Saturday, July 21, 2007

22 Days without a budget … but who's counting?


by Sacramento Bee Capitol Alert Staff: After approving the budget in a late night session until Friday AM, the state Assembly's Democratic caucus has posted a copy of the floor report for the 2007-2008 Budget Act online.

The Assembly Democratic floor report can be found here....

an after the last minute update:


GOP members maintain their opposition but agree to offer a plan of their own at midweek, when the upper house convenes again.

by Evan Halper. LA Times Staff Writer

Sunday, July 22, 2007 - SACRAMENTO — State senators went home Saturday morning after an all-night lockdown failed to force a budget agreement, with the exasperated Senate leader ordering GOP members to return midweek with their own spending plan.

The senators read books and magazines, listened to music and mostly just sat around through the previous night. Some of the Republicans posted notes ridiculing the lockdown to a conservative blog that has become a rallying point. By midmorning everyone was dismissed with no deal in place, pushing the budget impasse into a fourth week.

"We've reached the end of our rope," said Senate Leader Don Perata (D-Oakland). "I do not understand what they are after…. If those 15 Republicans want to stop state government, they are on their way to doing it."

The Senate Republicans continue to ignore Gov. Arnold Schwarzenegger's call to sign off on the $145-billion bipartisan budget approved Friday by the Assembly. The GOP lawmakers say that budget plan spends too much. But they have been unclear about where they would make about $700 million in additional spending reductions they demand.

Senate Republican Leader Dick Ackerman of Irvine said his caucus will meet Perata's challenge to put it all in a GOP budget plan this week. The upper house will reconvene Wednesday.

"We are going to try to fashion a budget," he said. "We will have a proposal."

Ackerman said his caucus will not sign off on a budget package resembling the one passed with support of Republicans in the Assembly. The lower house has since adjourned for a month, with its leaders vowing not to cut recess short to consider changes to the spending bill. Ackerman called on the Assembly to return.

As drowsy senators left the Capitol on Saturday, pressure on Republicans mounted. The governor warned that cutting as deeply into spending as the Republicans are demanding would mean scaling back funding to schools, something Schwarzenegger said he will not support.

"I remain firm in my commitment that we not cut education funding," he said.

The governor had earlier promised to use his line-item veto authority once the budget is passed to make some additional cuts that would appease the GOP. But the Republican senators say they are unconvinced that such a move would reduce spending enough.

Administration officials said that they were trying to help negotiate a deal but that Republicans had been unclear about what additional cuts they wanted to make, leaving discussions in limbo.

Individual Republicans, meanwhile, rebuffed invitations to meet with the governor late Friday night. In years past governors have occasionally managed to extract GOP votes for a budget from an otherwise obstinate caucus. Passage of a spending plan in the Senate requires at least two GOP votes. This year, the Senate GOP caucus has made a pact that none of its members will vote for a budget until the caucus as a whole agrees it would be appropriate.

One member appears to be wavering, however. Abel Maldonado (R-Santa Maria), a moderate, has been abstaining from casting a budget vote, rather than joining his colleagues in voting against the Assembly plan.

As the rest of the Republicans dig in, school groups have begun calling individual lawmakers, urging them to compromise. The Democrats have already agreed to hundreds of millions of dollars in reductions to public transportation, welfare, drug treatment and other programs. Education spending accounts for nearly half of the budget, and educators warn that any further cuts will hit schools.

Education groups also warn that unless a budget is in place soon, schools won't receive state money they need for the fall semester.

The effort to block the budget "creates confusion and concern for our school districts, which will be starting fall term in just a few weeks," said state Supt. of Public Instruction Jack O'Connell.

Conservative activists, meanwhile, told the lawmakers to hold their ground.

"You 15 are officially martyrs for all California taxpayers," Jon Fleischman, a member of the state party's board, wrote to the caucus on his blog Flash Report, GOP senators have been using the blog to sound off on Perata, the governor and Assembly Republican Leader Michael Villines of Clovis. They also offered updates on the lockdown.

