According to Mike Genest, the Governor’s Director of Finance, the $24.3 billion dollar problem expanded by $2 billion dollars last night.  He’s not taking into account the interest on IOUs, of course, or the expanded borrowing costs.  But he’s factoring in the education spending that now cannot be cut below a certain level because of “maintenance of effort laws.”  Genest said that higher education has agreed to keep their books open an extra month, until July 31, meaning that the $1 billion in higher education cuts to the 2008-09 budget year could still be enacted.  This is basically fuzzy math, since the additional expenditures due to the Governor’s stubbornness do not get addressed.  

What the Governor wants to do now, to recoup those cuts under Prop. 98, is to suspend the law.  Once again, the reckless lawlessness of the Governor and his allies, out of an unwillingness to deal with budget reality, exposes itself.  In addition, the Governor has backed off on the outsized budget reserve as well as eliminating vital programs like welfare, state park closures, children’s health care and student grants.  Of course, this has been replaced by unrelated items like cutting public employee pensions and social services fraud inspections, both of which would do nothing to the deficit in the near term.

The Governor has declared a state of emergency, under Prop. 58 rules.  This means that the legislature has 45 days to come up with a solution on the budget, and if they fail to do so, they cannot adjourn or act on other bills.  This is a moot point, since the Governor has vowed already to veto any non budget-related bill until a solution is reached.  This just brings the legislature into special session (the fourth since December, I believe).

In addition, the Governor announced three furlough days a month for state employees to save cash, which amounts to a 15% pay cut.  And IOUs will get issued tomorrow.  They will have an interest rate for the banks which accept them of between 2-5%.

Here was my favorite part of his press conference:

Guv gets booed by some who watch him leave press conf and walk back to his office.

By the way, there’s a new hashtag to find all budget news on Twitter: #cabudget.

UPDATE: John Myers has a story up about this, and he includes the Governor’s latest revise, the centerpiece of which is the suspension of Prop. 98.

I suppose the only good news to come out of last night, and indeed this entire cycle of budget nightmares, is that we are not alone.  Several other states missed their fiscal year deadlines.  Illinois has no budget and no plans to enact one; Pennsylvania may not be able to pay state employees due to a failure to reach agreement; Arizona got a budget in under the wire, but the Governor has not indicated whether or not she’ll sign it, because it doesn’t include a sales tax increase she sought; Ohio approved a temporary 7-day budget as legislators continued to wrangle; Mississippi left their utility regulatory agency unfunded; Connecticut’s Governor signed an executive order to keep the government running despite no budget.  We can take little solace in these difficulties other than to note that the national erosion of tax revenues combined with balanced budget agreements make the situation almost impossible for many states, particularly the large ones, and because of the threat to any economic recovery that would result from massive reductions in state spending and services, the door may crack open for a second federal stimulus package that specifically targets state budgets.  I don’t think we’re quite there yet, but the crisis reaches a whole new level starting today.

First of all, this is the first day that budget cuts from the previous agreement in February take effect for fiscal year 2009-2010.  These include major reductions in health and human services:

SSI/SSP grants for low-income seniors and people with disabilities will drop by 2.3 percent, cutting the maximum grant for an individual from $870 to $850 per month. A previous SSI/SSP grant cut took effect in May, reducing maximum monthly grants for individuals from $907 to the current $870.

CalWORKs grants for low-income families with children will be cut by 4 percent, reducing the maximum grant from $723 to $694 per month (the same amount as in 1989) for a family of three in high-cost counties. CalWORKs grants have been frozen since 2004-05.

Dental services for most adults in the Medi-Cal Program will be eliminated along with seven other benefits, including eye exams and incontinence creams and washes. (Last week, a trial court judge in Sacramento County ruled against a group that sued to stop the cuts from taking effect.)

Grants on those who make the least are the most stimulative to an economy, because that money gets spent quickly.  Now it’s drying up.

