Just a thought or two on this whole mess while we wait for the Senate to reconvene.  While I didn’t think it was the best strategy to announce a deal and start voting on it before there was an actual deal in place (although the rumor that Dave Cox reneged on a handshake deal changes my perspective a bit), Darrell Steinberg seems to have backed into a strategy of playing Yacht Party obstruction out very publicly, so that the essential insanity of their anti-tax, sink-the-state agenda can be well-described by what’s left of political state media.  So George Skelton does the math and refutes the Yacht Party assertion that cutting spending alone can solve the budget crisis, and Dan Walters manages to describe the situation accurately.

And we all sit at our computers and type out our “even Dan Walters and George Skelton believe” articles, eternally hopeful that this is the corner-turning event, that the public will find the right people to blame for the sorry state of affairs, and punish them repeatedly forever more.  Only it’s wishful thinking.  First of all, I hate to break it, but nobody reads George Skelton and Dan Walters.  They are opinion leaders to about .001% of the electorate.  Second, there was another audience watching Sacramento this weekend, and they were the bondholders, who would be crazy to allow California to borrow one more red cent from them given the political fracturing (and this budget calls for 1.1 trillion red cents, or $11 billion dollars, to be borrowed).  Even if this passed tomorrow there would need to be lots of short-term debt floated to manage the cash crisis until new revenues actually reached state coffers, and with the bond rating the lowest in the country and the dysfunction being played out, I don’t see it happening.

The other point is that this is, let’s face it, a bad deal for Californians.  Among the sweeteners thrown in the deal to attract that elusive third Republican vote are a $10,000 tax break for home buyers to re-inflate the bubble and set the state economy up for an even bigger crash; weakened anti-pollution laws that will cost the state additional public health and environmental cleanup spending in the long-term; a potential budget cap that will make it impossible for public schools and social services to meet demand; and much more.  The tax changes, which are short-term except for a huge break to multinationals, tax things that we want to encourage in a downturn, work and consumption.  What the federal government is offering to spur demand and get the economy moving again is exactly what the state government will be cutting to balance the budget.  That’s not an argument to kill it, but it’s a reflection of reality.

So there will be at best a kind of zero-growth stasis, and at worst a further crumbling of the local economy, with shrunken revenues likely to require another round of this by summer.  Ultimately, the media cannot help the Democratic Party solve this problem.  The bill is coming due for 30 years of anti-tax zealotry and the belief that we can provide whatever citizens need without paying for it.  There isn’t a light at the end of the tunnel.  That some opinion leaders are coming around about 20 years to late doesn’t wash the blood from their hands.  And that the Democratic Party is finally thinking that they should maybe fight against the 2/3 requirement that has relegated them to a functional minority in Sacramento since is was instituted doesn’t absolve them for 30 years of inattention.

It gives me no pleasure to bear the bad news, but there’s no wake-up call on the horizon.  Even all 38 million Californians coming to the same “Hey, GOP is suxxor” conclusion at the same time doesn’t change structural realities.  Those must be fought for over years if not decades, and it is not defeatist to wonder whether it’s too late.

…I think Joe Matthews says it fairly well.

Per an update from Anthony Wright of Health Access and The Community College League folks, the Senate now stands adjourned until 11am tomorrow.  I peeked a bit of the speeches towards the end of the session, and I would concur wholeheartedly with obscureSportsQuarterly’s comment. Aanested is crazy.  And Sen. President Pro Tem. Steinberg is really, really angry. Update: Check out Sen. Steinberg’s speech. It really is something.

Feel free to vent.

In today’s Matier and Ross, news of the deal continue to leak:

Buckle your seat belts – the ride is about to get wild in Sacramento, with state Senate President Pro Tem Darrell Steinberg planning to put a $42 billion budget deal up for a vote. The deal – a combination of cuts and tax hikes – is expected to be unveiled Monday, then put up for a vote Tuesday.

Whether there are enough Republican votes to make it fly, however, is unknown.

