CapAlert sez it’s all over, and it’s marginally better, actually:

Legislative leaders said today that they have reached a deal on the long overdue state budget that will satisfy demands made by Gov. Arnold Schwarzenegger.

The Republican governor has said he would veto the $104.3 billion plan lawmakers passed this week. He demanded that a proposed rainy day fund to help the state though bad economic times be tightened to prevent its balance from being depleted in good times.

And he said lawmakers must remove a maneuver, worth $1.6 billion, that would have increased the amount of withholding tax paid by personal income taxpayers.

Republican leaders and Senate President Pro Tem Don Perata emerged from a meeting this afternoon saying they had agreed to the governor’s demands. They have proposed making up the lost revenue by increasing penalties on corporations that underpay taxes. The leaders also agreed to lower the amount of the state’s reserve fund from $1.2 billion to $800 million. Under the proposal, corporations who underpay their taxes by $1 million or more would see penalties rise from 10 percent to 20 percent. The deal also assumes a cancellation of a proposed tax amnesty program.

A mixed bag here.  I think the rainy-day fund is kind of silly, and the worst part of this is that Schwarzenegger will now get to wield his blue pencil on the budget (last year he struck funding to treat mentally ill homeless people, you recall.  How moderate!).  But eliminating the interest-free loan all of us taxpayers were going to give to the state against our will is a good thing, especially in return for increasing penalties on corporate tax cheats.  The withholding gambit wasn’t going to pass the override, because Republican leaders wouldn’t have gone along (they somehow snuck it into a party-line vote the first time around).  

Of course, that isn’t a reliable form of income.  And there are still plenty of gimmicks inside this budget.  And, the $8 billion dollar chunk that could be siphoned off by judicial mandate to rescue prison health care has yet to be dealt with.  So this end result is not exactly wonderful.

The pundits who gave Arnold a tongue bath over having the post-partisan postpartisan-ness to veto the budget ought to take a look at the finished product.  It’s still a piece of garbage.  And that’s by design in the dysfunctional budget system, where you practically are destined to come out with an illegal finished product.

The Bay Area Council, a group of high-level executives from around the state, has the right idea – it’s time for a Constitutional convention that can blow all of these contradictory and debilitating rules off the table and start anew.

A constitutional convention was used nearly a century ago to wrest California’s government from the hands of railroad barons. Today, some say it could help the state out of its current political dysfunction.

The Bay Area Council, which represents the chief executives of Google, Yahoo, Chevron, Wells Fargo and other major San Francisco Bay Area businesses, is leading the charge for a state constitutional convention to revamp state government.

“This year’s budget deadlock shows better than perhaps any other recent event that our state needs a constitutional convention to fix a governance system that is hopelessly broken,” Jim Wunderman, president of the Bay Area Council, said in a statement.

Among some of the changes being proposed:

Adopt a two-year budget cycle.

California’s taxing and spending systems, along with its ties to local government spending.

Remove the two-thirds vote requirement to pass a budget in the Legislature.

The devil’s in the details, but the current system doesn’t work, and we end up suffering.  There are dozens of teachers, health care workers, managers of clinics, public employees, and countless other groups who get hurt every summer by the late budget.  The legislators aren’t currently allowed to do their job.  Reform is desperately needed.

I will be on KRXA 540 AM at 8 this morning to discuss this and other California politics topics.

George Skelton holds Arnold responsible for the worsening political climate in Sacramento in his column in today’s LA Times:

Overrides of any bills are humiliating and extremely rare — the last one was 29 years ago when Jerry Brown was governor — and generally are regarded as symptoms of gubernatorial weakness.

Schwarzenegger has vowed to retaliate by vetoing “hundreds of bills” passed by the Legislature in the closing days of its session, measures close to many lawmakers’ hearts.

At that point, the Capitol would be heading into nuclear winter.

But rather than write the easy column – blaming everyone for the crisis and calling for some moderate solution – Skelton digs deeper and takes Arnold to task for his posturing and particularly his tendency to increase his demands once the Legislature has given him what he wants:

And what’s this all about? Besides the governor trying to escape any blame for a bad budget and position himself standing up to an unpopular Legislature?

The state already has a rainy day fund. The Legislature agreed to increase it significantly and to transfer into the pot unexpected “April surprise” revenue exceeding 5%. The dispute is over when and how the money can be extracted from the fund. At least, that was the dispute.

Democrats agreed Wednesday to Schwarzenegger’s demand that the fund be tapped only when the state is collecting insufficient money to pay for current services, according to one source familiar with the negotiations. But then Schwarzenegger — seemingly itching for a fight — asked for more.

