at the CBP with budget-related work. That’s why we’re just now getting around to posting this op-ed written by CBP Executive Director Jean Ross that appeared in the Los Angeles Times yesterday. In the op-ed, Jean examines a Republican proposal to place a hard spending cap on the ballot in exchange [...]

• Sowing the Seeds of Future Budget Problems

  Posted: Tue, 27 Jan 2009 00:27:59 +0000

  Press reports and the rumor mill suggest that lawmakers may be close to reaching agreement on a deal that attempts to address most, if not all, of the state’s $40 billion budget gap. A reasonable voter might wonder why, in the face of an impending cash flow crisis, reaching an agreement is so difficult. One [...]

• California Stands To Receive Nearly $20 Billion Under House Economic Recovery Plan

  Posted: Fri, 23 Jan 2009 01:43:06 +0000

  Our colleagues at the Center on Budget and Policy Priorities (CBPP) have released preliminary analyses of the state-by-state impact of the House Economic Recovery Plan. The CBPP estimates that California would receive $11.1 billion from provisions that would increase the federal government’s share of Medicaid spending (Medi-Cal in California) in the current and next two [...]

• Limiting California’s Future - An Elaboration

  Posted: Thu, 22 Jan 2009 19:30:07 +0000

  We received a number of good questions on yesterday’s post. Explaining the impact of a hard budget cap is a tough thing to do in a blog post! The $31.2 billion figure is the difference between budgeted 2008-09 General Fund spending and the level of spending that would be allowed under a cap similar to that [...]

• Limiting California’s Future

  Posted: Thu, 22 Jan 2009 00:25:49 +0000

  Republican lawmakers have called for the Legislature to place a “hard spending cap” on the ballot in return for Republican support of a tax increase to help close the state’s budget gap. First, it is important to note that California already has a hard cap in the state’s constitution. In fact, we’ve had one since [...]

PTA LEGISLATIVE ALERT & PRESS RELEASE

Legislative Alert
January 15, 2009

 

 

California State Budget:

Our responsibility to children cannot be cut in bad economic times

Action Needed – you need not be a PTA member to act for children:

Please call or email your state assembly member, state senator and the governor right away and deliver the following messages:

• We must find a balanced approach to the budget crisis that includes sufficient new revenues to protect children and the future of California.
• Support continued funding for programs and services that help ensure that all children can succeed, such as smaller class sizes, arts and physical education, science, counselors, nurses, librarians, and health and social services for children.
• We cannot build a world class public education system by going backwards in funding for education and other children's services.

To find your legislators' contact information, click here. To contact the governor, click here.

Background

With a worsening economy, state legislators and the Governor are faced with difficult decisions to adopt a balanced state budget. The Governor's 2009-2010 budget proposal includes deep cuts to education, health and human services as well as tax increases and borrowing.

In releasing the proposed budget last week, the Governor stated:

"California, like the rest of the nation is in the midst of a severe economic downturn. The combined effect of the state's continuing structural budget deficit and the loss of revenues resulting from the economic downturn results in a budget gap of $41.6 billion, just under half of the revenues projected for 2009-10. This is the most challenging budget in the state's history. It demands quick action and calls for every type of solution possible, including major spending cuts, revenue increases, borrowing and cash management strategies."

California State PTA issued a press release (copy follows) yesterday in response to the latest budget proposal. In the release, Pam Brady, President, states:

"Don't think for a minute that we don't understand the magnitude of the current financial crisis. Families throughout California are living each day with the realities of the economic downturn. But families also understand that we have a responsibility to children and their future which cannot be compromised in bad economic times.

"We believe the smartest economic stimulus plan for California right now is to invest in the future by investing in the education, health and welfare of our state's children."

The Governor's latest budget proposal would cut an additional $6 billion to public schools over the next 18 months.  When combined with cuts already made to our schools in the current year and proposed accounting maneuvers to delay other payments owed to schools, the total cuts are nearly $11 billion -- not including other cuts to vital children's services.

