You can browse the Calitics live feed of the Governor’s May “this is not a revise” Revise, if you’re a glutton for punishment.  Basically, Arnold used a taxpayer-funded press conference to scare the public into voting for his ballot measures, vowing to fill a $21 billion dollar budget gap with a mess of cuts, some borrowing, and no new revenues, in taxes or fees, suggesting that the majority-vote fee increase idea would get a veto.  He’s including cuts that would spur the loss of stimulus funds, with the caveat that he would sweet-talk the Obama Administration to allow the funds to go through despite the cuts.  He’s floating a raid of state and local governments.  Essentially he’s lined up fully with the right wing of the Yacht Party to drown the state and make it impossible to climb out of this recession.  Calitics will have more coverage of this in the coming days.

So, with that, a bit of more promising news.  The state’s Congressional delegation will fight for a federal backstop for California’s bonds.  Well, at least the Democrats in the delegation.

“California faces a tremendous budget deficit and cash flow crisis, which requires immediate attention,” said Democratic Rep. Doris Matsui of Sacramento. “There is no panacea for addressing California’s budget issues at the federal level. However, it’s time for the federal government to step in and temporarily guarantee bonds until the economy improves.”

Matsui is working on a bill with Democratic Rep. Barney Frank of Massachusetts, the chairman of the House Financial Services Committee.

Proponents say they’re not asking Washington for a bailout, merely trying to lower the state’s borrowing costs by having the federal government back its loans.

Critics say it would be a drastic mistake that would jeopardize the federal government’s AAA credit rating, noting that California ranks as the worst credit risk among the 50 states.

“That’s never been dhttp://www.blogger.com/img/blank.gifone, and I think it’s never been done for good reason,” said Republican Rep. Dan Lungren of Gold River.

He said the federal government can’t afford to back bonds for every state, adding: “If California does it, other states are going to be standing in line, with New York right behind them.”

Does Dan Lungren have a functioning brain?  A federal backstop would cost the government $0.00 dollars.  The guarantee would lower borrowing rates.  The chances of the state defaulting on these loans is about 0.000001%.  California has never done so in its history, as much as the Yacht Party would like it to happen (then they’d get the REAL reform, is I believe how it goes).  Ultimately this would save the state $1 billion dollars in interest on these loans.  The federal government has spent $700 billion on the same financial firms trying to gouge the state on these bonds.  I think it’s a fair trade.

Not that $1 billion is more than a drop in the bucket in the overall picture of things, but I figure you need a little sugar with your rainstorm…

UPDATED at the top, as the Governor lays off 5,000 state workers, the perfect thing to get California working again.  He’s basically borrowing from the Whitman playbook here.  See below for why that’s crazy.

It’s a long way until the 2010 Governor’s race, but I think Calitics needs to do our part in pointing out that Meg Whitman is frequently full of crap.  She’s seized on this idea that California’s problems can merely be solved by firing all the state employees.  Now, first of all, California has the second-lowest rate of state employees per capita in the entire nation, a conveniently forgotten fact by eMeg and the rest of the swinging corporate raiders in the Yacht Party.  Next, as Josh Richman explains:

“We haven’t looked hard enough at where we can cut. We can lay off 20,000 to 30,000 state employees while prioritizing public safety and teachers,” Whitman told the Long Beach Chamber of Commerce. “We shouldn’t have to lay off teachers, we need to lay off bureaucrats.”

Fact is, “cut the bloated bureaucracy” has been a GOP rallying cry for decades, and yet whenever the study, the audit or the blue-ribbon commission report comes back, we’re suddently talking about far less “waste, fraud and abuse” than they’d implied. Is there some fat to cut? Sure. Should we? Probably. Will it fix this deficit? Not even close.

The budget deficit now looks to be about $21.3 billion; it would be about $15 billion if voters approved Propositions 1C, 1D and 1E next week, but that almost certainly ain’t gonna happen. And $21 billion isn’t 30,000 jobs, as George Skelton so eloquently put it back in February:

According to the state budget document, there is the equivalent of 205,000 full-time jobs controlled by the governor. There actually are more workers than that because some are part-time. Do the math based on 16 months, since that’s now the time frame of the projected deficit, assuming a balanced-budget package could be implemented by March 1.

