CSUN University News Clippings

Rhetoric reigns as California IOU deadline nears

(June 30, 2009)

By Steve Wiegand and Kevin Yamamura

The quest to balance the state budget remained mired in sharp rhetoric and fruitless votes Monday, as the clock ticked nearer to California running out of cash and paying its bills with IOUs.

Senate Republicans blocked a trio of bills that promised to stave off the need for IOUs for a few weeks. Senate Democrats passed a budget-balancing package of seven bills that Gov. Arnold Schwarzenegger said would be dead on arrival at his desk.

The Republican governor has backed off initial demands to eliminate safety net programs such as welfare-to-work and Healthy Families insurance for low-income children to bridge a $24 billion deficit. But he wants Democrats to accept $2 billion in deeper spending cuts, in addition to an overhaul that reduces pension benefits for new state employees.

Schwarzenegger also wants Democrats to reconsider borrowing $2 billion from local governments rather than raise revenues through oil or cigarette taxes, according to an administration document. He plans to keep state parks open, while he still wants to reduce state worker pay by 5 percent.

Democratic leaders dismissed the possibility of reaching a complete deal on those terms by midnight tonight and accused the governor of leveraging the state’s dire situation to impose long-term changes that would help his legacy.

“In the political vernacular and the inside game, they call it a leverage play,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento. “And it’s not the way to go about working with people.”

Democrats said the governor should instead accept a three-bill, $5 billion stopgap solution that would free up enough cash to avoid IOUs through most of July and give lawmakers more time to negotiate the rest of the budget package.

The trio of bills would cut spending on education in the fiscal year that ends tonight at midnight; defer payments to schools, colleges and local governments that are due early in the fiscal year that begins Wednesday until later in the year; and redirect money from local redevelopment areas to school districts.

If they’re not signed by midnight tonight, the state loses the chance to save $3.3 billion in cuts still available in the expiring fiscal year.

The Assembly overwhelmingly approved the bills last week on bipartisan votes, but Senate Republicans refused to vote for them. Because the measures need two-thirds approval so they can take effect immediately, the GOP senators’ refusal blocked them.

Assembly Speaker Karen Bass, D-Los Angeles, accused Schwarzenegger of orchestrating Senate GOP opposition, and called on him to “release” those members to vote for the $5 billion stopgap solution.

Earlier in the day, Senate Democrats passed a package of majority-vote bills that included deep cuts, tax and fee increases and accounting tricks. No Republican senator voted for any of the package’s bills, and the governor repeated he would kill them if they are sent to his desk.

“What they’re working on right now is, I think, all part of the kabuki,” Schwarzenegger said. “They’re wasting time by going through those drills, by trying to pass a simple majority illegal tax increase. I will never sign anything like this.”

Even if the governor did sign them, they wouldn’t take effect for 90 days, too late to head off the issuance of IOUs by state Controller John Chiang, which Chiang has said would start Thursday.

Chiang and state Treasurer Bill Lockyer have repeatedly warned that if a balanced budget is not in place Wednesday at the start of the fiscal year, it will be extremely difficult to borrow enough money on Wall Street to meet the state’s cash flow problems.

There has apparently been little progress in negotiations toward an overall plan acceptable to Republicans, who want no taxes or fees and deeper cuts, and Democrats, who have vowed not to accept deeper cuts in health and social service programs to the poor, elderly and disabled.

Schwarzenegger initially sought to eliminate the state’s welfare-to-work program, Cal Grants for college students and Healthy Families low-cost medical insurance for children. But recognizing that Democrats won’t agree to wholesale eliminations, he asked for roughly $2 billion in deeper spending cuts than Democrats want, while still preserving those programs.

“We’re not cutting deeper,” Steinberg told Senate Republicans during debate on the Senate floor. “Just as you told us to hear you loudly (on taxes), hear us loudly: It’s not where we will go.”

In addition to deeper cuts in social service and health programs, the governor presented Democratic leaders on Saturday a list of reforms he wants.

They include greater anti-fraud efforts in the state’s in-home care programs, streamlining enrollment procedures for other social service programs and changing the pension system for future state employees.

Steinberg said that while Democrats were willing to consider the proposals, they were reluctant to do it in the dwindling hours before the fiscal year starts and the IOU threat gets closer. They shifted their focus late Monday to the $5 billion stopgap solution, believing it would be difficult to reach agreement on the entire $24 billion plan by Tuesday.

Republican senators stuck to a position they share with the governor: The whole budget gap must be closed at once, and not nibbled at.

“The time is passed for just doing one part of the problem,” said Sen. Bob Dutton, R-Rancho Cucamonga. “We don’t have any choice but to deal with the whole thing.”

Publication: Sacramento Bee