A recent national study revealed that California recently slipped from 46th to 47th in the nation in terms of per-student funding -- funding which goes to hire and train teachers, provide instructional programs and materials, ensure smaller class sizes, and provide all other aspects of a quality education to every student. 

Next Steps

The Board of Managers of the California State PTA has voted to launch an aggressive campaign to protect children. In the coming weeks we will be providing additional information, resources and advice to help you communicate a strong message for a greater investment in children and against deeper budget cuts.

Budget Details on the Web

Press release issued by PTA in response to the state budget

Education Coalition Response to the Governor's State of the State: California's Schools Face State of Emergency

California Budget Project Analysis

Schwarzenegger seeks education cuts

Governor Holds Press Conference to Discuss State Budget

Legislative Analyst's Office 2009-10 Budget Analysis Series: Overview of the Governor's Budget

Governor's Budget 2009-2010

California State PTA | 2327 L Street | Sacramento | CA | 95816 | info@capta.org

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press release

CONTACT: Carol Kocivar

Vice President, Communications

(415) 577-1125

Alison apRoberts, Communications Manager

(916) 440-1985, ext. 106

FOR IMMEDIATE RELEASE:

January 14, 2009

PTA Responds to State Budget:

Our responsibility to children cannot be cut in bad economic times

Pam Brady, President of the California State PTA, issued the following statement in response to the Governor's budget proposal and ongoing negotiations with legislators.

“Don’t think for a minute that we don’t understand the magnitude of the current financial crisis. Families throughout California are living each day with the realities of the economic downturn. But families also understand that we have a responsibility to children and their future which cannot be compromised in bad economic times.

“We believe the smartest economic stimulus plan for California right now is to invest in the future by investing in the education, health and welfare of our state’s children.

“The latest budget proposal would cut an additional $6 billion to schools. When combined with cuts already made to our schools in the current year and proposed accounting maneuvers to delay other payments owed to schools, we’re looking at total cuts of about $11 billion.

“Cuts of this magnitude fail the basic test of good government. They hurt our children.

“These proposed cuts will completely derail efforts to provide a world-class education to all students. We are already 47th in the nation in terms of how much our state spends per student on education. These cuts are likely to make us dead last.

“The mission of California State PTA is to positively impact the lives of all children and families. We cannot and will not back away from that mission during tough economic times. In fact, these are the times when the children of California need our advocacy the most.

“The 120-member Board of Managers of the California State PTA has voted to launch an aggressive campaign to protect children from drastic budget cuts.”

 

The California State PTA is a branch of the 111-year old National PTA, with nearly one million members statewide. The PTA is the nation's oldest, largest and highest-profile volunteer organization working on behalf of public schools, children and families, with the motto "Every child, one voice." PTA volunteers work in their schools and communities to improve the education, health and welfare of all California children and youth. The PTA also advocates at national, state and local levels for education and family issues. The PTA is non-profit, non-partisan, non-sectarian and non-commercial. For more information, go to www.capta.org.

SCHWARZENEGGER PROPOSES BUDGET

By JENNIFER STEINHAUER

 

January 1, 2009 — LOS ANGELES — Gov. Arnold Schwarzenegger, at war with the California Legislature over how to close tens of billions of dollars in projected budget shortfalls, proposed a budget Wednesday that contains a hefty sales tax increase and would cut away at state services.

Mr. Schwarzenegger, a Republican who has repeatedly derided lawmakers — particularly those in his own party — for failing to come to an agreement over how to close the budget gap, released his latest plan through his staff while on a ski vacation in Utah.

The plan is unusual in that it covers 18 months instead of 12, the six remaining months of this fiscal year and the new fiscal year that begins on July 1.

It calls for increased taxes and fees amounting to roughly $9.3 billion, and spending cuts and other solutions — mainly accounting changes and hopeful projections about lottery and other revenues — of more than $18 billion. Fees for higher education would increase, but class offerings would be cut. Health care would be trimmed, and the state work force would be reduced through layoffs.