It’s clear to me what’s happening here. Arnold took one look at the Field Poll that showed 15% approval for the Legislature and decided now was the time to play hardball. Knowing that legislators would not be interested in prolonging budget fight that causes Californians suffering so close to an election, he is pushing hard, shock doctrine style, for his right-wing reforms.

The Legislature has its share of blame for this crisis – Republicans who used the 2/3 rule to hold the state hostage are the prime culprits here – but Skelton is right to refocus our attention on the role Arnold has played in helping break California’s government at a time when strong, decisive government action is needed to save us from the economic abyss.

Of course, the problems with our government are structural. Perhaps it’s time for more fundamental forms of change – changes to the way our state’s government operates. We can’t keep doing this any longer.

Arnold approve	38%
Arnold disapprove	52
Leg approve	15
Leg disapprove	73
Support Recall	29
Oppose Recall	63

Californians hate their politicians these days, but they hate the Legislature more strongly than they do the governor. Today’s Field Poll showed Arnold has record high disapproval ratings but still fares much better than the Legislature, as the table at right suggests.

The poll also shows little appetite for the prison guards’ proposed total recall. Whereas at this stage in the process in 2003 46% of voters backed a Davis recall, only 29% do today. Even Democrats oppose a recall, 40-52.

What this means is that the Legislature and the Legislature alone is on the hook for this budget. And as the budget is getting panned by virtually every stakeholder in the state, it’s likely that the Legislature’s standing is only going to be damaged further by this budget, to the point where one has to wonder from a purely political standpoint whether the Dems were better off prolonging the fight.

This budget, then, represents a BIG political gamble on the part of the Legislature – that the public will hate them less for this deal than they would a further budget delay. A spring 2009 special election on the budget is almost certain, and it may include SEIU’s effort to repeal much of this current deal alongside fundamental budget reforms from eliminating the 2/3 rule to the GOP’s long-sought spending cap, perhaps even a constitutional convention.

For Democrats to prevail in those struggles they need public support, and ultimately, some level of trust that if the Legislature is given new powers or an easier time of making a budget they will use those powers wisely. This budget deal may make that more difficult.

Dems can still win the 2009 budget war – but to do so they’re going to have to be smarter than they were this year. Perata in particular seemed to have no plan or strategy at all, and wound up cutting and running just as he did with the Denham recall. With new Senate leadership we can hope and we will expect better. The state’s future hangs in the balance.

UPDATE by Dave: It’s worth noting that this budget will require the voters to weigh in just to get it enacted.  The provisions on the rainy-day fund and the borrowing against future lottery revenue (which is dumb, dumb, dumb) need voter sign-off.  So we could see a special election as early as January.  I don’t know if there would be time to piggy-back 2/3 or the SEIU proposal or anything else to that election.

Not content to see a crappy, kick-the-can budget get enacted without tacking on some pernicious elements of his own, Arnold Schwarzenegger wants additional budget reform in the budget before he’ll sign it.

All three of his demands relate to beefing up the “rainy day” account, known in budget terms as the “budget stabilization fund.”

In their tentative agreement, Democratic and Republican lawmakers had pledged to increase the size of that fund from 5 percent of the state’s General Fund to 10 percent.

But Schwarzenegger demanded the fund be increased to 12.5 percent.

That request appears to have been met. The Senate has distributed a document with highlights of the compromise, which included the 12.5 percent figure.

Schwarzenegger also insisted any transfers out of the rainy day fund could occur when the state’s revenues fall below projected spending. (The governor defines that as “prior year spending with Gann Factor adjustments.”) […]

The last demand is that the Legislature’s 3 percent deposit into the rainy day fund can only be suspended when money is being transferred out of the fund, or when the fund reaches its 12.5 percent cap.

The rainy day fund is one of those ideas that is catnip to reporters and pundits, but in practice just another strain on the overall budget.  It’s another bucket that lawmakers have to fill, without the revenues to fill it.  If we keep going down this road, there will be 0% of the budget that the legislature can actually effect, and then they can all go home and raise money year-round instead of having to head up to Sacramento every week or so.

Man, it’ll be good to have a Democrat in charge who understands the importance of progress instead of covering your ass and rewarding your friends:

“First of all, though it doesn’t help much this year, I think this process and the frustration many of us are expressing reveals what must be done next year.

We need to not only think about but begin planning for taking significant questions about state and public finance back to the people of California. And next year as your leader I intend to do that. I’m not going through this anymore. I’m tired of it. It’s unproductive. It does nothing for the way people view us.

You’re right Senator Aanestad, under the current state of the Constitution; it is a two-thirds requirement to pass a state budget. And I know that question has been taken to the people in one form or another. But maybe it has not been take to the people in the right form, at the right time. And so, be prepared next year. Whether it is through the legislature or by the initiative process, we’re not going to go through this anymore.