Of course, there’s also the matter of the still-yawning budget gap here in California, which just got $7 or $8 billion dollars larger, depending on your math.  This means that even more damaging cuts, likely to the most vulnerable elements of society, will ensue, leading to another wave of job loss, foreclosures, and pain.  The Governor and Senate Republicans are completely responsible for that addition to the deficit – consider that $7 billion is MORE than the money at stake to the near-term budget in the May 19 special election – and for the issuance of IOUs, which will add billions in unnecessary interest obligations.

In a nutshell, under the governor’s IOU plan the state pays vendors and others it owes with the equivalent of a post-dated check that is good for the face value of the amount owed plus interest. IOU recipients, for the most part, “sell” their IOUs to a bank for the face value of the check for quick cash. The bank holds onto and then redeems the IOU at a later date, earning millions of dollars in interest.

This type of borrowing is nothing like pulling out the state’s credit card to pay the bills. Rather, this is more like the state going down the street and getting an expensive payday loan.

The Governor’s payday scheme not only makes California the laughingstock of the credit markets, but it unnecessarily puts a black eye on the state’s long-term credit rating.

This means that, for years to come, millions of taxpayer dollars get shoved into the pockets of Wall Street bankers every time we issue long-term debt to build schools or roads, or other needed public projects.

Somewhere in the neighborhood of $6 billion dollars in additional interest alone will be added to the cost of selling bonds that voters have already approved.

Of course, by that time, Schwarzenegger will be out of office, so what does he care?

Harold Meyerson has the must-read of the day about this disaster, pinning the blame where it needs to go – on shock-doctrinaires like the Governor who demand to use this crisis to destroy the public sector.  Read the entire thing, but here’s an excerpt:

Right-wing ideologues see the crisis as an opportunity to shrink government regardless of the consequences. Schwarzenegger is proposing to end welfare, not just as we know it but altogether, and to throw 1 million children off the rolls of the state’s healthy families program. But the consequences of closing the deficit simply through cutbacks will be felt by more than the poor. Already reeling from $15 billion in cutbacks that the state put through in February, many school districts, including that of Los Angeles, have canceled summer school this year. Scholarships that enable students of modest means to attend California’s fabled university system have been slashed. Most of the state’s parks may have to be closed as well.

The terrible irony in decimating the public sector to save the state is that the California that was the epicenter of the postwar American dream was fundamentally a creation of government. Fighting a Pacific war during World War II compelled the federal government to spend billions on California industry and infrastructure, and the state was the leading beneficiary of Pentagon dollars during the Cold War. As Kevin Starr, California’s leading historian, points out in “Golden Dreams,” his brilliant new history of the state in the 1950s and early ’60s, fully 40 percent of all defense dollars for manufacturing and research in 1959 went to California, anchoring the state’s booming economy in a well-paid workforce that was either unionized or professionalized, and seeding an electronics and high-tech sector that was to blossom in the following decades. Building on that prosperity to create more prosperity, Earl Warren, Goodwin Knight and Pat Brown — two Republicans, one Democrat — invested state dollars in schools, universities, freeways and aqueducts that were the best in the world. The Golden State was never more golden.

Today, its governor seems determined to turn that gold to dross. On Monday, the Democrats in the legislature passed a budget that included cuts of $11 billion, levied a tax on oil companies and tobacco, and raised auto registration fees by $15 per car to keep the state parks from closing. Schwarzenegger reiterated his refusal to raise any taxes or fees and said he would veto the budget.

There’s still a chance to avoid IOUs, though I wouldn’t call it likely.  There is no chance to avoid the devastating impact of a broken political process and irresponsible legislating which at this point can only slide California into depression.

It has been truly depressing to watch the Twitter feeds of John Myers and Scott Lay tonight, as the mood shifted from guardedly hopeful to despairing.  The Senate keeps voting on things and not coming up with any solutions.  They tried to pass the stop-gap solution again, and came up short of the votes needed.  They passed the majority-vote budget with some fee increases, and the Governor vetoed them.  Let’s all please remember that.  With a stroke of the pen, the Governor could have ended this.

If SB 64 and SB 80 (the stop-gap) don’t pass by midnight (and actually, in an hour or so, because it takes a couple hours to prepare the necessary paperwork), the state will forfeit $3 billion in cuts to the 2008-09 budget year, which they will have to find in the following year, and a total of around $7 billion in total costs, when you add in the costs of additional borrowing, etc.

