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NEWS ANALYSIS

Gov. crafts budget gambit

A special session of current lawmakers could result in tax hike.

October 22, 2008|Evan Halper | Halper is a Times staff writer.

SACRAMENTO — Gov. Arnold Schwarzenegger's decision Tuesday to call state lawmakers back for a special session next month comes with several strategic advantages.

The governor is planning to summon sitting lawmakers -- not the new class that will be elected in two weeks -- for the emergency session. They already are well-versed in the intricacies of the current state spending plan. They will no longer be waging reelection campaigns. And some will be leaving the Legislature when their terms expire Nov. 30.

Analysts say that if Schwarzenegger again proposes a tax increase to deal with the state's fiscal problems, the current crop of lawmakers is still his best hope of getting it passed -- even though Republican members beat back his efforts to temporarily raise the sales tax during the summer. Administration officials say they are drafting a plan to submit to lawmakers.

"There are some . . . lame-duck Republicans who could probably be persuaded to be made more agreeable to his fiscal approach," said Republican political analyst Tony Quinn. "Some are leaving office and have no plan of running again. I am sure he hopes he can put together an arrangement with them."

Quinn also said the resolve of Republican lawmakers to block taxes could soften if Democrats make big gains statewide Nov. 4. "It would be harder for them to say the 'no new taxes' mantra has been validated by voters," he said.

Schwarzenegger is calling on the Legislature to fix the budget passed only weeks ago, which is already at least $3 billion in the red. Analysts expect that deficit to grow as revenue continues to plunge amid economic uncertainty.

"We just don't believe we can wait to attack this deficit," said Schwarzenegger spokesman Aaron McLear.

Administration officials said Tuesday that the governor had not yet decided whether to propose a tax hike. Republican legislative leaders maintained that their caucuses would continue to block any proposals for new taxes.

"California's economy cannot handle a tax increase," said Senate Republican Leader Dave Cogdill.

Regardless, steep cuts in services are almost certain to be part of any plan the governor proposes. Fiscal analysts say it would be extremely difficult to balance the budget without cuts.

At a news conference in Carson on Tuesday, Schwarzenegger said the session would allow lawmakers to "fix some of the problems that need to be fixed."

"With the financial crisis, the economy, the housing market, things have changed so quickly from one week to the next," the governor said.

He said lawmakers could also use the special session to speed up allocation of public works bond money and "look at the housing crisis again and see if there is not some legislation that needs to be passed in order to help people stay in their homes."

Schwarzenegger this year vetoed all but one of more than a dozen bills aimed at addressing the housing crisis.

Economists, meanwhile, say the outlook for state revenue is bleak and the deficit is almost certain to grow. "We're going to have falling job levels and rising unemployment," said Stephen Levy, director of the Center for the Continuing Study of the Economy in Palo Alto. "We have moved into a major, consumer-driven economic decline that is going to take some time to settle out."

The state is looking to Congress for help. Schwarzenegger sent a letter to congressional leaders Tuesday, urging them to approve economic stimulus measures for states that are now being considered in Washington, D.C.

Such a package could include an increase in funding for healthcare programs for the poor as well as grants for public works projects. It should also fund an extension of unemployment insurance benefits, the governor said. The plan could generate as much as $6 billion in aid to California's state and local governments.

"Congress should move as quickly as possible to enact this legislation," he wrote. "The timing of an economic stimulus package is just as important as its components."

As state lawmakers grapple with the state's fiscal troubles in coming months, they will get advice from someone new: Lawmakers announced they have chosen Mac Taylor, a 30-year veteran of the nonpartisan Legislative Analyst's Office, to take over that group.

Taylor replaces Elizabeth G. Hill, the long-serving analyst who consistently advised lawmakers to confront the state's persistent debt and stop pushing the chronic deficit into the future. She had become known in the Capitol as the "budget nun."

Taylor was diplomatic when asked about lawmakers' tendency to ignore the advice of the office. "Sometimes it takes a while for ideas or information to filter through," he said.

He said bringing the state's finances under control is going to be a big challenge. "We're clearly going to be in a string of seriously difficult fiscal times," he said. "There are no magic answers. It would have been made evident if there were.

"It just means a lot of very difficult choices and a lot of hard work. It is going to take time."

--

evan.halper@latimes.com

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