California budget: Tough vote ahead on deal to close gap |

California budget: Tough vote ahead on deal to close gap

SACRAMENTO, Calif. and#8212; The deal between Gov. Arnold Schwarzenegger and legislative leaders to close California’s $26 billion budget deficit may have been the easy part.

Now they have to sell their plan to a skeptical Legislature amid partisan backpedaling, threatened legal action and potential walkouts by state government workers.

Rank-and-file Democrats are grumbling about deep cuts to education and social programs, as well as a plan to expand oil drilling off the California coast. Republican lawmakers are wary of prison cost cuts and accounting gimmicks that defer part of the state’s financial problem into the next fiscal year.

Lawmakers from both parties are reluctant to anger their constituents and#8212; not to mention jeopardize their own political ambitions and#8212; through a raid on local governments. All sides are finding much to dislike about a convoluted deal that is scheduled to be put to a series of votes Thursday in the 80-member Assembly and 40-member state Senate.

“This is an awful budget in an awful time, so it’s not surprising we have awful choices,” said Mark DeSaulnier, a Democrat.

At stake Thursday is whether the Legislature will take what the Schwarzenegger administration and top lawmakers describe as the painful but necessary steps to address the state’s cash-flow crisis. The Democratic and Republican leaders of both legislative houses said the deal they reached with the Republican governor is California’s best chance to avoid insolvency.

On Wednesday, Schwarzenegger predicted the agreement to balance the state’s books will get through the Legislature despite “some hiccups, some obstacles, some bumps in the road” put up by special interest groups.

“There’s a lot of pressure from outside, from the special interests, to derail the budget,” the Austrian-born governor told reporters during a news conference outside his Capitol office. “They’re not happy.”

As the recession roils the state’s treasury, California has been forced to conserve cash by issuing notes to thousands of state contractors and vendors, expected to total nearly $3 billion for July alone.

State employees have been furloughed three days a month, the equivalent of a 14 percent pay cut, and the state’s bond rating is hovering near junk status.

Unless the budget for the current fiscal year is balanced by late August, the state controller has warned that California’s cash shortage will grow so acute that he may start paying government workers with notes and halt contributions to state pension funds.

The compromise reached by Schwarzenegger and the party leaders of the Assembly and Senate includes about $15 billion in cuts to education, health care, prisons, welfare and other programs. The rest of the deficit will be made up by borrowing from local governments, shifting money from other state government accounts and accelerating the collection of certain taxes.

As details emerged, protests grew louder.

Representatives of county governments threatened to sue over provisions in the budget agreement that would take some $4 billion in local property taxes, gas taxes and other revenue. The raid on local coffers is expected to speed layoffs and service cuts in cities and counties, as well as delays in repairing streets.

The state’s largest public employee union, representing 95,000 workers, is polling its members to determine whether they want to hold a strike vote.

Meanwhile, Republicans raised objections to a provision of the budget-balancing agreement that seeks to cut the state corrections budget by $1.2 billion. They say it would let 27,000 state prison inmates go free before they complete their full sentences.

The governor’s office disagrees with his own party’s interpretation and says the measures do not amount to an early release program.

The steps being considered by corrections staff would allow elderly inmates who are sick to spend the final year of their sentences at home, keep certain offenders out of state prison by raising the sentencing bar for certain property crimes, keep some parolees from returning to prison by not punishing them for low-level offenses, and accelerate early release credits granted for getting a high school diploma or completing a drug and alcohol program.

Republicans support cutting the Department of Corrections and Rehabilitation budget but want to delay a specific plan for achieving that savings until later this summer, after lawmakers return from break.

Democrats, meanwhile, expressed concern about authorizing the first new offshore oil drilling on state lands since an oil spill off the Santa Barbara coast 40 years ago coated miles (kilometers) of ocean and shoreline. The expanded drilling will bring in an estimated $1.8 billion in royalties over 14 years, but many Democratic lawmakers said closing corporate tax loopholes would have been a better way to generate revenue.

Local governments were lobbying both parties not to raid city and county treasuries. Under the proposed budget, the state would borrow about $4 billion from property tax revenue, redevelopment money and local transportation funds.

On Tuesday, the Los Angeles County Board of Supervisors voted to sue the state if lawmakers passed the plan to take local redevelopment and gas tax money.

Welfare advocates also warned of devastating cuts they said disproportionately target seniors, children and the disabled.

Senate President Pro Tem Darrell Steinberg acknowledged the budget agreement contains gimmicks that delay some hard choices for next year, another potential point of contention when the agreement goes to the full Legislature. Among the accounting tricks is a provision delaying state paychecks on June 30, 2010, by one day so the amount will be counted in the next fiscal year.

Steinberg, a Democrat, said he hoped the overall deal would satisfy the bond markets so California will be able to take out short-term loans. The borrowing will help cover daily expenses until next spring, when most of the state’s tax revenue arrives.

Obtaining those loans is essential to the state’s ability to stop issuing notes.

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