Just before 7 a.m. Saturday, Sen. Jim Battin (R-La Quinta) sent in a posting. "We've been locked in, and there are sergeants at every exit making sure we can't leave," he wrote. "I slept in a chair for about an hour (and btw — Dennis Hollingsworth [(R-Murrieta)] snores :/). Ah-Democracy at work…. It's all rather quite embarrassing."

Also posted on the blog was an attack on the governor by Sen. Tom McClintock (R-Thousand Oaks): "He sided with liberal Democrats in refusing to balance the state budget."

Sen. George Runner (R-Lancaster) blogged that if Assembly Republicans "had chosen to learn more from their colleagues in the Senate who have gone through more than one or two budgets, we might have a true 'fiscally responsible' budget to vote on."

He also took a swipe at their decision to leave town: "Now is the time to put our vacation plans aside, get back to Sacramento and craft a better budget."


By Judy Lin – Sacramento Bee Capitol Alert
10:06 am PDT Saturday, July 21, 2007

After a long night with no progress to speak of on the budget, Democrats and Republicans in the Senate agree: The Assembly negotiated a flawed tax credit package when they struck their deal. Now Republican senators are demanding changes in the overall plan, which would require the Assembly to reconvene.

The Speaker's Office has already said members won't come back, no way, no how.

But can the Assembly stay away for then entire four weeks of summer recess? Maybe not.

Under Article IV, Section 7, Part D of the state Constitution, "Neither house without the consent of the other may recess for more than 10 days to any other place."

The joint rules - house procedures adopted by both houses - backs up the law of the land. "This recess shall not commence until the Budget Bill is passed."

Assembly spokesman Steve Maviglio says the rule is unenforceable.

"The constitution also says we are required to have a budget by June 15th -- that's the one that the holdout Senate Republicans need to focus on instead of making excuses for their failure to do what Assembly Democrats and Republicans have done by passing a balanced budget that has the support of the governor and Senate Democrats.

The legislative counsel has opined in the past that this provision is (inapplicable) and unenforceable," Maviglio said in an e-mail.

SENATE ADJOURNS BUDGET TALKS UNTIL WEDNESDAY: Republicans want the deficit cut further; Assembly closes shop.

By Judy Lin and Jim Sanders – Sacramento Bee Capitol Bureau

Published 12:00 am PDT Saturday, July 21, 2007

Senate Democrats on Saturday morning ended a night-long lock down over the already-overdue state budget and adjourned until Wednesday.

Senate President Pro Tem Don Perata, D-Oakland, said he had hoped to persuade at least two Republicans to vote for the $103 billion Assembly-approved plan by locking members in the chambers Friday for a marathon session.

But Republicans refused to budge, and a frustrated Perata threw in the towel just after 10 a.m. He challenged the GOP to come up with a list of budget cuts to debate by a scheduled Wednesday morning floor session.

"Until they are ready, willing and able to specifically say 'we want cuts here, we want changes there' and write trailer bills that satisfy the budget requirement, I don't see how we're going to make any progress," Perata said Saturday shortly after letting senators go home.

Senate Republican Leader Dick Ackerman of Irvine called Perata's request a "drill" but said he will have his staff compile a new budget as best it can.

Gov. Arnold Schwarzenegger suggested the Republicans may not be able to reduce a projected operating deficit in the 2007-08 fiscal year without cutting education.

"I have been open to ideas put forth over the last three weeks," the governor said in a statement. "I know how difficult it is to eliminate the operating deficit all in one year. But I remain firm in my commitment that we not cut education funding."

The development leaves the state without a budget 22 days into the fiscal year with little prospect of immediate resolution. While union contracts and court decisions require the state to make some payments, including paychecks to most state employees, payments to vendors for services and goods incurred after July 1 cannot be made until a budget is approved.

Perata said Republicans are negotiating in "bad faith" and "overreaching" by continuing to press for deeper savings. He said the GOP keeps moving its goal farther on the operating deficit, even though the version now pending made more progress on the deficit than the plan the Republican governor put forth in mid-May.

The senator said Democrats have already made as many concessions as they are willing in order to protect the state's most vulnerable people, including seniors and children.

"The governor is perplexed, I'm perplexed," Perata said.

Ackerman denied that he's been moving the goal line, saying he has called for a balanced budget all along. He declined to say specifically where the state might find savings, but suggested it could be done without lowering education funding.