The plan calls for a 1.5-cent increase to the state sales tax, which is now 7.25 percent — a rise Republicans have repeatedly rejected — and would cut the dependent credit permitted on the 2009 state income tax return by about two-thirds.

California’s fiscal situation is among the direst in the nation, in large part because of the confluence of large tax cuts made early in Mr. Schwarzenegger’s administration and declining tax revenues resulting from high rates of home foreclosures.

The state has already reduced school and health care programs, laid off workers and halted infrastructure projects because of the difficulty it is having selling municipal bonds.

The Legislature passed its own version of a similar budget earlier in December, but Mr. Schwarzenegger, arguing that it lacked sufficient spending cuts, has refused to sign it.

“I appreciate the governor acknowledging today the necessity of the cuts and revenues the Legislature approved,” Speaker Karen Bass, Democrat of Los Angeles, said in a prepared statement. “And I hope the governor’s first act of the new year will be to sign the responsible package we are putting before him.”

Big Government, Schwarzenegger-Style
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By AP "The fact that the Legislature has failed to reach a compromise between Republicans and Democrats and take action during the last three special ...

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(12-31) 14:12 PST SACRAMENTO -- Gov. Arnold Schwarzenegger will propose a state budget that uses more new taxes, wider program cuts and nearly $5 billion in ...

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Published: Thursday, Jan. 01, 2009 | Page 3A
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BUDGET STANDOFF CARRIES BIG RISKS, MARGINAL REWARDS FOR CALIFORNIA GOVERNOR: Arnold Schwarzenegger is putting the state's solvency in jeopardy while seeking largely symbolic concessions.

By Evan Halper | NEWS ANALYSIS From the Los Angeles Times

December 21, 2008 -- Reporting from Sacramento — Gov. Arnold Schwarzenegger's rejection last week of the tax hikes and service cuts the Democrats rammed through the Legislature seemed frivolous to many in the Capitol: He had put the state's solvency on the line over items normally considered too marginal to derail an emergency spending plan.

But the experiments in privatization, tweaks in environmental laws and trims to state welfare programs the governor has demanded are laden with symbolism. They have been on his agenda for years. Signing a budget without them would signal capitulation to Democrats, especially at a time when whatever standing the Republican governor has left in the GOP is being undermined by his support for billions of dollars in new taxes.

"I don't see how the governor could have signed that package and saved face with the people of California," said GOP political consultant Bill Whalen.

But rejecting the plan carries big risks for Schwarzenegger. It shifts responsibility to him if things get bad enough that the government has to shut down or go into default. He must get the Democrats to blink to keep the situation from careening out of control.

The governor hit the stump Friday -- a day after spurning the latest fiscal plan -- with rhetoric that positions him to declare victory if Democratic lawmakers get on board with his proposals, even if the things he wants do little to change the Democrats' package.

At a Fresno news conference, he complained of the lawmakers' incompetence. He said they are controlled by special interests. He groused that they live lavishly on the taxpayers' dime. He called the situation in Sacramento "sad."

"They passed legislation with a whole bunch of high taxes, to punish you, as if they didn't do anything wrong -- you did something wrong," Schwarzenegger told a group of students and supporters gathered at a high school. "But they passed a whole bunch of legislation of high taxes, but no real spending cuts, no real jobs package."

The governor gave no indication that the additional cuts he is seeking amount to less than 1% of state expenses. Nor did he let on that a day earlier, he had told the Capitol press corps the tax hikes were not what stopped him from signing the Democratic package; rather, he wanted lawmakers to incorporate more of his ideas.

The governor and Democratic leaders will return to the negotiating table in coming days. The governor has said publicly that he is prepared to sign off on the $9.3 billion in higher taxes that they seek on gasoline, retail sales and oil companies. And the Democrats say they have come too far to walk away.