At some point, a large majority-vote budget (which wouldn’t take effect for 90 days), absent the tax increases, passed the Senate and moved on to the Assembly, where it will be voted on tonight.  According to Scott Lay, it covers all but $1 billion of the target, which is probably enough for the Governor to veto it.  Why, it’s almost as if he doesn’t want a solution but instead an opportunity to push through a bunch of long-sought goals shock-doctrine style!

The Senate just tried again to get the necessary votes for the stop-gap, and fell short by the exact same amount.  They’re in recess until 9:30 and will probably get only one more shot.

…we’re past 10pm at this point, the Senate has yet to reconvene, and by most calculations the die has been cast.  Enjoy your scrip!  Zed Hollingsworth has been spotted in the Governor’s smoking tent, for whatever that’s worth.  But the Governor remains intransigent and apparently determined to bring the state to complete failure.

…counting down the minutes until the end of the fiscal year is kind of like waiting for New Year’s, only it involves budgets and trailer bills and at the end people die.

…So the Senate is going back into session.  John Myers tweets: “Senate pro Tem Steinberg calls senators back..we’ve watched a lot of “shuttle diplomacy” betwn Dems, GOP, and Guv’s ofc. Still, long odds.”  We’re at T-minus 43 minutes.

…the way this is going from the Twitter feeds, Steinberg looks like he’s desperately trying to pass the stop-gap measures again.  The odds are long.  He pleads to the Yacht Party not to be party to irresponsibility.  I wonder what the response will be?… this: “Reeps still refuse to put up votes.”  Maldonado, in fact, won’t vote at all.  He’s just walking away.  Abstaining his way into oblivion.

…Democrats are spending a lot of time lobbying Leland Yee (who has been consistently voting against this stop-gap solution because it hurts schools too much) and Abel Maldonado (who isn’t voting), but of course even if they switched their votes that would leave the Senate one vote short of being able to override Arnold and put the stop-gap into effect.

…Republicans are playing their usual game of holding back all their votes until all the Democrats vote for something, so they’re waiting on Yee to flip.  But assuming he does in the next 20 minutes, who joins him?  Two GOP votes are needed.  Beyond Maldonado, who would change their vote?

…Yee just came back to the floor, I’d bet he’ll vote with the majority this time around, but time is running out… indeed, Yee votes aye.  Will there be a second Republican?  Or even a first?

…Maldonado still not voting on the three-bill stop-gap package.  10 minutes and counting…

…This is pretty much over.  At midnight, the state loses the equivalent of $7 billion in savings.  I will remind everyone that Senate Democrats, in the end, voted 25-0 for this deal; Republicans, 0-14 with 1 cowardly abstention (Maldo)… and Steinberg shuts it down.  It’s over.  IOUs will go out on Thursday, $7 billion wasted by the so-called fiscal conservatives.

Something’s a-stirring for the second straight night in Sacramento.  Scott Lay @ccleague and the indefatigable John Myers @KQED_CapNotes will have the best play-by-play.  The Senate has scheduled a session but immediately went into party caucuses for meetings.  If they do hit the floor, CalChannel will have it.

Basically, here’s the latest: The Senate and Assembly have already passed majority-vote budget revisions that would fill the current deficit, but the Governor has vowed to veto them.  The Assembly, with bipartisan support, passed three bills in a stop-gap measure, which would at least provide savings for $3 billion in fiscal year 08-09, which ends tomorrow, and would keep money flowing in state coffers for another few weeks, avoiding IOUs.  The stop-gap consists entirely of cuts and gimmicky delays in funding, by the way.  The Governor has no plan whatsoever to recoup that $3 billion if passage of the stop-gap fails by the deadline.

What the Governor has done is create a completely new budget plan with a day to go before the deadline.  Some would call that deliberate.  This “Plan B” budget would not eliminate Healthy Families, CalWORKS or Cal Grants, nor would it cut all funding for state parks, which was apparently a bridge too far.  It would accept the one-day delay in state employee paychecks from June 30, 2010 to July 1, “saving” the state $1.2 billion.  However, the new plan would borrow $2 billion from local governments, the maximum allowable under the old Prop. 1A; reduce state worker salaries, benefits and pensions; and make broader cuts over various different programs to make up the gap.