"We were negotiating all last night and even some this morning. We did not get to a conclusion. We did not," Ackerman said. "Democrats did not want to meet us anywhere on some of our proposals so we are now going to present some more of our ideas.

Sen. Tom McClintock, R-Thousand Oaks, said the budget plan is based on faulty economic assumptions. "The claim that this budget is only a half-billion dollars out of balance is simply a monstrous ... how do I put this politely ... a mathematical malfunction," he said in a late night floor speech.

The budget plan was approved by the Assembly before dawn Friday, freeing members of that house for a four-week summer recess.

Members of the Senate, however, were less fortunate.

Throughout Friday night and early Saturday morning, senators were confined to the chamber and had to have permission to go to their their offices. To distract themselves, they read, listened to iPods, and played Sudoku on their laptops.

A window long thought to be sealed was opened, allowing senators to access the south balcony.

Republicans in the upper house say the budget bill doesn't go far enough to bring state spending into balance with revenues. Sen. Dennis Hollingsworth, R-Temecula, noted the state faces a $5.5 billion deficit in the 2008-09 fiscal year. Unless lawmakers reduce automatic growth in programs now, he said, the state will be forced to make "draconian cuts" later.

"The threat is there, the threat is real. It is unavoidable," Hollingsworth said during a floor debate before the bill came up for a vote.

The Senate initially voted 25-14, failing to obtain the necessary 27 votes - or two-thirds - necessary for passage.

Moderate Republican Sen. Abel Maldonado abstained. He plugged his ears with his fingers when Perata called for a recount of votes an hour later.

Democrats characterized Senate Bill 77 as a compassionate and fiscally sound spending plan. While it takes away more than $1 billion in dedicated public transit funding, Democrats argued it would be backfilled by new infrastructure bonds.

"It protects our seniors and our children," said Sen. Denise Ducheny, D-San Diego.

Schwarzenegger said the Legislature has done a "magnificent job" in driving the deficit down to $700 million, roughly half of what he proposed. The governor indicated he would cut more using his "blue pencil" authority.

Ackerman, who leads minority Republicans, said the GOP wants language in the budget to prevent the state from suing local governments if they fail to consider climate change in their development plans.

Sen. Bob Dutton, R-Rancho Cucamonga, said Attorney General Jerry Brown recently sued San Bernardino County for failing to comply with the California Environmental Quality Act - the law that ensures planners consider the impact of a project on the local environment.

Republicans, he said, want to create a "safe harbor" by preventing Brown from filing such lawsuits.

Perata refused to negotiate further.

"We've made as many concessions as we will, and I'll stay here as long as is necessary," the Democratic leader said.

Both parties in the Senate agreed that a package of tax breaks for business that helped win Assembly passage of the state spending plan in the wee hours of Friday morning would not get much of a look.

The Assembly tax package was designed to benefit numerous types of business activity, including research and development, the airline industry, the shipping industry, and movie or television production.

Perata called the last-minute compromise "an irresponsible action to take in the dark of night, without any debate or discussion."

He also argued that the bill appeared to have drafting errors that could hurt the businesses it was designed to help, saying it appeared to have been "written by chimpanzees."

In a memo to the Senate sent on Friday, Assembly Speaker Fabian Núñez and Assembly Republican leader Mike Villines said the centerpiece of the tax-cut plan was poorly drafted and the legislation, Senate Bill 98, "inadvertently" applied a sunset clause to "existing research and development provisions of California law."

Perata declared the tax deal, which promised about $500 million a year in tax breaks in an effort to secure Republican votes for the bill, "DOA" and a "non-starter," adding that he would derail the measure without a Senate floor vote.

The tax bill is not directly linked to the budget bill.

Senate Republicans, meanwhile, were criticizing the budget bill even before Perata turned thumbs-down on the tax breaks embraced by many of their Assembly colleagues.

For hours Friday, Senate Democrats and Republicans held separate caucuses to discuss concerns and decide what action to take.

Perata said his Democratic caucus supports the budget bill itself, but not the Assembly's companion tax compromise.

Providing tax breaks would lower the state's revenue base, thus jeopardizing future funding for schools, public health and public safety, Perata said.