They used audacious legal maneuvers Thursday to sidestep a requirement that new taxes be approved by at least two-thirds of the Legislature, which would have required some support from anti-tax Republicans. They rushed their tax bills through on simple majority votes, and now all they need to put them into effect is the governor's signature.

"The silver lining is he did essentially agree with our innovative approach to increase the state's revenues," Senate Leader Darrell Steinberg (D-Sacramento) said of the governor. "Sometimes the best deals, the best arguments, the biggest accomplishments . . . have to break apart two or three times before they come together."

State Treasurer Bill Lockyer reminded reporters at a news conference Friday how high the stakes are. About 2,000 public works projects for which the state suspended funds last week will not get their money absent an agreement. Lockyer said the state simply can't sell bonds for the projects amid deep fiscal uncertainty.

A downgrade in California's credit this month leaves California with the distinction of the lowest rating in the country, on par with some developing countries.

"I think right now Wall Street is believing that California is not a place you invest in," Lockyer said. "Until these things are fixed, investors are going to stay away."

Yet Democrats are under considerable pressure not to budge, especially from unions and environmental organizations -- their support base.

Turning over to private interests the construction and maintenance of roads, schools, courthouses and other public works projects, as Schwarzenegger wants, would threaten thousands of union jobs. And easing environmental restrictions would chip away protections guaranteed by the California Environmental Quality Act, which conservationists have fought for years to protect.

Additionally, the welfare reductions the governor seeks would further fray a safety net that Democrats and organized labor have spent decades stitching together.

Some rank-and-file Democrats say the governor is exploiting a crisis. Even if their leaders ultimately strike a deal with him, there are no guarantees that the caucus will fall into line. The governor Friday ordered mass layoffs in the state workforce and unpaid furloughs for tens of thousands of state employees, irking Democrats across the board.

The Capitol standoff may feel familiar to lawmakers. The governor rejected a budget they passed in September. But he quickly signed a nearly identical document after they agreed to bolster the state's rainy day fund, a concession unlikely to have much effect on state spending until after he leaves office.

Schwarzenegger, however, had positioned himself to declare a big victory.

The governor almost appears to relish these games of chicken.

"Put the pressure on the legislators," Schwarzenegger urged the public in Fresno on Friday. "E-mail them, call them, send them cards, really bombard them."

evan.halper@latimes.com

A CALIFORNIA BUDGET -- YES, AND NO: Democrats do an end run on Republicans; then the governor threatens a veto.

Editorial from the Los Angeles Times

…in which Monty Python (hint, hint; nudge,  nudge; say n’ more) rakes a seat on the Time’s Editorial Board.

Not that they’re wrong!

Friday, 19 December 2008 -- The Legislature's Republicans had their nonstarter budget proposal; Thursday it was the Democrats' turn. Gov. Arnold Schwarzenegger promised to veto their budget not because it was just too clever and quasi-legal in circumventing the GOP and the state's two-thirds vote requirement to pass a budget, but because it didn't have, in his words, "exactly what we proposed" in an economic recovery package. Who's being obstructionist now, governor?

The Democratic road map to a majority-vote budget for California was, ahem, simple and (cough, cough) straightforward: Get rid of taxes on gasoline, raise sales and income taxes and add an oil extraction tax, but make sure all of those revenues combined don't exceed the amount lost from eliminating the fuel taxes. There's a legal opinion somewhere that says the Legislature can make revenue-neutral moves without the two-thirds threshold that otherwise would be needed to approve a budget.

Now replace the lost fuel taxes, this time calling them fees, which also can be adopted by a majority instead of a two-thirds vote. In fact, raise those fees to 13 cents a gallon more than the current level of gasoline taxes and enhance transportation programs.

Next, undo part of the "triple flip" -- don't ask -- by revoking the state's hold on a quarter-cent sales tax that Sacramento grabbed to pay off economic recovery bonds left over from the last fiscal meltdown, and in so doing allow counties to raise sales taxes by the same amount. Withhold income taxes from contractor payments. And slash deeply from schools, seniors and the disabled.