If Darrell Steinberg was in charge right now, Jeff Denham wouldn’t be in the State Senate.  Abel Maldonado would be hanging on for dear life.  And we’d have a 2/3 majority.  Because he would prioritize it.  He would design the entire year around achieving it.  Don Perata simply has failed in understanding what is crippling this state.  Steinberg gets it.  And finally, progressives and the legislature will be on the same page.  For now, we struggle with the failed perspective of the past.

Technically, the session is over in Sacramento, but of course, with no budget, the work will go on.  More on that in a moment, but let’s take a look at the bills that have passed thus far.

Hundreds of bills passed through their respective houses and made their way to the Governor’s desk.  Among those passing:

• AB 1945, which cracks down on insurance company rescission policies

• SB 1301, the California DREAM Act, allowing children of illegal immigrants to access financial aid for college

• SB 375, a major land use bill that would improve transportation planning and reduce urban sprawl (this is a real coup)

• AB 583, the Clean Money pilot project bill that would make the 2014 Secretary of State election a Clean Money race.

UPDATE: More bill passage from the indispensable Frank Russo:

• AB 1830 (Lieu): This is the good version of the subprime mortgage bill that passed in a weaker state earlier this year.

• AB 180 (Bass): Another mortgage bill that seeks to go after predatory lenders and “foreclosure consultants.”

• SB 1440 (Kuehl): This is a big one.  It sets a minimum requirement that insurers spend at least 85% of their premiums on health care.

• SB 840 (Kuehl): The single-payer bill, which will be promptly vetoed by the Governor, sadly.

• A couple toxic chemicals bills: AB 1879 and SB 509.

• AB 2939 (Hancock): Allowing cities and counties to implement stricter green building guidelines than state law, which are already tightening through SB 375.

Among the bills that failed:

• SB 1522, a health care reform bill which would have standardized the individual health care market and made it easier to comparison shop, as well as set a floor for basic minimum care.  That those who most strongly pushed for comprehensive health reform would fail to pass this common-sense fix makes no sense to me.

• SB 110, which would have created an independent sentencing commission to review and revised sentencing guidelines and parole standards.  Another failure of leadership in our prison crisis, as lawmakers refuse to loosen their grip on the rules which they’ve abused and led to this disaster.

As for the budget, now the legislature, out of session by constitutional mandate, must work on nothing else.  Sen. Perata has called the bluff on the Republicans, asking them to formally submit their unspeakably cruel budget plan so that the whole state can see their priorities for what they are.

There was a strange colloquy near the end of yesterday’s Senate session (Republican Senator Jim Battin is pictured at right), where the Republicans were clearly caught flatfooted, flustered in their responses like school kids admonished for not doing their homework, and having a hard time coming to grips with what Perata told them. This is a reprise of what Perata did last year when Senate Republicans held the budget up and when he asked them to come up with their own proposal.

Perata: Right now, the bill that I brought up yesterday is kind of an orphan. You have your opportunity to present a bill that you outlined today in your press conference. I appreciate the fact that there is a substantial amount of work to be done on that bill. We know, because we started ours 8 months ago. So you’ve got a lot of work to do. But we’re very confident you can do it. Every day we will be here to see how we’re doing […]

Republican Senator Jim Battin: I just want to make sure I understand what your expectations are. So what you want from our caucus is a full budget document, is that correct?

Perata: Yeah. A budget.

Battin: And every day we are preparing that, you want to meet.

Perata: Yeah. You know what I don’t’ want to do is to be caught in that position where people are getting confused whey we don’t have a budget. Now every day we meet, we can say, “you’re working on it.”

Battin: And you also want to have the trailer bills as well?

Perata: Yeah. A budget.

Battin: You would actually allow us to bring it up for a vote on the floor?

Perata: You betcha.

Battin: So my expectation is that it will fail…And then what?

Perata: Let’s not prejudge. You may come up with a piece of work that will knock our socks off. So let’s see what you will do.

It’s a neat trick, and good for political purposes.  I don’t know how it gets us closer to a budget.  Schwarzenegger still wants the sales tax hike, Yacht Party Republicans are still dead-set against it, and Democrats are trying to compromise and on the edge of cracking.  But they seem to believe, this time around, that the budget can be blamed on Republicans in November and there’s a benefit in campaigning on the issue (I think that’s why Perata wants a real plan).

So nobody knows how this ends.  And the victims are the public employees, the long-term care workers, the schools, the health clinics, the everyday Californians that did nothing wrong and don’t deserve this anxiety.  

This is a terrible, terrible idea.

With the end of the legislative session approaching, no budget in place and a $15.2-billion deficit hanging over their heads, the Assembly’s Democrats on Friday unveiled their plans for the next week: a three-day vacation from the Capitol.