The Senate conceivably could break the logjam by negotiating separate concessions with Senate Republicans, but that would require the Assembly to return from recess.

"We're not coming back under any circumstances," said Steven Maviglio, a spokesman for Núñez.


by Dan Walters – Sacramento Bee Capitol Bureau
7:50 pm PDT Friday, July 20, 2007

The convoluted, multifaceted and almost impenetrable political thicket surrounding the state budget recalls a line in movies made by 1930s comedians Stan Laurel and Oliver Hardy.

When the two loonies would find themselves in some seemingly intractable dilemma, Hardy would turn to Laurel and scowl, "Well, Stan, this is another fine mess you got us into." And Laurel, tears welling in his eyes, would whimper, "Sorry, Ollie."

Plug in Senate President Pro Tem Don Perata and Assembly Speaker Fabian Núñez, and you get the idea.

Núñez created the fine mess when he more or less caved into Republican demands to reduce the state's chronic budget deficit and enact a multibillion-dollar package of tax breaks for various business groups. The Assembly passed the budget bills and the tax bill about 4 a.m. Friday and then adjourned for a month, with members scattering across the globe.

Hours earlier, Perata had denounced the tax breaks for giving away millions to business while tax credits for teachers were being eliminated and benefits to the aged, blind and disabled were being scaled back to narrow the budget gap. "How could you throw them over for Hollywood movie moguls and multinational corporations?" Perata asked Núñez in a sharply worded letter.

After the Assembly passed the tax breaks anyway, Perata declared them to be dead-on-arrival in the Senate. "It's an irresponsible action to take in the dark of night, without any debate or discussion," Perata said, later adding that it appeared to have been "written by chimpanzees." Republican senators refused to back it, as well, because it inadvertently wiped out a longstanding research tax credit and, eventually, Núñez admitted it was drafted incorrectly.

Republican senators were a little scornful of their Assembly counterparts. "It appears to be that the Assembly was too quick to go on vacation," Sen. George Runner, R-Lancaster, observed, saying of GOP Assembly members: "I just think they were snookered."

The dustup over taxes, however, was just one aspect of the mess. More fundamentally, Republican senators demanded tighter restrictions on spending to narrow the operating deficit even more and ease projections of big deficits in future years.

"We've been spending much, much more than we've been taking in," Senate GOP leader Dick Ackerman said as he and other Republicans refused to vote for the package of budget bills late Friday afternoon.

Republicans also had a laundry list of non-financial demands, including curbs on Attorney General Jerry Brown's lawsuits against local governments over growth plans that failed to account for greenhouse gas emissions. Brown described the demand, backed by developers, as "an outrage."

Perata reacted by locking up senators indefinitely, requiring them to remain "on the red carpet" - inside the Senate chambers - and suggesting that they begin thinking about ordering breakfast. When a few GOP senators tried to leave for their offices, Senate sergeants-at-arms locked the chamber's doors and turned them away.

Given the lengthy list of Republican senators' demands, it is very uncertain when - or if - the impasse would be resolved; Perata said he was "done negotiating." But even if there were to be some deal in the Senate, the Assembly's recess would make it very difficult to reconvene that house to complete budget action.

Even before the Senate met, a Núñez spokesman declared that "we're not coming back under any circumstances" and if the impasse continued, "the Senate will have to live with that."

Núñez, however, also would have to live with a prolonged impasse that would alienate voters further and dim prospects for passing a Núñez-backed ballot measure to ease legislative term limits.


By Shane Goldmacher – Sacramento Bee Capitol Alert

5:00 pm PDT Friday, July 20, 2007

In a memo to the Senate sent on Friday, Assembly Speaker Fabian Núñez and Assembly Republican leader Mike Villines reveal that the centerpiece of the tax-cut plan passed in the wee hours of the morning was miswritten and the legislation, Senate Bill 98, "inadvertently" applied a sunset clause to "existing research and development provisions of California law."

The tax cut proposal had already received a cold shoulder in the Senate on Friday, where Senate President Pro Tem Don Perata said the bill looked as if it had been "written by chimpanzees."