“Darrell has made it clear that there was no handshake agreement, and there may not be the votes,” said one Democratic state senator who was briefed on the plan, but asked not to be named because of the sensitive nature of the talks.(SF Chron 2/8/09)

Just what sort of mess this makes for our future is still just as up in the air as whether this will get Republican votes. Legislation by the gun of a small minority is sure to be a mess, and it is extremely doubtful that this will be any different.

One Day More!  

He’d have a better shot at that than convincing the Yacht Party of anything.

Gov. Arnold Schwarzenegger gave Democrats the cold shoulder as he grew convinced he can somehow win Republican support for a midyear budget deal that includes tax hikes, Senate President Pro Tem Darrell Steinberg said Wednesday […]

“He believes that he can convince the Republicans to vote for revenue increases given that we’re now pretty much at the brink,” Steinberg told The Bee’s Capitol Bureau. “And if that’s the case, great. Then we’ll resume a different kind of negotiation. If it’s not true, then I expect we’ll be right back to our $17 billion-plus proposal and try to close that out.”

Steinberg said he thinks lawmakers can still avert a cash shortage if they pass midyear changes by February. While the changes alone may not be swift enough to provide California with enough cash to pay its bills, he suggested that passage of a credible budget solution would enable the state to take out sufficient loans.

It’s important to remember how stunningly ineffective Schwarzenegger has been at governing for five years.  He hasn’t brought one Republican along on ANYTHING he has sought.  All of the policies he’ll be talking about as part of his “legacy” were passed without any Republican votes.  He has no chance whatsoever to attract anyone from his own party, and he never has.  That is the epitome of failure as a leader.

Of course, you have to question whether he really wants to solve the problem at this point.  It’s probably more about political posturing at this point.  Democrats wouldn’t privatize the state, so Arnold will fall back on the same tired tactic of demonization while California goes up in flames.

“We all know how this movie goes,” Steinberg said. “The governor will be out again in some community in California attacking the Legislature and elected representatives for failing to act. It’s frankly a tired, old movie.”

In the end, the Democrats couldn’t — or wouldn’t — meet Schwarzenegger’s demands (more cuts, additional public-private partnerships and easing of environmental regulations for at least 10 projects) for him to sign the budget.

“The Legislature has been more than willing to meet the Governor halfway on his proposals, but we cannot in good conscience back an ‘anything goes’ approach to California’s environment and a privatization scheme that would make George W. Bush blush,” the Democratic leaders write in an op-ed in today’s Bee.

Arnold was never interested in “creating jobs,” he was interested in breaking his old nemesis, the unions.  And when it didn’t happen, he used the ridiculous excuse that now, when the Republican project to bankrupt government is almost realized, NOW they’ll see the light.  And in the end, even his “comprehensive” budget solution would only solve the problem until he could leave office, sticking his successor with another crisis.



Fail, fail, FAIL.

UPDATE by Brian: The Republican Senate Caucus just sent out a quite humourous email.  I’ll summarize: You try to kick the ball Charlie Brown, we’ll definitely leave it there. A snip:

We should start by immediately enacting the $6 billion in budget solutions that have already been agreed upon by both Republicans and Democrats. This would be a responsible first step to avert the looming cash crisis and put Californians back to work.”

“Republicans continue to stand ready to work with the Governor and Democrats. Too much time has been wasted on schemes to make an end-run around Prop. 13 and the will of the voters. It’s time to adopt a fiscally responsible budget plan, which is what voters rightfully expect from their elected leaders.”

Just so we’re clear here, well over 60% of the California voters agrees that we need to increase taxes, according to recent polling data.  In some polls, that even exceeds the 2/3 figure. The will of the voters is to have a viable K-12 system, higher education, decent transportation options and human services.  

Apparently, the Democrats should compromise on the parts they are willing to give, but the Republicans don’t have to give anything.  That’s not compromise, that’s unconditional surrender. Surrender to a theory of market economics that is crumbling around us as we speak, yet that’s where the GOP leads us.  Compromise indeed.

Dan Smith reports that we’re nearing a deal on the work-around budget which would cover half of the state’s projected deficit between now and mid-2010.

“The areas of negotiations have significantly narrowed, and on those issues we’re very close,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento.

