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No end in sight for Sacramento budget stalemate

The two parties are staging stunts as the state's unpaid bills pile up heading into the fifth week without a spending plan.

July 28, 2010|By Shane Goldmacher, Los Angeles Times

Reporting from Sacramento — As California staggers toward the fifth week of the fiscal year without a spending plan, a month of closed-door talks in the Capitol have produced little but tension and finger-pointing. The calendar is flipping toward August with no resolution in sight.

Budget impasse: An article in Wednesday's LATExtra section about the lack of progress on a state spending plan said Assembly Speaker John A. Perez was out of town when his office declined the gift of an Easy-Bake oven from Republicans. In fact, Perez was simply out of the Capitol building. —

Top officials don't even publicly agree about what they agree upon. The two parties are staging stunts at the Capitol and trading barbs in dueling radio addresses, each side accusing the other of being dug in or disengaged, or both.

Gov. Arnold Schwarzenegger has demanded overhauls of the public pension system, the state tax code and the budgeting process, on top of the annual budget-balancing struggle. He has said he won't sign a spending plan that lacks those things, and California could languish without one until he leaves office — in 2011.

Senate President Pro Tem Darrell Steinberg (D- Sacramento) retorted that he was "prepared to grant his wish."

Meanwhile, California's unpaid bills are piling up, the state's worst-in-the-nation credit rating faces another downgrade and the prospect of printing IOUs for the second time in as many years threatens on the horizon.

"Every passing day of political paralysis leads us closer to a completely avoidable fiscal meltdown," state Controller John Chiang, a Democrat, warned officials in a written statement this week.

The state's $19.1-billion shortfall remains despite a temporary increase in taxes last year and lawmakers' slashing of billions from school budgets. Tuition at public universities has skyrocketed, and healthcare and other services for the poor have been scaled back.

The hangover from last year's budget decisions has infected this year's debate. Democrats are weary of cutting, and Republicans are standing fast against higher taxes; neither side has publicly expended any political capital to move toward compromise.

"This debate is about two fundamentally different philosophies of government," Matt David, Schwarzenegger's communications director, said in a statement Tuesday.

Schwarzenegger proposed deep cuts this year, including the elimination of welfare, to close the deficit. Democrats have countered with some tax increases, mainly on oil companies, and the rollback of some corporate tax breaks.

Assembly Speaker John A. Pérez (D- Los Angeles) backs a borrowing-based plan that would push off hard decisions for a year. Steinberg wants a mixture of tax hikes and cuts.

"The Democrats can't even agree among themselves," Senate GOP leader Dennis Hollingsworth (R-Murrieta) said in a radio address last week, although the Democrats say they are united.

Schwarzenegger, in his own radio speech, castigated lawmakers for bolting town "on vacation." The rank-and-file will return from summer recess next week.

Some officials stay upbeat publicly: "Pessimism doesn't get you anywhere," Pérez said Tuesday.

He and other Democrats say they have found common ground with Republicans on how to fill more than half of the state's $19-billion shortfall, citing areas of accord such as accounting shifts, brighter economic assumptions and aid from Washington. Republicans and the governor acknowledge no such meeting of minds.

A testy moment came last week during private talks among legislative leaders, according to several people who spoke on condition of anonymity because of the nature of the discussions. Assembly GOP leader Martin Garrick (R-Solana Beach) sternly told his Democratic counterparts to "man-up" and cut some programs. The remark got a chilly reception.

Talk of a prolonged stalemate worries George Usi, owner of the Sacramento Technology Group. His company goes unpaid, as all vendors who do business with the state do, as long as California has no budget.

State contracts account for about 35% of his revenue, Usi said, and California already owes his firm $220,000 in late payments. Another $450,000 falls past due within days.

A months-long standoff would "put businesses like us in a situation where we're going to have to let people go," Usi said.

Chiang said this week that IOUs will become a necessity in late August or September if the gridlock drags on and California's credit could descend to "junk status."

Officials on all sides are eager to avoid blame for the gridlock in this election year; they are busy blaming one another.

Last week, the state's Democratic and Republican parties hosted mock bake sales on the Capitol steps to portray their opponents' budgetary deficiencies. The Democrats hawked empty pie shells to symbolize the lack of a GOP plan. Republicans offered Pérez an Easy-Bake oven and a recipe to finish cooking his "half-baked" budget ideas.

"Roll out a thin bureaucratic crust…mix in a big dose of reality…toss in a pinch of compromise…toss out the sour grapes," read the GOP instructions.

Pérez's office declined the gift, but the speaker said Tuesday that he was out of town at the time but would gladly have accepted it.

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