In a letter sent to Núñez late Thursday night, Perata urged the speaker not to include tax cuts for businesses in the budget.

"We have surrendered $185 (million) in teacher tax credits to balance the budget!!!" Perata wrote. "How could you now throw them over for Hollywood movie moguls and multi-national corporations???"

Specifically, the tax incentives, according to Villines' office, will promote research and development, keep more of the film industry in Hollywood, and create tax exemptions for the purchase of jet fuel. The total value was estimated to be as high as $500 million by Perata.

But the section covering research and development tax credits in SB 98 was subject to a "drafting error," according to the memo obtained by Capitol Alert.

"One particular area of emphasis in Senate Bill 98 is the area of research and development tax credits, and in particular conforming California's tax law to the federal Alternative Incremental Credit (AIC). SB 98 provides a full five-year conformity to this enhanced federal credit," Nunez and Villines wrote. "However, in the final draft of Senate Bill 98, a technical drafting error inadvertently applied this five-year sunset to the existing research and development provisions of California law, and not the specific change to the AIC."

"All parties to the debate, discussion and drafting of SB 98 agree that this was not the intended result," the memo continues.

Núñez and Villines, however, hold firm that the Assembly has adjourned for summer recess and will not return until mid-August.

"As Speaker and Assembly Republican Leader, respectively, we are pleased to have been able to come to agreement on a significant tax incentive and economic stimulus package. Upon our return from the Summer Recess, we will take the necessary steps to correct any concerns or inadvertent consequences due to this drafting error," the memo concludes.

Meanwhile, the Senate, in an initial vote, has rejected the budget passed by the Assembly in a party-line vote, with Republicans opposed.

Below is the full memo:

TO: Interested Parties

FROM: Assembly Speaker Fabian Nunez

Assembly Republican Leader Mike Villines

DATE: July 20, 2007

RE: Drafting Error in Senate Bill 98 Related to Research and Development Credit

We write both to bring to your attention an inadvertent drafting error by Legislative Counsel in Senate Bill 98, which passed off the Assembly Floor last night with strong bipartisan support, and to express our mutual understanding to address this drafting error in August.

As you know, SB 98 contains numerous provisions, all of which provide enhanced taxpayer incentives to bring new jobs and capital investment to California. One particular area of emphasis in Senate Bill 98 is the area of research and development tax credits, and in particular conforming California's tax law to the federal Alternative Incremental Credit (AIC). SB 98 provides a full five-year conformity to this enhanced federal credit.

However, in the final draft of Senate Bill 98, a technical drafting error inadvertently applied this five-year sunset to the existing research and development provisions of California law, and not the specific change to the AIC. All parties to the debate, discussion and drafting of SB 98 agree that this was not the intended result.

As Speaker and Assembly Republican Leader, respectively, we are pleased to have been able to come to agreement on a significant tax incentive and economic stimulus package. Upon our return from the Summer Recess, we will take the necessary steps to correct any concerns or inadvertent consequences due to this drafting error.


By Dan Weintraub – Sacramento Bee Captiol Alert

July 18, 2007

The LA Times reports this morning that Republicans have proposed to "slash" aid to the schools by $400 million and the Democrats say that will happen, essentially, over their dead bodies. The school lobby is deeply disappointed in the Republicans for considering such a thing.

Nothing against my friends at the LAT, since the Republicans deserve to be slapped when they whisper this stuff in private rather than explaining it to all in the light of day, but a little more context might help here. It sounds as if the Republicans might be talking about adjusting the Prop. 98 estimate for the coming year. That estimate is tied in part to the state's revenues. In May, Schwarzenegger increased the Prop. 98 number for 07-08 to reflect higher projections for tax revenues in the coming year. Then before the ink was dry on those numbers, the actual tax collections started coming up short, to the tune of $800 million already in just May and June.

The Democrats' budget "slashed" about $400 million from the schools to reflect those lower revenues in the current year, but kept with Schwarzenegger's assumption for the minimum in the coming year. If you assume that the lower than expected revenues in May and June will be continue in soft collections in the rest of 2007 and 2008, you would also expect the Prop. 98 minimum to be a bit lower. I'm guessing that is what the Republicans have suggested.