At least it was a budget, which is something the Legislature otherwise hasn't been able to come up with despite a fiscal emergency. It would have put some cash in state coffers, which in turn would have put people back to work on economy-stimulating projects, which California needs badly right now, even if it's not the full package Schwarzenegger wanted.

Whatever budget the Legislature finally passes will necessarily be some version of ugly, given the state's economic circumstances and the unacceptable delay caused by the two-thirds vote requirement, the Republicans' intransigence on taxes, and now Schwarzenegger's hard line on his own wish list. Democrats are hardly blameless, given their refusal to deal on workplace and contracting rules, but they at least came forward with a short-term emergency plan.

If the three-way failure that the governor and both parties delivered this week is a sort of Grand Guignol precursor to a pre-Christmas budget package, well, Californians can watch in horror and relief.

So far, it's just horror.

LAUSD Statement on State Freeze on Funds for Public Works Projects

 

For Immediate Release	
Contact:  Shannon Haber 					Dec. 19, 2008
(213) 241-4575									
#08/09-178 


LAUSD STATEMENT ON STATE FREEZE ON FUNDS FOR PUBLIC WORKS PROJECTS

Los Angeles (Dec. 19, 2008)- Sacramento is betraying the children of the Los Angeles Unified School District (LAUSD) by freezing state funds that have already been approved for projects ranging from construction of new schools to upgrades of the oldest campuses. 

The District had planned to get $833 million in state funds for projects that have already been approved and construction started.  Without the promised funds, the District could be required to stop work on projects currently underway and the ability to go forward with the $1.5 billion in construction 
contracts planned for 2009 would be in jeopardy.  

"We absolutely need these funds, because turning off the spigot would paralyze the District's ability to complete these urgent projects," said Superintendent David L. Brewer III.

Based on the dire nature of this threat, the District is beingpro-active and making plans to try to sell more local bonds earlier than expected to avoid these catastrophic issues.  This will only work if there are buyers, given 
the nation's financial crisis.  The District will not know the answer to this until late January.

"Delaying our children's ability to get back the education they deserve in two semester neighborhood schools is unacceptable and we need to take action," said Guy Mehula, head of the District's facilities program.  

"These economic times are not the time to eliminate jobs," said LAUSD Superintendent-elect Ray Cortines.  "We should be encouraging our legislature to find other solutions for the students of the Los Angeles Unified School District and continue to infuse the local economy with jobs."

                    
#  #  #

Contributed by Facilities News

A message from Assemblymember Tom Torlakson (D-Antioch)

Thursday, 18 December, 2008

I am hopeful that the Legislature will act later today on legislation to respond to the grave budget and economic situation facing our state.

In addition to the variety of painful program cuts and revenue increases to be debated this evening, I wanted you to be aware of my effort to provide an additional revenue stream that could avoid some potentially disastrous cuts--ones I fear are inevitable if we do not take further action.

As we confront the difficult decisions facing us during this severe budget crisis, I believe we must look at additional revenue options as part of a balanced solution that protects the education and health of our children. Regardless of what the Legislature may do tonight, the depth of our state's financial problems will require billions and billions of additional solutions in the near future.

In addition to the other revenue measures I support to protect our schools and the health of our children, I am reintroducing a measure during the 2009 legislative session that has had surprisingly little discussion so far--a bill to increase the current tobacco tax by $2.10 per pack.

This tax could raise approximately $2 billion annually for education, children's healthcare, and tobacco-related disease, research, and cessation programs. Specifically, about $1 billion would go to our severely under-funded public education system--partially backfilling lost Proposition 98 dollars and "cost-of-living" cuts. And, a portion of this funding could go towards enrolling 700,000 uninsured children into the Healthy Families and dental care programs, fortifying the Medi-Cal program, reversing cuts already made or proposed for programs serving our state's developmentally disabled and autistic children, and restoring and preventing further cuts to protective services for children. Healthier children are absent less and learn much more.

