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With 6 Days to Go, Budget Talks in Chaos

Republicans have locked themselves into an antitax position while Democrats say they refuse to make more cuts in social programs.

June 09, 2003|Evan Halper and Megan Garvey | Times Staff Writers

SACRAMENTO -- After a week in which California lawmakers seemed to pull away from rather than toward a compromise on the state budget, lawmakers now have six days to consider their fateful choice: whether to cut a deal that would allow the $38-billion budget shortfall to be resolved by the constitutional deadline or to stand by as deepening ideological gridlock lets government stumble toward insolvency.

At this critical time in budget negotiations, with the deadline for the Legislature to approve a spending plan arriving at midnight Sunday, Republicans have firmly locked themselves into an antitax position that has thrown talks into disarray. Democrats, meanwhile, say they refuse to cut more deeply into social programs.

Both parties agree that there probably is no turning back from Senate Republican leader Jim Brulte's threat last week -- a "read my lips" moment -- to end the political careers of any of his fellow party members who join Democrats in voting for a tax hike. A tax increase would require at least eight GOP votes to reach the needed two-thirds majority.

Now Democrats, who have a majority of both houses as well as the governorship, are desperately searching for a way to get out of the budget mess without new taxes. Their ideas include a legally questionable attempt to pass a "revenue-neutral" measure that would raise taxes for a few years and then cut them just as much a few years later. The point: Such a plan theoretically could be approved without Republican votes.

But the larger question in Sacramento is this: Are Republicans trying to force a government shutdown, do they believe Democrats will cave on spending or are they holding fast on taxes because they believe Democrats can find a way to sneak around them to raise an unpopular source of revenue?

Wall Street is searching for the answer, or at least a clear sign, that the state with the largest economy -- which nevertheless bears the worst credit rating -- will snap out of it, balancing revenue and spending in time to avoid running out of cash this summer.

Brulte's threats came just as a bipartisan deal to close the budget gap was beginning to look likely.

At least a few Republicans were saying privately that they would consider voting for a new half-cent sales tax proposed by Gov. Gray Davis in exchange for an easing of government regulations on business. Those same lawmakers now say they've lost their appetite for raising that issue.

Though Brulte's ultimatum threatens to halt government operations, party loyalists say they are confident that is not what he intends.

"Brulte's conservative, though he is not a 'shut down the government for the good of the people' kind of Republican," said a GOP consultant, Dan Schnur. "He has some level of confidence a budget can be adopted without tax increases."

Many in the Capitol expect Brulte and Senate President Pro Tem John Burton, a liberal San Francisco Democrat, to broker the final budget deal. The two senators report being close to reaching a compromise on transportation and local government issues, but say they are nowhere near a deal that closes the budget gap.

Like Brulte, Burton has publicly stated that he will not entertain certain solutions.

"If Republicans follow the line that Brulte put out and they don't vote for any additional revenue, the state will go broke," Burton said.

A growing movement to recall Davis from office also is coming into play. The governor lurched to the left when he revised his budget in May, restoring billions of dollars in spending that pleased labor and school officials. Republicans complained that he was pandering to his political base, and some say Brulte's move was meant to counteract that.

Yet Brulte's threat angered others in his party who had hoped to bring home major victories for their core constituents by using budget votes to push reform of workers' compensation, continue tax credits for manufacturers and rein in what they say are frivolous lawsuits against businesses.

If the threat of challenges from within their own party convinces Republican lawmakers that they must hold the line on taxes, that shifts the questions to the Democratic majority, which then must either agree to spending cuts or find a way to raise revenue without Republican support.

Party leaders already have promised to issue an administrative order that would raise the vehicle license fee charged to every California car owner by an average of $136 in the coming months to generate $4 billion annually. Such fees are intended to protect programs. But Democratic analysts are looking at accounting maneuvers that they believe would allow them to use fee revenue to pay off the deficit.

The tenor of negotiations has discouraged many old Capitol hands. One fiscal staffer, who spoke on condition of anonymity, laments that "budgeting has turned into how sneaky can you be, and how late can you wait to slip something through."

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