Now let's look again at the "slash."

When the budget was approved last summer, the schools stood to get $55.1 billion from state and local taxes, a ten percent increase over the amount originally budgeted the year before -- despite essentially zero growth in enrollment.

The governor's May revision increased the current year amount by $371 million to reflect the higher revenues, and proposed $57.6 billion for the coming year.

The Democrats' plan approved by the conference committee backed out that extra $371 million for this year.

If, indeed, the Republicans are now proposing $400 million less for next year, that would mean the schools budget would grow from $55.1 billion to $57.2 billion, an increase of $2.1 billion, or just under 4 percent.

K-12 attendance, by the way, is expected to decline by about 28,000 from this year to next.


By Dan Walters – Sacramento Bee Capitol Alert

4:47 pm PDT Thursday, July 5, 2007

Capitol legend has it that the state's politicians can't enact a new state budget until the temperature in Sacramento hits 100 degrees.

Triple-digit temperatures arrived this week, so that impediment, if it exists, has vanished. But there are no indications, as yet, that the three-way budget wrangle involving Democratic and Republican legislators and Gov. Arnold Schwarzenegger, who's caught in the middle, will be resolved quickly.

It's an old story in the Capitol. Although the governor and lawmakers produced an on-time budget last year, thanks to a surge of revenues, that was the first time the state had a budget on place for the July 1 beginning of the fiscal year since 2000 and only the fourth time in the last two decades, according to a chart prepared by the Department of Finance.

The latest a budget was enacted, at least since 1977, was Sept. 2, 1992. Then-Gov. Pete Wilson and legislators were deadlocked over how to handle a humongous budget deficit created by the worst recession in a half-century. A year later, in 1993, however, Wilson and lawmakers produced one of the state's rare on-time budgets.

Schwarzenegger's revised budget is available here.

If you want a summary of what the Democrats want in the budget, contrasting with Schwarzenegger's major proposals, it's available here.


By Dan Walters – Sacramento Bee Capitol Alert

Published 10:00 pm PDT Wednesday, June 27, 2007

Gov. Arnold Schwarzenegger crows loudly and often about how "post-partisanship" is the Capitol's new operating credo and that he and the Legislature's Democrats are working together on the state's knottiest issues.

A new poll, however, indicates that Californians, both voters and nonvoters, are increasingly skeptical about the ability of Schwarzenegger and Democratic lawmakers to perform as promised - even though they continue to give the Republican governor very high approval ratings.

The poll is the latest in a frequent series of attitudinal surveys by the foundation-supported Public Policy Institute of California, and among its other findings is the increasing preoccupation of Californians with illegal immigration.

"Immigration tops just about everyone's list of the most important issues facing California today," PPIC says in a summary of its poll. "This holds true across regions, political parties, racial and ethnic groups and gender."

PPIC president Mark Baldassare finds that fixation puzzling, since the state has almost no power to affect immigration, legal or illegal. "State leaders cannot make immigration policy but they will continue to feel the fallout of voter discontent over its effects."

The poll found strong support for immigration reform, especially for the general thrust of the measure being pushed by President Bush to give illegal immigrants a pathway to legalization - although Bush's own popularity in California has sunk to what PPIC describes as "nearing rock bottom," just 28 percent.

Of more immediate concern to the Capitol's politicians is the poll's finding that Californians are becoming somewhat disenchanted with their performance - which may stem, the poll indicates, from the upbeat promises that Schwarzenegger and legislators made earlier in the year about their intention to attack health care and other pithy issues.

That could be bad news for Democratic legislative leaders who want voters to pass a measure to loosen up on legislative term limits. The Legislature's popularity is scarcely half of Schwarzenegger's, and he's been threatening to oppose the term limits measure if Democrats refuse to overhaul the process of drawing new legislative and congressional districts after the decennial census.

The survey found that Californians generally endorse Schwarzenegger's health care proposal, including mandatory coverage and "shared responsibility" among consumers, government, employers and health care providers for the cost.

Other findings include strong support for abortion rights, a nearly even division on same-sex marriage and continuing support for Democrat Hillary Clinton and Republican Rudy Giuliani for their parties' presidential nominations.

The survey can be accessed here

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