You could lay off all those state workers – rid yourself of their pay and benefits – and save only $24.4 billion.

Meanwhile, you would have dumped 160,000 convicted felons onto the streets because all the prisons were closed after the guards and wardens were fired. There’d be no Highway Patrol because all the officers were canned. State parks would be closed because there were no fee-collectors or rangers.

Truth is the savings wouldn’t even add up to $24.4 billion because some of those employees are paid out of small special funds that are self-sustaining.

If these people were in an empty trash bin, they’d still clamor to “cut the waste.”

Let me again commend Chris Kelly’s Meg Whitman week on the Huffington Post, he’s doing an oppo research job that should practically ensure him a spot on any number of campaign staffs.  I particularly like the part detailing the $1.78 million she stole from Goldman Sachs, which for all I know might make her a folk hero.

Next year oughta be fun.

…by the way, I’m not letting other Yacht Party gubernatorial hopefuls off the hook either, like Tom Campbell.  He predictably dissembles about California’s low per-pupil spending on K-12 education, making the same debunked “hey, the schools have plenty of money” claim that Dan Walters likes to peddle.  Allow me to introduce them both to Julia Rosen circa April 2008, which by the way is before the even deeper cuts to schools made in the February budget agreement.

…And if you want to laugh, read this “we’re winning, and the fact that everyone makes fun of us PROVES it!” op-ed from Whitman senior adviser Jeff Randle.

As the special election swirls the bowl, I think one of the enduring memories I will have is the late-campaign decision on the part of the Governor to ignore the current budget deficit.  That’s right, ignore.

In the final sprint to Tuesday’s election, Gov. Arnold Schwarzenegger has warned day after day of teacher layoffs, fire-station shutdowns and other dire consequences if voters fail to pass budget measures that would produce almost $6 billion to ease California’s fiscal crisis.

Yet Schwarzenegger and his allies have abandoned TV advertising — the main vehicle for reaching voters statewide — on the three measures that would generate that money: Propositions 1C, 1D and 1E.

Instead, they are running TV ads solely for Propositions 1A and 1B, measures that would do nothing to slow California’s slide toward insolvency this summer, but in future years could help the budget’s bottom line and Schwarzenegger’s political image.

It’s really all you need to know about this special election – at a time when the Governor is flailing madly, casting about for things to sell like someone rummaging through his things for a garage sale, and threatening all sorts of cuts and mass prisoner release and 100 other options for closing the current budget gap, his campaign committee pushes the only measure on the ballot that would do NOTHING to close the current budget gap.  He just wants his long-sought spending cap and unilateral executive authority to make budget cuts.  It’s all, as said above, about image.

Randy Bayne reports that Gary Davis, a member of the Elk Grove City Council, has announced that he will run against Dan Lungren in CA-03.  He’s unveiled an official campaign website named Davis Beats Lungren, which certainly displays confidence.  

Davis also works as the Political Director for EdVoice in addition to serving on the Elk Grove City Council, and was a legislative director for Darrell Steinberg when he served in the State Assembly.  EdVoice has lined up on the “reformer” side of the divide inside the Democratic Party over education, supporting charter schools and vouchers, and often raising the ire of teacher’s unions.  CEOs like Reed Hastings of Netflix and Don Fisher of the Gap fund EdVoice, and they have played in many local races with independent expernditure money.  See this very lame EdVoice attack on eventual winner Mariko Yamada used in AD-08 last cycle on behalf of Christopher Cabaldon for an example.  Simply put, EdVoice has used deep pockets to try and become a special interest player in Sacramento, with mixed results.

I’ve been adamant that we need a real candidate in CA-03 to take advantage of this opportunity in that district.  I still believe Phil Angelides, who has been unusually active in the special election battle (advocating a No vote, I might add), could make a good fit here.  Hopefully, I’ll have a chance to talk to Davis in the next couple weeks, but his association with EdVoice doesn’t exactly make me leap to the phone to make a donation.

