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State lawmakers set Valentine's Day for final budget vote

Schwarzenegger delays layoffs of 10,000-plus state workers

Posted: February 14, 2009 1:17 a.m.
Updated: February 13, 2009 10:17 p.m.

SACRAMENTO (AP) - Will there be love between Democrats and Republicans this Valentine's Day?

Although there were no assurances that enough Republicans would vote for it, both houses of the state Legislature were scheduled to vote Saturday on a critical budget package to tackle California's $42 billion shortfall.

Democrats in contested districts were under tremendous pressure not to cave on a tenuous plan that calls for some $14 billion in tax increases, $15 billion in cuts and $11 billion in borrowing.

Republicans also faced pressure from conservative backers who oppose higher taxes.

"There are 120 members that don't like this budget," said Sen. Abel Maldonado, a moderate Republican from Santa Maria, referring to all members of the Legislature. He said he was still undecided on the plan.

"I'm not the only one. This could be a career-ender for folks on both sides. I haven't seen any one member do cartwheels for this budget," Maldonado said.

Legislative leaders and Gov. Arnold Schwarzenegger have been locked in a battle for 100 days over how to solve the massive shortfall. Republican and Democratic leaders tentatively agreed to a framework that would give businesses tax credits and relax some environmental rules in exchange for tax increases and borrowing.

Voters would also be asked to weigh in on five ballot measures, including a state spending cap and a plan to borrow against future lottery revenues.

California is running dangerously low on cash and has already halted road projects and delayed some payments to counties and taxpayers.

The Republican governor was in Los Angeles Friday, where he was calling members of the Legislature to try to secure enough votes to pass the package, said his spokesman, Aaron McLear.

"The leaders and the governor are very close to closing on an agreement and they'll be working together to get the votes for it," he said.

Democrats hold a majority in both the Assembly and Senate, but California, along with Arkansas and Rhode Island, is one of three states to require an unusually high two-thirds approval to pass annual spending plans, as well as increase taxes. Three GOP votes are needed in each house, as well as support from all Democrats.

In addition to $8.6 billion in education cuts that will likely force schools to lay off teachers, Schwarzenegger and Republican lawmakers won a number of items they considered vital to rescuing the state from the current recession.

The proposal to be voted on includes up to $400 million in tax credits for small businesses that make new hires over the next two years, lowers taxes by a projected $690 million for corporations that operate in multiple states, and provides $100 million in tax incentives for film production in California.

It removes environmental hurdles and allows the state to partner with more private businesses on transportation projects such as toll roads. The plan would also postpone air pollution regulations for some diesel-run equipment.

Assemblyman Jared Huffman, D-San Rafael, said he intends to support the budget his party leaders helped negotiate but he wasn't pleased with all the Republican giveaways.

"I think there's a difference between supporting the core budget compromises and some of the extortion stuff from the minority party," Huffman said.

The Schwarzenegger administration threatened earlier this week to start the process to lay off up to 10,000 state workers if there was no deal by Friday. But McLear said he would hold off for now, pending the outcome of this weekend's vote.

"We still have some flexibility about when we can send those (layoff notices) out for them to be effective in the next fiscal year, but that time is running short," he said.

Schwarzenegger and lawmakers planned to be in Sacramento on a particularly busy Saturday. Tens of thousands of spectators were expected to crowd downtown to watch Lance Armstrong and other pro cyclers compete in the Amgen Tour of California. The race ends with a lap around Capitol Park, and many of the streets around the Capitol were to be closed.

Both houses were scheduled to meet Saturday, with the Assembly starting at 9 a.m. and the Senate at 5 p.m.

The proposal faced particular uncertainty in the Senate.

Maldonado, the moderate Republican, said he remained "noncommittal" along with Sen. Lou Correa, D-Anaheim, whose seat is in conservative Orange County.

"He's going through a hard time," Maldonado said of his former roommate Correa. "I don't think he's made his final decision."

A message couldn't be left for Correa on his cell phone Friday because his voice mail was full. A message left by The Associated Press at his office was also not returned.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, said earlier this week that he expects his entire caucus to support the budget, while Senate Minority Leader Dave Cogdill, R-Modesto, advised Republicans the package was as good as he could get.

A failed budget would mean the state's finances would continue to spiral out of control. Small counties could go bankrupt, health clinics and hospitals would close and the state's credit rating would fall into junk-bond status. Standard & Poor's recently lowered the state's credit rating to A, lower than any other state.

On Friday, Sacramento and San Diego counties sued state Controller John Chiang seeking to force him to release $270 million in payments for social service programs operated by counties. Other counties were likely to join.

Counties said the programs affected by the funding delay included the state's main welfare program, CalWorks, and mental health, adoption, foster care, alcohol and drug programs.

Chiang last month started delaying tax refunds and certain other payments for 30 days because of the state cash shortage.

A spokeswoman for Chiang, Hallye Jordan, said the controller "shares the frustration of counties throughout the state," but that he was required to give priority to funding schools and paying off state debt.

But even before final bill language was released, some GOP members were publicly stating their opposition. Two Republicans who are exploring a run for governor, Insurance Commissioner Steve Poizner and former eBay chief executive Meg Whitman, expressed dismay over the size of the tax increases and said they would prefer to see a government overhaul.

Citing the sales tax, gas tax and vehicle licensing fees included in the plan, Sen. Bob Dutton, R-Rancho Cucamonga, said he refused to burden families.

"I, in good conscience, can not look in the mirror and raise the taxes on the average family of four by more than $1,000, as the Howard Jarvis Taxpayers Association has estimated," Dutton said in a statement.


Associated Press Writer Juliet Williams and Steve Lawrence also contributed to this report.

Copyright 2009 The Associated Press


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