Schwarzenegger has appeared to back off from the worst cuts he proposed initially, a win for the grassroots and legislative Dems, but the steady stream of changes to his proposals, along with an insistence on the June 30 deadline for a full solution, have conspired to virtually assure that the deadline will be missed.  This is the backdrop for tonight’s Senate action.  If they can get two GOP votes for the stop-gap solution, they can actually override a gubernatorial veto and set into law something to at least extend the process by a few weeks.  I don’t know about the likelihood of that, but the choices have become limited.

Meanwhile, the Yacht Party made a tiny ad buy on the budget to try and get people to notice they exist.

I’ll monitor if anything interesting happens…

…from Myers: “One more night…to search our souls.” -Senate pro Tem Steinberg on Senate floor. No agreement tonite. New fiscal year about 26 hrs away.

…and it looks like nothing interesting happened.  They took a vote on the stop-gap, didn’t get the 2/3 required to override Arnold’s veto, and adjourned until tomorrow morning.  Looks like we’ll have late night with the legisature Day 3 tomorrow, as the midnight deadline looms.

The Senate followed the Assembly today by passing a majority-vote budget, mostly along party lines, that solves the entire current deficit and includes a large reserve.  The Governor has vowed to veto the package.  CDP Chair John Burton is asking for grassroots action to force the Governor into compliance, which I consider unlikely, but it’s worth reposting some of the letter for the perspective of Burton:

Late last night, Assembly Democrats passed a spending plan that minimizes the cruel cuts advocated by the governor by raising $2 billion in new revenue. Just a few minutes ago, Senate Democrats followed suit, passing a plan that requires Big Tobacco and Big Oil to share in the state budget sacrifice.

Speaker Karen Bass, President Pro Tem Darrell Steinberg and their caucuses should be commended for standing firm against the governor’s Draconian cuts.

In order to pass the plan, legislative leaders structured it to require a majority vote. That’s because Republicans have repeatedly refused to provide the handful of votes necessary to pass the plan with two-thirds support.

Disappointingly, Gov. Arnold Schwarzenegger has vowed to veto the Democrats’ budget plan, preferring to play a game of chicken with the budget. He and Legislative Republicans would rather strip health care from nearly one million children and close 220 state parks than ask corporate special interests to pay their fair share.

Now, the onus is on the governor and Republican lawmakers to explain to Californians why they would rather drive the state over a cliff than agree to a budget with a mix of cuts and new revenue.

Please, call Governor Schwarzenegger’s office today at (916) 445-2841 or (213) 897-0322. Ask the governor to sign this budget plan, which minimizes the cuts by sharing the sacrifice.

Echoing the theme, Sen. Steinberg said today, “Shutting down the govt is not the answer to solving CA’s problems.”  He also called on the Governor to “release the Senate GOP” and allow for a bipartisan vote on stop-gap measures, the same that passed the Assembly, to allow for continued negotiations after the June 30 deadline.

What is now at risk, in addition to the distribution of IOUs, are $3 billion in savings from the current fiscal year, savings that will essentially be lost with no deal by midnight tomorrow.

In a nutshell: the deficit solutions pitched by both Governor Schwarzenegger and Democratic legislators rely on a spending reduction of about $3.3 billion in the 2008-2009 fiscal year that ends on June 30.

That’s tomorrow at midnight. Once the new fiscal year begins, those savings are effectively gone.

$3 billion of those savings would come from K-12 and higher education. They are not popular spending cutbacks in education circles, but reflect the larger ‘all options are bad’ narrative that you’ve heard in all circles for the past several weeks. The final $300 million or so of current year savings come from a plan to transfer money away from local redevlopment agencies.

Budget staffers say it matters which budget year to which these spending reductions are attributed (2008-09 vs. 2009-10) — in large part because additional cutbacks in 2009-10 could complicate the already delicate issue of eligibility for federal stimulus dollars.