Barbara Boxer made it pretty clear in a news conference at the California Democratic Party convention that she and Dianne Feinstein would be studying the ballot measures and offering a joint statement on them in the near future.  As it turns out, with a week to go, she broke with DiFi, who has made no public pronouncement, and quietly endorsed Props. 1A and 1B yesterday.

“California’s budget process is broken,” Boxer announced. “It’s time for California to join the vast majority of states and reform the two-thirds requirement for adopting the budget.

“However, until we make this crucial reform, I will be supporting Propositions 1A and 1B on the May 19 ballot. These two measures will help get California back on track, while protecting our investment in education.”

I heard that Arnold Schwarzenegger misspelled “track” in the initial release for Boxer, and she had to re-release it.

The relative lack of fanfare around this announcement, and Boxer’s unwillingness to make her opinion clear on any of the other measures, suggests that Boxer just wanted to fulfill her obligation to say something in the most silent way possible.  She doesn’t want to back the whole loser of the ballot and doesn’t want to impinge upon her Democratic colleagues in the legislature who put together the deal.  That’s about it.

UPDATE: Now DiFi has come out in favor of 1A & 1B as well, while specifically rejecting Prop. 1C and calling for “a budgeting system that works effectively and efficiently in times of budget crisis.”  If this was the case all along, and the endorsements came out within 24 hours of each other, why wouldn’t they have put out the statement at the same time?  Good to know our Senators work so effectively together.

Meanwhile, No on 1A released a TV ad for the final week, and I’m a bit baffled by its middle-ground focus on “porkbarrel spending” that may result from the way the spending cap and reserve fund are structured.  It’s true that money in the reserve fund could only be used for one-time spending like infrastructure and debt service, and that does significantly change the model for how the state gets funded, with ongoing services getting sucked dry.  I don’t know if I would characterize that as “pork-barrel” spending, necessarily.  In addition, the loss of revenues in recurring services like health care and education, not the supposed pork barrel spending, concerns me far more.  The ad does hit the fact that 1A won’t kick in on the revenue side for two years, so framing it as a response to the current crisis strains credulity.  The larger frame here is of Prop. 1A as a complex proposal full of loopholes that will not meet its intended goals.

I have several questions about this sudden restatement of the budget deficit for the next year.  First of all, this is not an independent assessment by the Legislative Analyst, but from the Department of Finance.  No report was released accompanying the budget revise, just some raw numbers in a letter to the legislature.  Apparently a dual revision, one based on whether the ballot measures pass and one based on whether they fail, will be illegally delivered on Thursday, despite the fact that the February budget deal calls for it to be released on May 28.  The Governor is getting around this by calling the release a “summary,” allowing them to AGAIN show no numbers, just a “trust me” belief that the deficit is now $15 billion, $21 billion if Props. 1C, 1D, and 1E go down.

More curious is this bit from John Myers:

Taking a closer look at the $15.4 billion deficit projection, aides to Schwarzenegger say that a full $7.4 billion of that is in the fiscal year that ends just 50 days from now; the remaining $8 billion is in the 2009-2010 fiscal year.

That $8 billion in the ’09-’10 year matches up with March’s projection by Legislative Analyst Mac Taylor. And given that Controller John Chiang announced last Friday a $2.1 billion shortfall in anticipated revenues for the current year… that leaves about $5 billion in what budget watchers might call “new” deficit in this announcement.

That doesn’t make a lick of sense.  I believe Chiang’s numbers that we’re $2 billion short in tax collection in the current year through April 30.  I do not at all believe a Governor who has lied repeatedly about budget projections throughout his entire career, claiming $5 billion in new deficit in the last 50 days of the budget year.  Especially because there are no independent numbers to check.