Steinberg and Assembly Speaker Karen Bass, D-Los Angeles, talked via videophone to Schwarzenegger, who is vacationing in Idaho. Talks will continue over the weekend, with leaders hoping lawmakers can be called back to Sacramento by the end of next week to approve a final deal.

Schwarzenegger spokesman Aaron McLear said Democrats are “moving closer” to the governor’s demands for deeper spending cuts and an economic stimulus package. “But we don’t have any agreements,” McLear said.

We know that the main sticking point issues were: 1) eliminating CEQA for certain infrastructure projects, 2) privatizing a lot of those public works contracts and 3) cutting state worker holidays and overtime.  So the fact that Democrats are “moving closer” to those positions isn’t exactly heartening, although it’s contradicted somewhat later in the piece.

Bass said Democrats are trying to meet the governor’s desire to stimulate private investment in public projects without hurting public employees by shifting their jobs to contractors.

The Democrats believe changes to state employee pay must be hashed out at the bargaining table between unions and the administration. “There’s no question that state workers know that they’re going to be part of the solution as well, but we also think it’s very important to respect their ability to have a say in how that is done,” Steinberg said.

Privatization is simply not the answer, it has no relevance on budget savings (cost overruns exist in the private world, too) and is just a way for Arnold to reward his Chamber of Commerce pals.  

But what’s notable here is that these are meetings between the Governor and the Democratic leadership, and the Republicans have been completely frozen out due to their inability to play nice with others.  The byzantine plan for a majority vote on fee increases and tax shifts is still operative, and if it survives the subsequent legal challenge, suddenly the Yacht Party would be powerless.  The Very Serious pundits have already turned against Yacht Party rhetoric on spending as the source of the problem, and even the most casual observer understands that the 2/3 rule is destroying the state.  There ought to be a formal voting down of 2/3 (even this work-around will be insufficient to approve a new budget in June, which requires a 2/3 vote) but this is a creative solution to a crisis largely created by the rulemaking structure of the body and Republican intransigence (not to mention Arnold’s vehicle license fee slash, the dumbest first act by a Governor in many a year).

Open Left’s Paul Rosenberg summarized our site over the past week by musing that California is a failed state.  It’s hard to argue with that.  We have a political system governed in exactly the opposite direction of the will of the people.  Despite 63% majorities in the Assembly and the Senate, in Sacramento the Yacht Party rules.

California is bleeding Republican red as the state’s minority party tries to squeeze a spending cap and pro-business policies from fiscal chaos.

Badly outnumbered and often ignored by the Democratic-dominated Legislature, the GOP is not getting sand kicked in its face these days.

California is hurtling toward a financial abyss, projecting a $40 billion shortfall by July 2010, and no deal can be struck without at least three Republican votes in both the Assembly and Senate.

GOP officials clutch that trump card with relish as the state braces to pull the plug on $5 billion in public works projects and warns it won’t be able to pay all its bills by February or March.

Kind of amusing that the Treasurer thought he was making a threat to Yacht Party regulars when he vowed to shut down infrastructure projects without a budget deal.  To the GOP, that’s a GOAL.  All the posturing and tut-tutting at the lack of compromise, along with the horror stories spun out as a consequence of doing nothing, simply bolster the Yacht Party argument.  If you haven’t been paying attention, they want to do nothing.  They want to end government.  In a way they are the ultimate anarchists.

There’s supposed to be some kind of “cuts only” package released by Republican leaders today, by the way:

The GOP is scheduled to unveil its own proposal Monday, with no tax hike. The plan is expected to identify about $11 billion in budget cuts and, among other things, propose asking voters to redirect money designated for mental health programs and preschool programs and services.

State Treasurer Bill Lockyer, a Democrat, characterized the high-stakes showdown between legislative Democrats and Republicans as political “chicken,” with each party expecting the other to blink.

“I think they’re going to run off a cliff,” Lockyer said.

