Steinberg v. Pérez: LEGISLATIVE LEADERS AT ODDS OVER BUDGET -- Senate president's bipartisan work on earlier budgets has cost him popularity in the Capitol. Labor leaders back freshman Assembly speaker's plan despite its heavy borrowing and questionable legality.

By Evan Halper and Patrick McGreevy, Los Angeles Times | Reporting from Sacramento

June 26, 2010 -- The willingness of Darrell Steinberg, the liberal California state Senate leader, to collaborate across party lines won him a lofty Profile in Courage Award from the John F. Kennedy Library in Boston earlier this year.

But back in Sacramento, some of the power brokers who once nurtured Steinberg's career are less enthralled.

Steinberg

Organized-labor leaders, who hold considerable sway over the Legislature, are working to sideline Steinberg (D-Sacramento) in budget negotiations. They complain that his efforts to compromise too often result in capitulation. They question his loyalty. They wonder if his crusade for a lasting solution to the state's accounting mess is just a liability.

They see an alternative in Democrat John A. Pérez, the rookie Assembly speaker from Los Angeles whose spending proposal would generously fund programs these labor leaders value without piling onerous new taxes onto Californians — mostly through massive borrowing of dubious legality. Pérez is approaching the budget as a rigid partisan, vowing to boycott talks with the governor if Democratic demands are not immediately met.

Pérez

Steinberg and Pérez are jockeying for position in negotiations. Steinberg says it is time to make the painful policy moves needed to shed the state's reputation for fiscal incompetence. But he is meeting considerable resistance as Pérez essentially proposes postponing the day of reckoning — perhaps until a Democrat is in the governor's office.

Steinberg — who in his decade in the Legislature has chaired fiscal committees and negotiated through the night on budget packages — says he refuses to fret about the politics.

"People think state government has become a joke. I am trying to make things better," he said.

But Steinberg's experience has become a liability. Few were pleased with the last several budget deals, which included painful reductions in government services to keep the state solvent. The other three legislative leaders honored by the Kennedy Library for their role in brokering the February 2009 bipartisan accord that saved the state from financial ruin are no longer in their posts. Two were ousted by their own caucuses.

The California Teachers Assn. recently posted billboards in Steinberg's district implying that he sold out teachers — and his constituents — in previous budget deals.

Another union spent heavily in a bid to defeat a Senate candidate whom Steinberg backed — a move widely interpreted in the Capitol as an attempt to weaken the Senate leader.

Labor leaders expressed further disappointment in Steinberg in a meeting earlier this month when he told them he would not rule out a budget agreement that rolled back some retirement benefits their members receive.

Steinberg says he is becoming accustomed to the attacks. "I used to see a billboard or newspaper story and be upset for a week," he said. "Now it is 15 minutes, maybe a half-hour."

The most frustrating thing about the criticism, he says, is that he still considers himself a true progressive and argues that his voting record reflects as much.

"I have not changed my values, what I came here for," he said. "But in this position you have to govern."

Meanwhile, a campaign has been launched to boost Pérez's budget plan.

The California Faculty Assn. is running radio ads to champion it. The California Labor Federation has encouraged members to pressure legislators to support it. County supervisors across the state are being lobbied to pass resolutions endorsing the plan.

One such resolution being considered in San Francisco says the Pérez plan would protect 465,000 jobs, prevent slashing the social safety net, jump-start the green tech industry and stop cuts to schools. It does not mention borrowing.

"Someone has got to start thinking outside the box in how best to address this problem," said David Sanchez, president of the teachers union. "We are encouraging our members to call senators and tell them to support the Assembly plan."

Pérez and Steinberg say only nice things about each other, even as Capitol corridors are abuzz with gossip of a rivalry. Comments the two made at a recent roast in Steinberg's honor fueled such talk.

Steinberg joked that Pérez had put a lot more thought into his speech ribbing Steinberg than he had put into his budget plan. Pérez expressed mock alarm that Steinberg was sitting near the governor's chief of staff, suggesting that any time the two are in the same room the Senate leader agrees to dismantle another government program.

Pérez, who calls his plan the Assembly "jobs budget," says it is rooted not in political gamesmanship but in sound fiscal policy. He says continuing to shred the social safety net and underfund schools will do substantially more harm to the economy than would pushing the deficit forward.

"Over the last couple of years we have done a lot of buckling down, some of which was absolutely necessary and some of which was situational and shortsighted," he said. "I am not at all apologetic about the fact that my approach is predicated on the notion that it is important for us to stabilize and protect and grow employment in the state of California."

Some measure of borrowing is typical when there is a deficit, but not to the extent Pérez wants. The last time California borrowed so heavily for the budget was in 2004, and voters amended the Constitution at the time to prohibit it from happening again.

With the clock ticking — the new budget year begins July 1 — the viability of the Pérez plan is in doubt. Atty. Gen. Jerry Brown's office sent a letter last week to the governor's legal staff saying the plan appears to run afoul of the borrowing ban. State Treasurer Bill Lockyer said the attorney general's finding alone would probably prohibit him from selling the bond at the center of the plan. And a state audit exposed numerous problems with the pot of state money the Assembly plan proposes to borrow against, further undermining the plan.

Pérez says adjustments are being made. But other Democrats question how much flexibility he has left himself — and has left them — to overhaul the proposal now that so many special interests have become so invested his approach.

The unions "have been organizing a campaign around it and [Pérez] has been organizing a campaign," said Senate Budget and Fiscal Review Committee Chairwoman Denise Ducheny (D- San Diego). "People have to be cautious about something that just may, on a practical level, not be doable."