Like Legislative Analyst Mac Taylor, I would not be SURPRISED that we’re not $15 billion out of balance.  Some expenditure increases contributed to this deficit, and clearly the worsening economic picture has strained the revenue side.  But I’m funny this way – I actually want to see the data.  The Governor has spent the entire special election trying to scare people into compliance; would anyone but this Hail Mary pass with one week to go past him?

I think the sand has come out of the eyes of most everyone in Sacramento, and seeing their May 19 solutions sinking, the legislative leadership has returned to the drawing board, where a deficit somewhere between $14-$16 billion dollars for FY 2010 must be wrestled with.  Unsurprisingly, conservative lawmakers and the media have foregrounded cuts as the first among all other options.

So where might they look?

For starters, the state would spend down its $2 billion reserve, Steinberg said.

State leaders are eyeing a possible $5 billion reduction in school spending allowable under the state’s constitutional education guarantee when revenue drops. Education groups say that could threaten valuable programs and prevent schools from rescinding layoff notices they issued this spring.

“Schools would have to look at extracurricular programs, library hours, transportation,” said Scott Plotkin, executive director of the California School Boards Association. “An awful lot of things not required by the law that are desirable are going to start falling by the wayside.” […]

Schwarzenegger aides have warned public safety groups he may propose an early release of up to 38,000 prisoners, split between 19,000 undocumented immigrants and 19,000 low-level offenders. The governor may also seek to house those who commit “wobbler” crimes in county jails rather than in state prisons.

The plan would save an estimated $335 million in 2009-10 and $849 million in 2010-11.

It proposes to hand over undocumented immigrant prisoners to United States Immigration and Customs Enforcement, though public safety officials questioned whether the federal government would agree to such a plan. The plan also would release 19,000 “nonserious, nonviolent, non-sex offense” inmates in the final six months of their sentences.

I don’t see ICE terribly happy with the state plopping 19,000 undocumented immigrants in their laps.

On the flip side of this, I think it’s important to recognize the solutions out there that involve no cuts, ones that must become part of the conversation immediately.  For example, federal guarantees for municipal bonds would save the state billions of dollars that could be diverted to closing the budget gap.  While it appeared that Congress was unmoved by this proposal, the Treasury Department could step in.

The Treasury, for instance, is working on a plan to help cities, school systems, hospitals and other agencies borrow money at cheaper rates. The credit crisis made it more expensive to get money for buildings, ballparks and other projects. The problem has been particularly acute for those with lower credit ratings, which require them to pay more for their bonds.

Officials are considering options including the creation of a federal agency that could back the bonds, aiding bond insurers that backstop municipal bonds or simply providing subsidies that could lower the rate for municipalities.

This is not a direct pass-through to the budget, but the savings would be felt in future scorings of overall revenue and spending.

More important, the Senate leader has started to talk about the majority vote fee increase once again.

But making deeper cuts into social services begins to run against logic, Steinberg said. With CalWorks, for instance, the federal match is “so significant,” that to cut $1 is to turn away $4 or $5 in federal dollars.

“At some point, it makes little sense to cut even deeper,” he said. “But, let’s assume we make significant and broader cuts. Then, you’re looking at corrections and public safety. … I wouldn’t take it as a complete given that the other side is really willing to vote for a cuts-only strategy.”

If Republicans don’t go along with new revenues, Steinberg said Democrats may have to resort to a simple majority vote on fees, the same tack he took last winter before Schwarzenegger vetoed the effort to force negotiations. “But we’re not going to lead with that,” Steinberg said.

They ought to go ahead and lead with it.  The problems we face in Sacramento are governance problems, which favor solutions that kick the can down the road instead of facing up to current challenges.  In such an environment, bold solutions that finally remove the structural revenue gap and end budget dysfunction are really the only step forward.  The majority-vote fee increase is a bold, albeit short-term, step, certainly preferable to counter-cyclical and counter-productive spending cuts, and the pressure on the Governor to accept it will increase as the summer marches on.  The long-term solution, of course, comes in building the rationale for restoring democracy to the legislature by ending the conservative veto over the process and returning to a simple majority to run government.