NO Chance to Make State Budget Deadline

The most forlorn provision in the California Constitution -- the seldom-met deadline for the Legislature to pass a new state budget -- kicks in Monday with no chance that it will be honored.

Lawmakers haven't approved a budget by the June 15 deadline since 1986, and Republican Gov. Arnold Schwarzenegger and the Democratic-controlled Legislature don't seem close to reaching a deal on how to erase a $24.3 billion deficit.

Assemblywoman Noreen Evans, the Santa Rosa Democrat who chairs the two-house committee that is trying to draft budget legislation, said she hopes the Senate and Assembly will have something to vote on in about a week or 10 days.

But there seem to be internal differences among both Democrats and Republicans over how to close the deficit.

Democrats are divided over whether to push for tax increases. Republicans say they won't provide the votes needed to raise any taxes and will not buy the cuts in prison budgets that Schwarzenegger is proposing.

Controller John Chiang said the state will run out of money if there is no agreement on a budget by late July, and Schwarzenegger says he would rather let state government come to a "grinding halt" than authorize borrowing the nearly $2.8 billion that would be needed to cover that shortfall.

If the state runs out of money, it would have to delay paying its bills or issue IOUs, said Hallye Jordan, a spokeswoman for Chiang.

"We are preparing for either or both scenarios," she said.

The state's latest budget problems come 3 months after lawmakers and the governor ended months of negotiations over how to close a $42 billion deficit. On May 19, voters rejected a series of ballot measures designed to help implement that agreement, adding about $6 billion to the deficit.

Assembly Speaker Karen Bass, D-Los Angeles, said last week that the deficit was too big to close just with the cuts, fee increases, borrowing from local government and other proposals made by Schwarzenegger. She said her caucus was examining other ways to raise revenue.

Evans, chairwoman of the budget committee, said that might include fee hikes that could be enacted without Republican votes or targeted tax increases, such as a tax on oil production, higher tobacco taxes or rolling back corporate tax breaks lawmakers granted in February.

"What we don't have in mind are any broad, general income taxes or any broad new sales taxes," Evans said.

Senate Democrats seem to be reluctant to consider raising taxes, although their budget plan includes temporarily increasing income tax withholding to help erase the deficit.

"Everything is on the table when you have a $24 billion deficit and an impending cash crisis," said Jim Evans, a spokesman for Senate President Pro Tem Darrell Steinberg, D-Sacramento.

Senate Democrats also are proposing to spend $4 billion of the $4.5 billion reserve fund that Schwarzenegger wants to set aside for emergencies.

"In our view, building a reserve in a time of fiscal emergency like this is like filling a water bucket when your house is on fire and not using it to put out the fire," Evans said.

Schwarzenegger spokesman Aaron McLear said most of the reserve -- $3 billion -- was set aside to cover the higher deficit estimates issued by the Legislature's nonpartisan budget analyst. The administration initially projected the deficit at $21 billion instead of $24.3 billion.

"That $3 billion is already spoken for," McLear said.

He said "tax increases are off the table" because Republican lawmakers and the governor won't support them. And he said the Legislature would be to blame, not Schwarzenegger, if a long budget deadlock left California unable to pay its bills.

"The governor is doing everything he can to get them to act," McLear said. "In the end, it's up to them."

Evans disagreed. She said work on the budget was being held up because the Schwarzenegger administration was putting out details of its budget proposals in "dribs and drabs."

"The Legislature has to flesh out the governor's proposals," she said. "We have to hear from the public, and we have to craft a budget that is, in our opinion, responsible. The governor is essentially saying, 'It's my way or the state goes off a cliff ...'

"Democrats are resigned to taking huge cuts in programs we care about. We just need to see some movement on the
other side of the aisle and from the governor's office."

McLear said the administration has been updating its budget proposals "as the economic situation has deteriorated. We expect Assemblywoman Evans to be able to keep up," he added.


Copyright AP - Associated Press
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