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A flurry of deals delays state budget

As final votes loom, legislators stuff the spending plan with last-minute favors.

October 08, 2010|By Jack Dolan and Patrick McGreevy, Los Angeles Times

Reporting from Sacramento — State lawmakers were moving Thursday night to bring California's longest-ever budget impasse to a close — but not before stuffing their spending plan with last-minute favors for special interests.

As the final votes on the budget loomed, legislators were engaged in a furious round of horse trading, according to lawmakers and staff involved in the deal-making. As legislative leaders rounded up votes, they added provisions that would boost the bottom lines of online travel companies and an ethanol firm founded by a close ally of the governor. They drafted language that could allow the city of San Diego to use more redevelopment money to facilitate a new NFL stadium for the Chargers.

Democrats pushed legislation to address an element of alleged corruption in Bell, where the city was reported to be making money by towing the cars of sober immigrants from DUI checkpoints if they did not have proper ID. The proposed law change would prohibit that practice.

"This is the money that fueled their corruption," said Sen. Mark Leno (D-San Francisco).

It was unclear whether all the special provisions would survive the night. But the flurry of deal-making delayed passage of the bipartisan $87.5 billion general fund plan, the foundation of an overall $125.3-billion budget that would avoid broad new taxes and deep program cuts by pushing the bulk of the deficit into next year.

The package included 21 separate bills, which were brought up in fits and starts in between negotiations on the last-minute proposals.

"Everything in the budget is give-and-take," said Senate Leader Darrell Steinberg (D-Sacramento).

Before Thursday, legislative leaders and the governor had already signed off on tax breaks that activists said amounted to giveaways for a timber company, cable companies and software firms. Those proposals, along with the one that would benefit online travel companies by changing a tax calculation, were drafted at the insistence of Republicans. GOP members are a minority in the Legislature, but some of their votes are needed to pass a budget, which requires two-thirds approval.

The core budget bills were made available to lawmakers only hours before scheduled votes, and some legislators expressed frustration that they were not able to sort out all the details of the bills.

"I simply can't vote under these circumstances," said Assemblywoman Diane Harkey (R-Dana Point).

Among the potential beneficiaries of the late scrambling were travel websites such as Orbitz, Travelocity and Expedia. GOP lawmakers were championing their bid for a tax break; cities and counties were warning that such a move would deny local governments tens of millions of dollars in hotel taxes each year.

The travel companies are seeking to change how a levy called the Transient Occupancy Tax is calculated. Instead of a tax on the full amount they charge for a hotel room, the online firms would pay tax only on the amount they pay the hotel for the room — typically much less than what they charge the customer.

On Thursday, according to lobbying memos obtained by The Times, the websites were directing a behind-closed-doors lobbying effort to slip a measure "clarifying the law" in their favor into a budget bill written by Senate Republican leader Dennis Hollingsworth of Murrieta.

"This would rob local cities of millions of dollars of tax revenue and line the pockets of online companies at taxpayer expense," said attorney Raymond Boucher, whose firm represents Los Angeles, Long Beach and other California cities.

Another budget provision was being extracted for a struggling business founded by former Secretary of State Bill Jones, a political ally of and campaign contributor to Gov. Arnold Schwarzenegger.

Jones' firm, Pacific Ethanol, would be relieved of a requirement to meet strict environmental standards by a change quietly inserted into budget legislation Wednesday. According to state energy officials, the requirements are part of a deal in which the company agreed to secure millions of dollars in government subsidies that helped rescue it from bankruptcy. They call for the firm, which uses corn to make the gasoline additive ethanol, to significantly reduce its carbon footprint within four years.

But a last-minute change to the statute would allow the carbon reduction requirement to expire in two years, essentially letting Pacific Ethanol, and three smaller firms that qualify for the subsidy, off the hook. Administration officials said the change was the idea of Assembly Democrats.

Shannon Murphy, spokeswoman for Assembly Speaker John Pérez (D-Los Angeles), said, "I can tell you emphatically that any assertion this was the speaker's idea is laughable." She added that whenever the speaker's office got calls about the subject, they "came from the administration."

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