Tobacco smoke has devastating effects on our children. Each year, smoke causes 31,000 asthma attacks in children and hundreds of thousands lower respiratory tract infections. At the same time, reports show that while smoking among teenagers was on the decline in California until 2004, the trend reversed course and increased from 13 percent in 2004 to 16 percent in 2006. Additionally, 11 percent of children, six years and younger, are regularly exposed to secondhand smoke in the home.

This tobacco revenue stream will not only save tax payers billions of dollars that go to treat tobacco-related medical conditions, but will also save lives by helping to prevent and reduce smoking. While we are aware this will be a declining revenue stream in the future, it is a revenue source that can be used to fund critical needs today. This measure is truly a win for California's schools, children, as well as our budget coffers.

You may recall in 2006, the backers of Proposition 86 were only narrowly defeated. This measure would have imposed an additional $2.60 tax per pack. Polling still shows growing public support for a tobacco tax. According to the Federation of Tax Administrators, 42 of the 50 states have increased their cigarette excise taxes since 2000, while California's levels haven't changed from 87 cents per pack since 1998. Thirty-three states have a higher tax.

I look forward to working with you on this opportunity to invest in education while lowering health care costs to the state. I hope you will publicly endorse and support this measure--and please let me know when you do so. You may contact me at (916) 319-2011 if you have any questions or concerns.

Sincerely,

Tom Torlakson

STATE’S HEALTHY FAMILIES PROGRAM GETS A LAST-MINUTE LIFELINE

A $16.8-million check from First 5 California would allow the children's health insurance program to keep enrollment open through June. GOP leaders suggest $15.6 billion in cuts to schools, healthcare

By Jordan Rau | LA Times

Tuesday, 16 December 2008 -- Reporting from Sacramento -- The state's healthcare program for the working poor received a temporary reprieve Monday when First 5 California's board voted to provide $16.8 million to avert imminent enrollment restrictions that were expected to leave 162,000 children without medical coverage in the next six months.
The money will allow the Healthy Families Program to continue enrolling children through the end of the fiscal year in June instead of capping enrollment, as state officials planned to do Wednesday.

• State budget gap could reach $41.8 billion by 2010

• Orange County cuts 210 workers

• California fiscal officials try 'Scared Straight' approach with Legislature

But the unexpected intervention, hailed by children's advocates, is only a stopgap measure as the Legislature remains deadlocked over how to erase a budget gap that is projected to reach $41.8 billion by mid-2010.

The severity of that problem was highlighted as Republican legislative leaders, who have been under attack for not offering their own solution, endorsed cutting $15.6 billion in funding for schools, healthcare for working-class families, and welfare, reducing many of these programs nearly to the minimum levels allowed by law.

The plan includes a $10.6-billion cut in school spending over the next 1 1/2 years, increases in class sizes at the state's universities and community colleges, and a 10% reduction in welfare grants.

The GOP plan would also seek voter approval to take $6 billion from pots of money the electorate set aside to bolster healthcare for children and the mentally ill -- including $2.1 billion from First 5, which voters created in 1998 and funded with a portion of the tobacco tax. Republicans want to divert that money to help pay for existing programs in those areas.

The $22.1 billion in combined savings from the GOP proposal, while larger than alternatives offered by either the governor or the Democrats who hold the majority in the Legislature, would still address only a little more than half of the anticipated budget gap.

Assemblyman Mike Villines of Clovis and Sen. Dave Cogdill of Modesto, the Republican leaders, said that they continue to oppose raising taxes, and that the plan would go a long way toward dealing with the state's long-term budget troubles. "If we had any of this in place, the problem wouldn't be as bad as it is today," Cogdill told reporters at an afternoon news conference.

The GOP plan also included some of their longtime priorities, including tax credits for businesses, but did not include the costs to the state's treasury. It listed other breaks for businesses, including delays in requirements for companies to meet new rules intended to limit greenhouse gas emissions, "regulatory flexibility" for the agriculture industry, and allowing schools to hire private contractors to handle transportation, cafeterias and other services.

