Democrats Say Budget Talks Are Deadlocked

SACRAMENTO — Legislative Democrats announced Thursday that state budget talks have reached an impasse that will probably delay any action until at least early next week.

Meanwhile, the state controller sent a letter to lawmakers warning them of the financial consequences if an agreement is not reached soon.

Budget talks remain bogged down over the issue of how to protect money for cities and counties. Democrats, who hold majorities in both legislative houses, are resisting a constitutional amendment supported by Republicans and local government leaders that would make it impossible to temporarily reduce future payments to cities and counties -- even in an emergency -- without support of four-fifths of the Legislature and the governor.

"We're at an impasse," said Assembly Budget Committee Chairman Darrell Steinberg (D-Sacramento). "If it takes three or four additional days to avoid a mistake that will last 10 or 20 years, then it is worthwhile."

With negotiations stalled, Gov. Arnold Schwarzenegger announced he would be in Austria this weekend to attend the funeral of that country's former president, Thomas Klestil, and lawmakers headed back to their districts for the weekend. Legislative leaders said they would continue negotiating with administration staff.

As news spread through the Capitol that it would be several days before even the framework of an agreement was reached, State Controller Steve Westly sent a letter to lawmakers warning of the consequences of delaying the governor's $103-billion spending plan much longer. The state is now nine days into the new fiscal year.

Unlike last year, when California was faced with running out of cash in the summer, Westly said a $15-billion bond issue approved in March affords lawmakers some breathing room. But he told legislators that the state Constitution would prohibit him from making large payments to schools, colleges and universities if no budget is approved by July 28. And the state must immediately stop paying vendors for any of their work since the new budget year began July 1.

Partisan rancor in the Capitol continues to increase.

"The Democrats keep saying no to everything, even when they are common-sense ideas," said Assembly Republican Leader Kevin McCarthy of Bakersfield. "I think from their standpoint, they think it is somewhat politically beneficial to hold up California's budget."