So the State Senate pushed through the creative, $18 billion-dollar lawsuit bait of a budget moments ago by a vote of 23-15.  Republican Sen. Mark Wyland abstained and there are only 39 Senators in the chamber, with Mark Ridley-Thomas’ seat currently vacant.  That means there was one Democratic “No” vote.

Thanks, Lou Correa.  

A vote is expected in the Assembly later today, and I don’t think anybody knows whether or not the Governor will sign it.  He asked for a bunch of “economic stimulus” reforms and only a few of them made their way into the final bill.

Nail-biter time.

…OK, these bills are on the Governor’s desk.

Democratic legislators today sent Gov. Arnold Schwarzenegger a complex and controversial package of tax increases and program cuts, an $18 billion effort designed to avoid the need for Republican votes that GOP leaders called illegal.

The state Senate and Assembly made their way through the package of bills required for the maneuver, voting along party lines on tax increases while jointly backing other proposals to hasten public works spending. Republicans opposed the tax proposals and accused majority Democrats of breaking the law.

There is some relaxation of environmental legislation in the package.  Now we wait to see if the Governor signs it.

…within minutes, the Yacht Party caucus in the Assembly dashed off a letter to the Governor urging him to veto, calling it “the Democrat’s illegal tax package.”  Every member signed it but one – Paul Cook.  And contrary to my musings that he was in a tough election fight and might want some distance from the crazies, Shane Goldmacher sez he’s out sick.

UPDATE by Robert: Sure enough Arnold says no to the deal. Arnold has the Republicans’ back, never let there be doubt about it. He’s perfectly willing to let the state collapse, even after he got his pound of worker and environmental flesh.

I urge anyone who cares about California to listen to yesterday’s Which Way, LA.  It’ll make your hair stand up.  The program was about the decision by the Pooled Money Investment Board (basically Treasurer Lockyer, Controller Chiang and Schwarzenegger’s Finance Secretary Mike Genest) to shut down almost 2,000 public works projects, from schools for the deaf in Riverside to highway improvements along the 405, from hospital construction to transit projects and fire prevention services in heavily forested areas, affecting the entire state and as many as 200,000 jobs over the next several months.

The problem is that California is out of money. But it’s bigger than that.  The state floats revenue anticipation bonds to cover these kind of public works projects, and indeed the voters approved all kinds of infrastructure bonds in 2006.  The issue is that investors simply won’t buy them.  They believe that California will default on their commitments at some point or another (though it’s never happened before) due to the instability of the budget process.  Coming up with a work-around to get the budget more balanced (at the expense of hard-won labor rights for public employees, it appears) will go some of the way to fixing that, but NOT all the way.  We’re at a point of extremely low investor confidence.  California has the worst bond rating in the country.  So it’s not at all clear that the shovels will be picked up again even if the legislature passes and the Governor signs a budget deal.  The systemic budget cycle of catastrophe is what’s keeping investors away.  And of course, if the work-around falls apart or the courts strike it down, the state will be out of money in February and vendors will start receiving IOUs.

What’s more, if the Obama Administration offers massive infrastructure spending as part of a recovery package early in his term, EVEN THAT won’t necessarily get these projects going.  As I understand it, federal grants of this nature often require up-front money from the states, and the opportunity for matching funds if the state kicks in the first 25%.  At this time we don’t have that money, so we wouldn’t be able to access the match.  I assume Speaker Pelosi knows this, but it will be difficult to alter the standard practice on this kind of federal spending.

We’re talking about 200,000 lost jobs and an infrastructure shutdown at precisely the moment when infrastructure spending is seen as the key to economic recovery, with multiple obstacles to getting them going again.  And the state could be liable for whatever rises as a result of the shutdown:

Lockyer and other members of the Pooled Money Investment Board predicted that unless the state balances its budget, the funding shut-off will further harm the economy and expose the state to lawsuits.

“The likelihood of contract breaches is probably 98 percent,” Lockyer said […]

Also at financial risk is a new levee on the lower Feather River in Yuba County and a planned bolstering of Folsom Dam for flood protection.

Assemblyman Dan Logue, R-Linda, said the suspension of state funding for the Feather River levee project, already under construction, would put 40,000 people at risk in an area that has flooded twice in the past 25 years […]

“This (could) put tens of thousands of people’s lives at risk, and I believe the state will be liable if there is any damage,” Logue said. “The state is responsible for those levees in the first place.”

This looks to me like an unending nightmare.  If I were Hilda Solis or any California politician, I would want to get the hell out of this state too.  It looks like it’ll fall into the ocean.  But hiding from the problem is a mistake.  This has the potential to take down whatever economic recovery we may see come January.  The federal government needs to provide direct relief, not grants, to the state, or at the very least guarantee the bond issues so that we can restart the issuance of revenue anticipation notes.  You can run, but you can’t hide from California.

(I’ll be on the Bay Area’s Green 960 tonight with Angie Coiro to talk about the budget mess. I should be on around 7:15. You can stream live here. – promoted by Brian Leubitz)

After a few failed attempts at a vote on the most recent majority vote package, the Governor is threatening a veto if he doesn’t get some “stimulus.” By way of explaining what the Governor’s words really mean, please just replace the word “stimulus” with “screw California’s workers.”  After all, it’s not like Schwarzenegger thinks we can give some sort of tax break or anything, no he’s talking about cutting overtime to employees, allowing shorter breaks, and generally taking a machete to worker’s rights in this state.  So, you know, we’ll be “stimulated.”

Both houses of the Legislature attempted to get a vote done last night, but that was pushed back to this morning:

Both houses of the Legislature were to convene this evening to vote on a new Democratic budget plan that raises taxes without two-thirds votes but the sessions were delayed as legislative leaders negotiated for a signature from Republican Gov. Arnold Schwarzenegger.

Schwarzenegger reportedly was demanding concessions from Democrats on regulatory and labor laws that business groups have been demanding – changes that the Democrats’ allies in labor and environmental groups strongly oppose. (SacBee 12/17/08

This really is a strange situation, the Governor knows that he has a bit of leverage on this with the Legislative Republicans out of the picture, so he’s back to his right-wingish self. Attacking labor and quietly expanding the Chamber of Commerce’s stranglehold over the Horseshoe, he really is getting a knack for this. And yet, the situation is such that negotiation on these terms is mandatory, despite the fact that Arnold’s ridiculous “Car Tax” BS caused all of this.  Shock Doctrine anyone?

Meanwhile, Tony Strickland, showing his true stripes, has got the Howard Jarvis Taxpayer’s, and other assorted rightwingers all ready for a lawsuit against the proposed deal. If you happen to be in the Capitol, check out their presser this morning at 10 in Room 4203. If this gets a signature, we will surely see a lawsuit about 3 seconds afterwards. And no amount of Arnold cozying up to Jon Coupal on Prop 11 will avoid that.

UPDATE: Shane Goldmacher is reporting that Speaker Bass thinks the Governor will sign the bill as revised.  The bill includes some, but not all, of the Governor’s “stimulus” ideas.