The Republicans said they wanted to avoid future budget crises by limiting future state spending growth to inflation and population increases, which currently amount to about 5%, and expanding the state's reserve account to help the state in tough times.

Aaron McLear, the governor's press secretary, said the plan was "not a negotiated compromise" but a "rehash" of past GOP ideas.

Democratic leaders said they would hold hearings on the proposal, but made clear they found the GOP's ideas unsatisfactory. Senate President Pro Tem Darrell Steinberg (D-Sacramento) said the plan relied on "phantom revenues that may never materialize," and Assembly Speaker Karen Bass (D-Los Angeles) said that "at first glance it appears this proposal is not the serious response this crisis requires."

The enrollment restrictions for Healthy Families was expected to be one of the first concrete effects of the budget crunch. The Managed Risk Medical Insurance Board, which runs the program, had scheduled a meeting Wednesday to limit new enrollments in the program, which provides medical insurance for 900,000 children whose families are slightly above the federal poverty line.

The money from First 5, which is charged with improving healthcare for young children, will be used for enrollment of children under 6.

Kris Perry, executive director of First 5 California, said the idea came about after her group was approached by Healthy Families leaders looking for a way to avoid the cuts. The board is expected to accept the financing offer Wednesday.

"If this goes through, it would be a lifeline to tens of thousands of kids who wouldn't be able to see a doctor otherwise because they don't have health insurance," said Wendy Lazarus, co-president of Children's Partnership, a Los Angeles-based advocacy group. "It is just critical that we protect kids whose parents need to turn to our state's health insurance programs because they're losing their jobs or they can't pay."

Rau is a Times staff writer.

GOP BUDGET PLAN: SLASH $10 BILLION FROM SCHOOLS

 

Senate Minority Leader Dave Cogdill, R-Modesto, right, discusses a Republican state budget proposal at a Capitol news conference in Sacramento on Monday. (AP)

Matthew Yi, San Francisco Chronicle Sacramento Bureau

Tuesday, 16 Dec 2008 - Sacramento- Republican state lawmakers unveiled their answer Monday to the state's budget crisis - a $22 billion plan that would avoid raising taxes, cut deeply into education spending and dip into voter-approved funds intended to pay for mental health services and children's health care.

The plan is the Republicans' first comprehensive proposal since Gov. Arnold Schwarzenegger called a special legislative session last month to try to solve the state's fiscal crisis. That special session ended without any action by lawmakers, prompting Schwarzenegger to declare a fiscal emergency Dec. 1, the first day on the job for newly elected legislators, and to call another special session to fix the budget.

Senate Republican leader Dave Cogdill of Modesto insisted Monday that raising taxes was not the answer to California's problems. Republicans have refused to consider tax increases as California's money problems piled up, and they can block any budget that includes increases because both the Assembly and Senate must muster two-thirds votes to approve a spending plan.

"We have said time and time again that because California taxpayers, quite frankly, are more burdened than the average taxpayer in this country, and the fact that we are ground zero as it relates to the economic realities that this country and the world face right now, we've got to find a better way," Cogdill said.

The GOP budget plan would raise $6.5 billion of new revenue for the general fund and reduce spending by $15.6 billion over the next 18 months, about two-thirds of it from K-12 schools. The proposed cut in education is far deeper than Schwarzenegger and legislative Democrats have called for in separate plans for reducing the deficit.

As part of their proposal, Republicans also suggested measures they said could stimulate the economy, such as granting tax credits to businesses, and relaxing environmental and labor regulations. Those would include extending deadlines to retrofit diesel engines in trucks and changing the rules on overtime pay and meal breaks.

Schwarzenegger had expressed frustration with Republicans for bringing little to budget negotiating sessions other than a refusal to raise taxes. In a sign of how frayed relations between GOP lawmakers and the Republican governor have become, Schwarzenegger's office was as critical of the Monday's proposal as legislative Democrats were.