Incidentally, Bass and Steinberg are willing to come together on good government reforms, which we shouldn’t oppose in a knee-jerk fashion.  Liberals support reforming government and making it effective because they believe in it.  Republicans, under the guise of “reform,” mean to destroy government.  I don’t think there’s anything wrong with a performance review that looks at duplication or ineffective programs and seeks to mend them.  That’s what oversight is all about, and it’s a core function of the legislature.  What I do take issue with is the idea that reform is a “magic bullet” that will end all budgetary worries without anyone having to feel the pain.  That’s irrational and ridiculous, especially in this moment of crisis.

Dan Walters and Jon Ortiz from the Sacramento Bee are going to liveblog the joint session of the legislature helmed by Treasurer Lockyer and Controller Chiang today, coming up at around 3:00 PT.  Today we got a sense of what will be said in that session.

Treasurer Bill Lockyer, for instance, will tell lawmakers that unless a budget is adopted the state will stop financing construction projects for roads and other infrastructure. That’s not just bond sales for future projects — those will stop, too. It means projects that are underway will no longer be able to draw down cash from the treasurer’s pooled account as the state’s general fund moves toward insolvency. Thousands of jobs could be lost.

“No budget, no state financing,” said Lockyer spokesman Tom Dresslar. “The spigot is completely off. We’re talking about a complete shut-off of state infrastructure financing unless we get a budget fast.”

This is the exact opposite of what we should be doing, of course, and the exact opposite of what the President-elect wants to use as a means to kick-start the economy – massive spending on shovel-ready infrastructure projects.  But California does not, in the current context, have the money to support it.  In fact, we could be out of cash by February:

California is on track to run out of cash in February or March and faces a $15 billion cash shortage by the end of its fiscal year in June unless officials plug an $11.2 billion budget gap, according to the state’s budget director.

Additionally, if Gov. Arnold Schwarzenegger and lawmakers fail to close the current fiscal year’s budget shortfall soon, California, the most populous U.S. state, may in March delay payments to its vendors or hand them notes promising payment, according to a Dec. 1 letter to top lawmakers from the director of the Department of Finance, Michael Genest.

A copy of the letter was obtained on Friday by Reuters.

“Specifically, it now appears certain that available cash reserves from all sources will fall below the cash cushion target of $2.5 billion in February and that the state will begin delaying payments or paying in registered warrants in March,” Genest said in his letter.

That would be IOUs.  From the 8th-largest economy in the world.

Like I said last Friday, this should be a “Scared Straight” kind of presentation, only I don’t see how the Yacht Party members would be scared.  What’s being offered, a government shutdown, is basically their greatest dream realized.  And it’s not like there’s leadership at the top of their party to force any compliance – Arnold Schwarzenegger is too busy pretending he’s the world’s go-to source on global warming and trying to buddy up to Darrell Steinberg instead of making any effort to get members of his own party to stop hijacking the state.

If you’re a masochist, check out the liveblog at 3.

We figured that when Darrell Steinberg assumed the leadership post in the Senate, there would be less accommodation and more risk-taking from the Democratic caucus.  Well, this potential deal floated in today’s LA Times would certainly fit that description.

State lawmakers began moving toward a deal this week to close California’s deficit with the help of steeper car fees that would cost many drivers hundreds of dollars annually, according to people involved in budget talks.

Under the plan, GOP lawmakers — most of whom have signed anti-tax pledges — would vote to triple the vehicle license fee that owners pay when they register their cars every year in exchange for a ballot measure that would impose rigid limits on future state spending. Motorists’ annual license fees would rise from 0.65% of the value of their vehicles to 2%. For a car or truck valued at $25,000, the increase would be $336.

The higher fees would generate $6 billion annually, helping to fill a budget gap that is projected to reach nearly $28 billion over the next year and a half.

The proposal is being championed by incoming state Senate leader Darrell Steinberg (D-Sacramento). Democrats and advocates for the poor have opposed strict state spending limits, saying they would cripple government services.

Steinberg may be gambling that voters would reject the limits, as they have in the past.

This would be a simple restoration of the VLF to the levels put in place by Pete Wilson (yes, Wilson; the increase, which was meant to occur during poor economic times, only triggered under Gray Davis).  It is not a progressive version or a “feebate,” and it does not increase for higher emission-producing cars and trucks.  So it’s not the best way to restore the VLF, in my view.