Immediate savings are important for another reason: they provide some breathing room for the cash-depleted state coffers and might lower or eliminate the need for Controller John Chiang to issue IOUs by week’s end.

With no stopgap, essentially lawmakers will have to find an additional $3.3 billion in the 2009-10 FY budget, on top of everything they’re already doing.  So the Governor not only threatens a government shutdown with his intransigence, he wastes the state an additional $3 billion dollars, in effect.

In case you weren’t following along in the middle of the night, Assembly Democrats passed a majority vote budget that solves the entire $24 billion dollar deficit, as the Governor requested.  Through a maneuver found legal and Constitutional by the nonpartisan Legislative Analyst, the Assembly added a $1.50 per pack cigarette tax, a 9.9% oil severance tax on producers, and a $15 surcharge in the vehicle license fee to fund state parks, in addition to the homeowner insurance fee to fund emergency response systems, which was included in the Governor’s initial budget revision.  The new taxes amount to $2 billion of the $24 billion solution.  The majority of actions in this alternative budget remain cuts.  And according to Noreen Evans, the Senate will take up this majority-vote budget later today.

The majority approach was not our first choice. We spent weeks in Conference Committee pursuing a bipartisan budget solution. But we have hit a wall. And, we cannot afford to wait any longer. We are 48 hours away from the state plunging into financial ruin. The Legislature has a duty to act with or without Republicans for the good of California […]

As the old saying goes: lead, follow, or get out of the way. By voting against cuts and revenues tonight, the basis of any budget, Republicans ran from their responsibility to govern.

We gave legislative Republicans a chance to lead with us through a month of public hearings in the Conference Committee. That was the opportunity to present alternative budget proposals. Republicans squandered this opportunity.

If the Senate passes this and puts it on the Governor’s desk within 24 hours of the deadline to stop the state from issuing IOUs, he will have a simple choice to make.  Will he shut down the government because he failed to get everything he wanted from the legislature?  I suspect he will, actually.  And indeed, he has issued a statement to this effect, saying that he wants a “budget that solves our entire deficit without raising taxes.”

That’s the short-term state of affairs.  Going forward, the process itself is fundamentally broken, a fact that the state’s political media class has decided to notice in a boomlet of “How to fix California” articles over the past week.  I look forward to those debates.  If the Governor vetoes this budget, he will be shutting down the government and forestalling the effort to finally reform the process.

…more from the Governor, as he vows to veto this bill, calling it “illegal,” which is pretty far.  It is worth noting that, since most of this budget revision would not take effect for 90 days because none of them received a 2/3 vote, it is true that such a solution would not completely impact the immediate cash-flow problem.  Although, you could argue that putting such a solution in place would allow the state to borrow from investors.

I certainly don’t remember this hand being tipped anywhere prior to tonight, but there’s some activity going on in the Assembly with the budget.  Democrats appear poised to pass a majority-vote solution on about $2 billion or so in taxes, using some tax swaps and fee increases to pass the taxes on oil severance and tobacco, among other things.  Added to the other $21.5 billion that could conceivably be passed under a majority vote, that would fulfill the Governor’s requirement that all $24 billion be included in whatever solution gets reached.  The expectation would be that the Governor veto this majority-vote fee increase.  However, with the IOUs at the ready and the tax increases so small relative to the total budget, one wonders if Schwarzenegger can get away with such a veto.  If on the off chance that Arnold does sign this budget, the whole thing would probably head to the courts.

It’s unclear if the Senate will follow suit tonight.  And all of this is happening in the midst of negotiating sessions with the Governor, called a “stick-and-carrot approach” by the SacBee (I always thought it was carrot and stick, but there you are).  The Governor, for his part, continues inserting unrelated items into the deal, like pension changes for state employees that even he acknowledges would not impact the current budget year.

…for those late to the party, a bit of an explainer on how the majority vote process works:

Sunday night’s package included a 9.9 percent tax on oil production, a $1.50-per-package tax on cigarettes, and a $15 per vehicle registration fee.