"It's simply a rehash of the tax cuts that have been on the table for months with some borrowing on top of that," said Aaron McLear, Schwarzenegger's spokesman. "It's not a negotiated compromise. Until Republicans and Democrats negotiate with one another, our problem continues to get worse."

Assemblywoman Noreen Evans, D-Santa Rosa, chairwoman of the Assembly Budget Committee, said the GOP plan balances the budget "on the backs of poor children and the mentally ill."

Evans plans to convene a committee hearing today to consider the Republican plan. If and when a vote is held, the Democrat-controlled panel is certain to reject it.

Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), said she would hold a floor session this afternoon to vote on a separate budget proposal, even though there wasn't a deal in sight Monday.

Bass did not spell out what exactly was in the proposal, but she said it would include elements of plans put forward by Schwarzenegger and Democrats.

The governor has suggested nearly $10 billion in cuts and temporarily increasing the sales tax to help close the deficit, along with other revenue increases that would total around $12 billion. Democrats have proposed a $17 billion mix of spending cuts and tax increases, including increasing the vehicle license fee.

Under the Republican lawmakers' plan, the bulk of the new revenue - $6 billion - would be siphoned into the state's general fund by asking voters to alter Proposition 63, a 2004 measure that funded mental health services for homeless adults, and Proposition 10, a tobacco tax approved in 1998 that pays for health care and education programs for young children. A special election would be called to consider the changes.

The rest of the revenue would be generated by delaying certain loan payments and transferring money from other special funds.

The largest chunk of spending cuts, nearly $10 billion over the next 18 months, would come out of K-12 education. This year, the state is spending $58 billion on public schools.

Republicans also want to cut monthly payments for supplemental security income recipients - to $830 from $870 for singles, and to $1,407 from $1,524 from couples.

The Republican proposal also would reduce the Legislature's operating budget across the board by 5 percent, including lawmakers' salaries, and eliminate $6 million for Schwarzenegger's plan to build an infrastructure to support hydrogen-powered cars.

The budget crunch is so bad that, unpleasant as they are, none of the proposals set forth by Schwarzenegger, Democrats and Republicans would eliminate a deficit now expected to hit $40 billion by June 2010.

State Treasurer Bill Lockyer warned last week that budget problems were making it hard to sell voter-approved bonds that pay for public works projects. Lockyer, state Controller John Chiang and Schwarzenegger's finance director, Mike Genest, will decide Wednesday whether to halt spending on all such projects until lawmakers reach a budget solution.

With the state rapidly running out of cash, the need to find budget solutions quickly was one area that all sides seemed to agree on.

"If you keep doing business the way we're doing business in California today, we're heading for the cliff," said state Sen. Bob Dutton, R-Rancho Cucamonga (San Bernardino County), vice chairman of the Senate Budget committee. "We've got to change."

Competing plans

California's fiscal crisis is expected to create a nearly $40 billion budget deficit by June 30, 2010. Here's how Gov. Arnold Schwarzenegger, and legislative Democrats and Republicans would reduce that total:

-- Schwarzenegger has suggested a $22.4 billion plan that includes $9.8 billion in cuts and $12.5 billion in revenue increases. He would raise the sales tax by 1 1/2 cents on the dollar, broaden the sales tax to include certain services, add an oil severance tax, add an excise tax on alcoholic drinks and increase the vehicle registration fee.

-- Democrats have come up with a $17 billion plan divided almost equally between cuts and new taxes that include restoring the vehicle license fee that Schwarzenegger cut when he took office and increasing the income tax by eliminating this year's inflation adjustment.

-- Republicans want a $22 billion plan that includes $15.6 billion in spending cuts and $6.5 billion in new revenue for the general fund, most of which would be taken from money that now pays for mental health care for homeless adults and children's health care.

Sources: state Department of Finance, Chronicle research

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