Democrats back off on demand for new taxes to balance California budget

SACRAMENTO — State Democrats and the governor are backing off their demand for a budget that includes new taxes as pressure mounts on lawmakers to pass a spending plan and resume paying California's bills.

In a confidential e-mail obtained by The Times, Senate President Don Perata (D-Oakland) told fellow Democrats on Thursday night that he had informed the governor "we urgently need a budget -- let's see if I can work on a deal with the Reps [Republicans] that is no tax, no borrowing. He agreed."

Perata, who had been leading the crusade for a tax hike in the Legislature, wrote that he anticipated working with Republicans through the weekend in an effort to forge a final deal. His office declined to discuss the e-mail, other than to say talks are ongoing and the Democrats oppose borrowing.

Administration spokesman Matt David said Gov. Arnold Schwarzenegger is on board with plans mapped out in the Senate leader's e-mail.

"When Sen. Perata offered for the Democrats to work on a compromise budget that did not borrow and did not raise taxes and included budget reform," David said, "the governor agreed it was the right solution."

Such a "get-out-of town" budget would probably rely heavily on accounting maneuvers to close California's $15.2-billion budget gap. It would end the standoff and allow legislators to get back to their districts, where many have reelection campaigns to wage before voters go to the polls in about eight weeks.

Perata and others who have vowed for months that this would be the year when California raised taxes apparently see no other way.

The pressure to pay schools, health clinics, vendors and others reliant on state money is intense 75 days into the fiscal year. Typically, pressures due to late budgets eventually erode lawmakers' resolve to pass what they view as a responsible fiscal plan. This year's stalemate has lasted longer than ever.

"When you are at the point where you are reading stories every day about how the stalemate is breaking all records and voters are getting angrier, it is only human for the goal to become not a good budget but any budget," said Democratic political analyst Darry Sragow.

Perata's e-mail went to Democratic senators after he canceled a vote on Schwarzenegger's latest budget plan. The governor pitches the plan as a compromise that meets some of the demands of both Democrats and Republicans. It includes a temporary sales tax hike offset by a steeper tax cut in the future.