While tax hikes normally require a two-thirds’ approval, Democrats argued that by eliminating an 18-cent-per-gallon excusive tax on gasoline, the net revenue to the state becomes zero and thus doesn’t represent a tax hike. Sunday’s bills would then replace the excise tax with an equivalent fee, which Democrats argue does not require a two-thirds’ vote.

Perfectly legal, according to the nonpartisan Legislative Counsel.

…The Assembly passed the tax increase 44-30, with 6 not voting.  I’m assuming that the 30 no votes were the 29 Republicans and independent Juan Arambula, who announced that he would not support this part of the budget bill earlier in the night.  The Senate has adjourned but the Assembly appears to be plowing through their entire budget.  Interesting.

…You can watch the Assembly proceedings on Cal Channel, by the way.

The Governor’s shock-doctrine approach to the current budget crisis became very apparent this week, as he engineered rejections of bipartisan stop-gap measures and solutions that would cover $21.5 billion of a $24 billion dollar deficit.  He clearly would rather essentially shut down the state government than participate in the normal political process of compromise and negotiation.  This is his chance to be a dictator, and he is banking on the desire of Democrats not to watch the lights go out in Sacramento to push through his agenda.

Gov. Arnold Schwarzenegger, seeking to conquer what could be the last budget crisis of his tenure, is engaged in a high-stakes negotiating strategy with lawmakers that could force him to preside over a meltdown of state government.

As legislators have scrambled to stop the state from postponing payment of its bills and issuing IOUs starting next week, the governor has vowed to veto any measure that fails to close the state’s entire $24-billion deficit […]

The governor readily admits that he sees the crisis as a chance to make big changes to government — to “reform the system,” he said Friday — with proposals he has struggled to advance in the past.

Among them: reorganizing state bureaucracy, eliminating patronage boards and curbing fraud in social services that Democrats have traditionally protected. The governor also would like to move past the budget crisis to reach a deal on California’s water problems that has so far eluded him.

By agreeing to a partial budget solution such as one the Assembly approved Thursday, the governor would lose leverage to accomplish many of those things. Without the pressure of imminent insolvency, Democrats might be less likely to agree to his demands.

This is a dangerous strategy – not for Schwarzenegger himself, but for the hundreds of thousands of Californians who depend on a functioning state government every day.  Contrary to popular belief, the recipients of these IOUs would not be debtholders or vendors, but the most vulnerable people in society – families on welfare, the elderly, the blind, the disabled, and poor college students with state aid grants.  These are the pawns in the game Arnold has been playing.

The Governor has brought back to the table long-sought goals that he wishes to implement over the protests of a majority of the legislature.  Some of them are described in his weekly radio address.  The LA Times has a good synopsis here:

Back on the governor’s demand list is a plan to cut the pensions received by state workers, which unions have stymied before but which he thinks may gain traction with a cash-strapped public. Schwarzenegger also views this as an ideal time to once again target growth and fraud in the state’s multibillion-dollar in-home healthcare program, which employs 300,000 unionized workers.

His agenda includes anti-fraud efforts and tougher enrollment requirements for the state’s food stamp programs, efforts that advocates for the poor say are designed to discourage people from participating. In his radio address, he said the state and counties could get by with a “fraction” of the 27,000 workers now handling eligibility for Medi-Cal and food stamps by using Web-based enrollment.

Schwarzenegger has revived plans to allow local school districts to contract out for services like school bus transportation and lawn maintenance, a proposal favored by the GOP but despised by school employee unions.

Arnold has basically taken the lesson of the GOP, holding the budget hostage for pet projects like privatization and purging state services rolls of the dependent (I’m sure a lot of the desperately poor have Web access to fill out their forms).

One wonders if this will finally color the local coverage of the Governor, which throughout his tenure has been fawning, even in the face of near-historic unpopularity.  Some reporters seem to be coming around.