And the exchange, a ballot measure to restrict state spending, is a long-sought Yacht Party agenda item.  I’m guessing it would be substantially similar to the version voted down in 2005.  A spending cap is simply a way to ratchet down government and eliminate needed services which the public has said time and again they not only want, but are willing to pay for.

I understand Steinberg’s reasoning on two levels:

(1) It’s probably correct that Democrats and unions would fight like hell to stop a ballot measure with a spending cap.  These are tough economic times, however, and they’re projected to continue in the near future, so cutting spending may look more attractive to voters.

(2) This would be a stake through the heart of Yacht Party rhetoric about taxes.  You can see the effect of what this would do by just listening to talk radio:

Prospects for the plan, however, immediately began to dim after details were published on the Los Angeles Times website. Angry phone calls from constituents, advocacy groups and talk radio hosts prompted lawmakers to publicly distance themselves from the proposal.

I mean, this came out on the same day when Senate leader Dave Cogdill wrote an op-ed entitled Cut, Don’t Tax.  And Arnold Schwarzenegger made cutting the VLF the signature piece of policy in his platform in the 2003 recall election.  For him to reverse it just 5 years later would be humiliating.

Ultimately, Republicans are probably too spineless to agree to this – they’d fear primary elections in 2010, although directly after an election would probably be the best time to pull this off, with the most distance between now and the next election.  But Democrats should think hard about this as well.  Is it really worth having to fight a ballot measure that would cripple the state?  It may well be, especially considering there’s probably no other way to raise needed revenue.

It’s quite a gamble.

Darrell Steinberg is clearly not simply Don Perata redux. The tone and tenor of the conversation with him are simply different.  And you get a great taste of that with this conversation with Steinberg and then Perata in this edition of KQED’s Forum.

Steinberg enters a full leadership role at a time of crisis, but claims that, like Al Gore, he sees opportunity in this time of crisis.  Opportunity to increase legislative oversight. Opportunity to improve the governance of the state by ending the 2/3 rules which have brought the state to its knees.  Opportunity to really and truly revamp the tax system. And part of that revamp could lead to further results on AB32’s carbon emissions goals by monkeying with the Vehicle License Fee.

Good Luck Senator. You’ll need it.

Arnold has been making some rather shocking vetoes of important legislation this week, including a cave-in to Sarah Palin on port air quality and the veto of the anti-rescission bill. On balance his record on bills this week is atrocious.

But there are a few bright spots, including a bill that has the potential to revolutionize land use in California. Arnold has signed Sen. Darrell Steinberg’s SB 375, a bill that links land-use planning to the AB 32 global warming targets. The intent is to eliminate sprawl by limiting sprawl and favoring infill development.

The logic is clear – sprawl creates more auto traffic, and more auto emissions, which worsens global warming. 38% of greenhouse gas emissions in California come from transportation. The obvious solution is to crack down on sprawl and encourage infill development – urban density served by mass transit. SB 375 includes language streamlining CEQA review for infill development that meets carbon emissions reduction goals.

That’s an important element of an anti-sprawl, anti-global warming effort. It’s the Portland model – you can’t stop sprawl merely by limiting growth on the edge of a metro area. You must also encourage infill, dense development and provide the mass transit to serve it.

It’s also vital to California’s economic recovery. As I have argued before, we must redefine the California Dream by using urban density to provide for affordable living and economic security.

There are still some outstanding issues regarding SB 375 – business groups were lobbying to have urban commercial projects given the same CEQA streamlining as residential projects:

Some business groups remained critical because the bill did not allow commercial development to benefit from CEQA changes. And some local officials said it overreached by allowing the state to dictate greenhouse-gas reduction goals for each region.

Steinberg said he promised the governor that next year he will clarify that projects funded by the 2006 voter-approved transportation bonds will be exempt. But Steinberg said he agreed only to have “good-faith” discussions about the commercial development issue.

“The balance we struck was so precarious, we couldn’t pile anything more on top of the bill,” Steinberg said.

California cannot afford sprawl. SB 375 is a big step forward in our efforts to redefine the California Dream and follow Portland’s successful model into a prosperous 21st century future.