Their scheduled time away coincides with the Democratic National Convention in Denver, where 31 members of the Legislature are expected as delegates. But that has nothing to do with the decision not to hold sessions Tuesday through Thursday, a spokesman said.

“If we had work to do, we’d be here,” said Steven Maviglio, a spokesman for Assembly Speaker Karen Bass (D-Los Angeles). “It’s literally silly for some of them to sit around in Sacramento.”

I know that and you know that, but ordinary people who aren’t political junkies don’t, and when they see the commercial run by the Yacht Party that says “When the budget crisis was at its height, California Democrats left town to party,” they will be unsparing in their opinion.  You never give your opponent ammunition like this.  At a time when real people are suffering from the lack of services and prospective cuts, you can’t leave to hit the cocktail circuit at the DNC if you’re an elected representative in a time of crisis and you have something to say on the matter.  I know this is a Big Five question at this point, but it looks awful.

Good on Sandre Swanson for cancelling his plans to attend, by the way.  Karen Bass isn’t going, either, but obviously she has work to do.

Get this, here’s why the break is only three days:

Even though many will not be in Sacramento, Assembly members will still get paid more than $1,000 in tax-free living expenses for the next six days because they scheduled a Monday afternoon meeting on water bond legislation and other matters, Maviglio said. Under Assembly rules, they can collect their allowance as long as they don’t go four days without a meeting.

I give up.

The story of Sacramento lobbyists killing two bills to eliminate PFC chemicals from packaging is short, so you can go read it yourself.  It’s the same old story – legislation that is overwhelmingly popular and easily implementable is killed off by lobbyists for business and industry.  Regardless of the budget fight, that’s life in Sacramento.  And at the same time, legislators scurry to one fundraiser after another where the same lobbyists pat them on the head and hand them a check.  It’s nauseating, and anyone outside of a political consultant who thinks that the next governor race matters even a whit absent fundamental change of this aspect of Sacramento politics is dreaming.

And people power is the only thing that’ll kill it dead, not a kinder and gentler version of the same old politics that can’t change the state.

UPDATE by Brian: I’ve added the vote information for both bills in the comments.

Over-reliance on multiple economic bubbles has led this state to a worse job profile than Ohio and a state government utterly incapacitated to do anything about it.

SACRAMENTO — California’s unemployment rate climbed to a 12-year high last month as the state continued to bleed jobs in the real estate and construction industries.

The rate jumped to 7.3% in July from 7% in June. It was even worse in the Inland Empire, where the unemployment rate is approaching 9%, the state reported Friday.

“The depth and magnitude of the job losses are accelerating, clearly,” said Esmael Adibi, director of economic research at Chapman University in Orange.

Adibi and other economists believe unemployment will continue rising next year even if the economy stabilizes. “Unfortunately, the unemployment rate is a lagging indicator,” he said.

Once the economy improves, people who have fallen out of the job market will jump back in, which will keep the unemployment rate well into the 7% range through much of next year, he said.

California has lost jobs in 10 of the past 12 months, and the rate is 2 points higher than it was just a year ago.  

I think it’s very clear how we got here.  Nationally, multinational corporations have moved manufacturing jobs overseas and narrowed the job market to few options beyond the service sector.  The knowledge economy and the housing boom provided an artificial cushion, but when they went bust there were no alternatives for the middle class.  And when the legislature is so sclerotic and logjammed that they can’t respond to any crisis, the cruelties of the free market take over.

What’s also clear is that they way out of this is with a sustainable new economy based on green-collar manufacturing jobs that stay right here.  The need to innovate our way out of the climate crisis provides a stellar opportunity that is starting to be realized.

Companies will build two solar power plants in California that together will put out more than 12 times as much electricity as the largest such plant today, the latest indication that solar energy is starting to achieve significant scale.

The plants will cover 12.5 square miles of central California with solar panels, and in the middle of a sunny day will generate about 800 megawatts of power, roughly equal to the size of a large coal-burning power plant or a small nuclear plant. A megawatt is enough power to run a large Wal-Mart store.

The power will be sold to Pacific Gas & Electric, which is under a state mandate to get 20 percent of its electricity from renewable sources by 2010. The utility said that it expected the new plants, which will use photovoltaic technology to turn sunlight directly into electricity, to be competitive with other renewable energy sources, including wind turbines and solar thermal plants, which use the sun’s heat to boil water.

“These market-leading projects we have in California are something that can be extrapolated around the world,” Jennifer Zerwer, a spokeswoman for the utility, said. “It’s a milestone.”

This is about 57 times the largest photovoltaic plant currently in the United States.  Without the state mandate it simply would not be built.  So there’s a role to play for the state in encouraging job growth in the green sector.  This is a time with a lot of suffering, but with proper effort that could turn around.  That, and letting the government actually do their job.