So the Senate Republicans voted en masse against $11 billion in cuts as part of the budget proposal put forward by the Democrats today.  Lou Correa and Leland Yee voted no as well, and the final vote was 22-16.  Technically, I believe the bill could go to the Assembly, and after passage to the Governor, but Arnold has vowed a veto, so that’s probably out.  Meanwhile, California will start to use the reserve fund to pay bills for the next week or so, and failing a solution after that, will resort to IOUs, which basically was the deal back in February as well.  Yes, the Democratic proposal has its share of gimmickry, but no more than the Governor’s own plan, and considering the Yacht Party refuses to write a plan, ALL OF THEIRS is gimmickry, as is their entire ideology.  But the Yacht Party smells blood in the water, the Democrats have pulled their tax proposals off the table, and the future is incredibly uncertain.  

I cannot disagree with Greg Lucas’ analysis.

Examining the Senate’s budgetary actions of June 24 from a political rather than a policy perspective, the majority party Democrats may not have achieved their objectives […]

Judging from the remarks of Senate President Pro Tempore Darrell Steinberg, a Sacramento Democrat, the intent of the exercise was to illustrate that Democrats are unwilling to cut as deeply into social programs as Gov. Arnold Schwarzenegger and to portray Republican lawmakers as obstructionist or hypocritical or both for not backing the cuts embraced by Democrats.

“Democrats are asking Republicans to vote for billions of dollars in cuts and apparently your answer today is ‘no,’ Steinberg said. “Why won’t you cut? Why won’t you cut?” […]

In a purely political sense, the “bad” vote is the one cast by Democrats, ostensibly champions of public education, who – if the February budget they backed is included – have chosen to reduce state support of schools by more than $12 billion over a two-year period.

Republicans can portray their “no” vote as a refusal to cut nearly $5 billion more from public schools.

Perhaps a more effective illustration of support for what Democrats call the safety net would be to bring several of the GOP governor’s more draconian proposals to a vote.

It seems unlikely Schwarzenegger’s call to eliminate California’s welfare program would garner the votes necessary for passage. Nor would the governor’s proposal to end state grants to lower-income high school students to help them attend college.

After rejecting those and possibly other gubernatorial proposals then a vote on the more modest – more humane – measure with $11 billion in cuts might more satisfactorily frame the issue.

I would argue that making these “symbolic” votes doesn’t do a ton of good unless you’re willing to use them in the context of the 2010 campaign (and I don’t remember votes coming into play in key districts in 2008) or in a coordinated and widespread media campaign immediately.  To the latter point, we don’t have any such media in California.  It’s a good argument in search of a broadcaster, and that goes for Lucas’ alternative solution.

The real problem is that Democrats don’t appear to have an endgame strategy, and haven’t for years.  The words “two-thirds majority” hasn’t exited anyone’s lips in quite a while.  This is a process problem, and only a process solution will suffice, and teachable moments like these have been wasted for 30 years.  

Many of your typical right-wing gang has been making much of the principle of voting with your feet. That is to say that the rich and big corporations will leave the state based upon taxation.  Despite the fact that it’s been pretty thoroughly debunked, there is always another opportunity to find a scapegoat. (Like say Michael Savage condemning immigrants for messing up the White Man’s Paradise.)

But, when you also have Chuck DeVore saying that, essentially, poor people should leave the state, is the real risk of losing the California Middle Class? What if the middle class actually takes DeVore up on it?

I bring this up because we are now not only attacking the lower class, which has few options to leave, but also the middle class.  Not to be too crass here, but the Republicans have traditionally stuck to the taking from the poorest precisely because they had few options. The poor vote at disproportionately low numbers, but that is not really the case of the middle class.

If we abandon our middle class, we shouldn’t be surprised at the consequences. We’ll get a less educated work force that is less desirable for investment in the state. Jobs will leave the state, and then eventually so will the Californians.  The Reverse Okie Migration is far more likely to occur than the migration of the rich.  Of course, the Rich will ultimately find it’s hard to develop wealth in a state without a middle class.

In the short-term, it will be very hard to really analyze data for these types of questions.  But as our infrastructure deteriorates, our manufacturing sector withers, and the innovation inspired by education diminishes, will the Middle Class really stay in California? Could they afford to?

So, with Arnold’s cuts to CalGrants, public schools, community colleges, state parks, and other services utilized heavily by the middle class, will the middle class flee?  Is this the way that the California Dream really ends?