Lawmakers Prepared to Burn Midnight Oil

The state capitol may look a lot like a slumber party tonight as lawmakers say they plan to work into the overnight hours.

One elected official says he's already set up a cot in his office.

Whether California can stop issuing IOUs or continue to slide toward insolvency is in their hands as they hammer out a deal brought to them by Gov. Arnold Schwarzenegger and the four legislative leaders.

The compromise spending plan was debated by the 80-member Assembly and 40-member state Senate Thursday  afternoon. But given past budget debates, the package is not likely to be voted on until late Thursday or early Friday.

Lawmakers have piles and piles of bills to review before voting. There are 31 budget bills in all that outline $15 billion dollars in cuts.

"It's going to be painful we know it and I know it and I'm just hopeful we can move forward and crossing my fingers this economy turns around," State Senator Abel Maldonado said.

San Francisco Senator Mark Leno said, "the governor wanted to eliminate Cal Works, to eliminate in home support services, to eliminate healthy families, to eliminate Cal Grants, to eliminate state parks.  We didn't let him."

"I am confident we will have the required votes on all the important items of the budget in order to put $25 billiion plus of the budget deficit behind us," Darrell Steinberg, Senate President Pro Tem said.

Under the budget compromise, the state hopes to solve less than 60 percent of a projected $26.3 billion problem with spending cuts. The rest will involve one-time raids on local government funding and accounting maneuvers, such as deferring state employee paychecks by one day for a savings on paper of $1.2 billion.

For single mother Meka Brown and her 9-year-old son life could get very tough. They are dependent on the state for child care so Brown can work.

"Everyday is like a waiting game," Brown said. "My life and son's life hangs in the balance. He wants me to work but how can I work if I don't have child care (which) without I can't survive basically?"

Schwarzenegger has predicted the agreement to balance the books would get through the Legislature despite "some hiccups, some obstacles, some bumps in the road" put up by special interest groups.

But the plan's passage remains uncertain in a fractious Legislature that has been mired in a seemingly endless fiscal crisis for at least the past two years. Lawmakers from both parties also are reluctant to anger their constituents -- not to mention jeopardize their own political ambitions -- through a raid on local governments. Local governments have already announced they are ready to sue.

"We're going to fight Sacramento," said Los Angeles Mayor Antonio Villaraigosa about the city losing $240 million over one year from the tentative pact.

Legislative leaders acknowledge the plan is imperfect and contains distasteful provisions such as offshore oil drilling and cuts across all major programs, including education, prisons, health care and welfare. But they're making their case to 115 other lawmakers that their plan is vital to address the state's cash-flow crisis.

"Given the enormity of the numbers, I'm damn proud of what the Legislature and the governor have done here to avoid a complete catastrophe," state Senate President Pro Tem Darrell Steinberg had said.

The overall deal needs to satisfy the bond markets so California will be able to take out short-term loans needed to cover daily expenses until next spring, when most of the state's tax revenue arrives. State Treasurer Bill Lockyer has said it was too soon to tell the impact of the deal on the state's borrowing needs.

Obtaining those loans is essential to the state's ability to stop issuing IOUs to thousands of state contractors and vendors, which it has been doing in an effort to conserve cash. The total amount of IOUs issued for July alone was expected at nearly $3 billion.

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 IOUs and halt contributions to state pension funds.

State employees also 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.

The plan would sell off part of the State Compensation Insurance Fund, a quasi-governmental agency that is the state's largest writer of workers' compensation insurance, for an estimated $1 billion. The state Legislature's budget analyst has said it's unlikely a sale could be completed by the end of the fiscal year, June 30, 2010.

The plan also would push back state employee paychecks by one day so that paychecks originally slated for June 30 would be issued on July 1, the start of the 2010-11 fiscal year.

"It doesn't close the deficit," said University of Southern California political scientist Sherry Bebitch Jeffe. "Are they going to next year shift the last paycheck over again? That doesn't solve the problem."

As the saying goes: the devil is in the details and some of them:

• $6 billion from K-12 schools and community colleges over a two-year span.
• Nearly $3 billion from the University of California and California State University systems.
• $1.3 billion from Medi-Cal, the state's health care program for the poor. Also includes a proposal to bill the federal government for more money.
• Saves $1.3 billion by retaining three unpaid furlough days per month for state workers.
• Includes $1.2 billion in unallocated cuts to the state Department of Corrections. Does not include Schwarzenegger's proposal to release some inmates early.
• Cuts $528 million from CalWORKS, the state's welfare-to-work program, partly by increasing sanctions for families that fail to meet work requirements. Schwarzenegger had proposed eliminating the program entirely.
• Cuts $124 million from Healthy Families, a program that provides health insurance for 930,000 low-income children. Lawmakers hope nonprofits, foundations and other groups can fill in some of the losses.
• Cuts $226 million from the state's in-home supportive services program for the frail and disabled. Also includes Schwarzenegger's plans to require fingerprinting of caregivers and recipients, and would require caregivers to undergo background checks.
• Cuts about $8 million from state parks, allowing the majority of state parks, beaches and attractions to stay open. Some parks are likely to close, however, based on popularity and use.

Other Measures:

• Borrows about $2 billion from local governments' property tax revenue, money that would have to be repaid with interest in three years. As a concession to angry local officials, the deal would prioritize repayment of the so-called Proposition 1A money after schools and bond holders are paid.
• Takes $1 billion in redevelopment money from local governments.
• Takes $1 billion in transportation funding from local governments.
• Speeds up collection of 2010 personal income and corporate taxes to bring in revenue earlier than anticipated.
• Sells off part of the State Compensation Insurance Fund, which the administration values at $1 billion. The fund is a quasi-governmental agency that is the state's largest writer of workers' compensation insurance
• Allows limited expansion of oil drilling off the Santa Barbara coast, bringing in $100 million in the current fiscal year.
• Eliminates the Integrated Waste Management Board and the Board of Geologists and Geophysicists, which Schwarzenegger had targeted as wasteful and unnecessary.
• Gives school districts the option of cutting the school year by five days.
• Defers state employee paychecks by one day for a paper savings of $1.2 billion, which has been criticized by some as a gimmick. Instead of being issued on June 30, 2010, the paychecks would be issued on July 1, the start of the 2010-11 fiscal year.
• Gives the governor authority to pursue the sale of about 10 state-owned buildings as a potential revenue source in future years, including the Orange County Fairgrounds, the Public Utilities Commission Building in San Francisco and the Ronald Reagan State Office Building in Los Angeles.
• Rejects Schwarzenegger's proposal for a surcharge on homeowner insurance policies to boost funding for emergency services. The surcharge would have averaged about $48 a year per homeowner.

Source: Office of state Sen. Darrell Steinberg, other legislative sources.

Copyright Associated Press / NBC Bay Area

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