Although a budget deal has been rumored for a few days now it has yet to actually materialize. Still, the Sac Bee reports on the outlines of a widely rumored agreement (h/t to surfk9):

Multiple legislative sources said Tuesday that it would raise revenues temporarily by these means:

— Increasing the state’s sales tax by 1 cent on the dollar.

— Increasing gasoline taxes by 12 cents per gallon.

— Raising the state’s vehicle license fee from the current 0.65 percent of a vehicle’s value to 1.15 percent, with 1 percent going to the general fund and local law enforcement getting 0.15 percent.

— Increasing the personal income tax across the board, either by assessing a surcharge on tax liability or increasing the tax rate.

The sales tax, personal income tax and vehicle license fee components would be in effect for either two years or five years, depending upon the fate of a ballot measure to restrict spending.

If voters approve the spending limit, the three revenue-raising components would be in effect for five years. If they reject the measure, the revenue would die after two years.

It was not clear Tuesday whether the proposed gasoline tax increase also would be tied to the ballot measure or how long it would remain in effect.

It’s worth noting that this proposal fits the Republicans’ lawless nature. It’s outright extortion – vote for our spending cap or the tax hikes die – and that ballot measure would likely violate the single-subject rule. Republicans are consistent in one thing – they know the public hates them and hates their ideas, so the only way they can impose their far-right ideology on the state is at gunpoint. This proposal shows that the only difference between the Mafia and the California Republican Party is Sicilian accents.

Democrats ought to have been more vocal about the Republicans’ tactics and refused to go along with them (though there’s still time to ask Jerry Brown to investigate Republican lawlessness, and even John Garamendi joined the Facebook group). It’s not clear whether the non-budget items the Republicans illegally demanded are part of this proposal or not.

What the Republicans are trying to pull here is a damned if you do, damned if you don’t move. If we kill their catastrophically bad spending cap, then we return the state to budget crisis by killing the taxes. But if we accept the cap, we advance their Hooverite, aristocratic agenda.

I wonder if that’s actually how it would work out though. I would enthusiastically campaign against the spending cap ballot measure and I doubt that it would be so difficult to get 51% of Californians to vote no – especially once they learn that tax hikes go away if they vote no. We would then have more time to make our case to voters for revenues and government spending. We’d have more time to target and ideally defeat Republicans in November 2010, taking us to 2/3. And hell, if we’re really lucky the economy might recover enough to where the budget isn’t so bad and we’re not saddled with a spending cap holding us back.

I have to believe that the Republicans are at the end of the line on all this. Obama’s successful framing of the federal stimulus will soon impact California politics as voters realize that mass layoffs of government workers, including teachers, is a monumentally stupid idea and that government spending is good and good for you. Anger at Republican obstruction in DC can be easily translated into anger at obstruction in Sacramento.

In short, Democrats have no reason to feel pressured to accept a bad deal. They just need to hold their ground and explain to the public what is really going on. The public is fed up with Republican lawlessness, whether that manifests itself in this deal or in the killing of their horrific spending cap.

As local governments make the obvious moves to try and force resolution to the budget crisis, Republicans continue to hold the state’s economy and its future hostage to their insane right-wing demands. And unless Democrats refuse to give in, we will see the worst possible outcome – a permanent destruction of government services.

The Republican plan appears to be one of permanently locking into place the cuts that will be made during this budget deal. Some Californians believe cuts are necessary right now given the economic crisis – they’re wrong and misguided, but they see the cuts as a temporary measure of necessity, and many believe they can be restored once the economy recovers.

That’s not the Republican plan. There are persistent reports that a “hard spending cap” is going to be placed on the ballot as part of the deal – and a recent PPIC poll showed 70% of Californians would support a cap – never mind the fact that we’ve had one for 30 years.

As the California Budget Project clearly explains, a hard spending cap is a death sentence for government services. If we had a cap in place starting in 1995, as the chart below shows, this year we would have…you guessed it, $40 billion in cuts to make–>

Even worse, a spending cap prevents new spending efforts even if voters want to do so. Presumably a hard cap would stop high speed rail in its tracks, for example. Kiss goodbye any effort to address climate change, the drought, or the economic crisis. And when the economy recovers, California can never restore what was cut now. Schools will die once they are hit with the double whammy of massive funding cuts and NCLB rules.

And that’s not all. We’re also told that the budget deal may include new tax cuts – permanent tax cuts at that, including for corporations. Whereas the federal government can simply go deeper into deficit to pay for a tax cut stimulus, bad policy though it may be, California cannot. The CBP showed the impact of similar tax cuts that were included in the 2008 deal – which will soon cost over $1 billion per year (<–)

Democrats need to understand – a bad deal is worse than no deal. A hard spending cap and tax cuts mean that the pain that would be induced by the current budget solution would last far into the future. It is a recipe for permanent disaster. It’s time for Democrats to show that they have given all they can give, and that if Republicans want to destroy public services, it will not be done with Democratic votes.

We’re hearing that there could be a budget vote as early as tomorrow, although with the Big Five meeting today, that doesn’t seem physically likely, and the AP says no deal has been reached.  Nevertheless, according to Greg Lucas:

Allegedly the spending reductions – and tax increases – have been agreed to and the focus of continuing budget talks is the shape of the so-called “economic stimulus” legal changes sought by Gov. Schwarzenegger and his GOP allies.

Those changes, such as relaxing state environmental review of less than a dozen highway projects and allowing more outside engineers to design such projects, having been a sticking point for the Republican governor since last year when he criticized – and this year vetoed – a Democratic budget plan for not doing enough to boost the economy.

The new taxes are said to include a half-cent boost in the sales tax, which generates roughly $4 billion annually, and a return of vehicle license fees to 2 percent of a vehicle’s value. At 2 percent, the license fees, much of which are deductible on federal taxes, would generate $6 billion in new revenue for the state – and increase over time.

Returning the VLF to a historically consistent number would be poetic for a failed governor who based practically his whole campaign on reducing it and breaking the state in the process.  

What happens in between the taxes and the spending is going to be a key.  Whether the GOP is fighting old battles by trying to invalidate past environmental laws, or whether they are demanding a state spending cap, those details matter.  Dan Walters thinks that a “carefully written spending cap with realistic emergency provisions” could work in a swap for eliminating the 2/3 budget requirement, but when you’re adding emergency measures and writing it so carefully, you might as well raise enough revenue to pay for services people desire and be done with it.  Spending caps don’t work.

In the meantime, while these details are hashed out, citizens are paying the price, as this week California begins to stiff creditors and defer payments to individuals and businesses.

Wendy Hansen, a 52-year-old single mom in Monrovia, says she cannot afford a delay in her anticipated state income tax refund of $1,800.

Without the check, Hansen said, she will have to put off debt payments, long-needed repairs on her house and treatment for a back problem that she believes has been aggravated by stress over finances.

An estimated 2.7 million Californians expecting income tax refunds this month won’t receive them for now, because the state’s prolonged budget impasse has emptied its treasury.

“It’s horrendous,” said Hansen, an office manager for a doctors’ office. “I’m someone who counts on that refund every year to make ends meet.”

This will disproportionately hit those how make too little money to owe taxes and expect their entire withholding to return to them, as well as those expecting public assistance payments.  In other words, the least of society.

Who in Sacramento will speak for them?

Jim Sanders reports that tax increases are on the table for the Yacht Party, but only with additional long-sought concessions.  This actually is a shift because taxes weren’t even on the table before, but not much of one.

The GOP caucus realizes a tax hike will be part of any budget pact but could support it only if agreement were reached on permanent program cuts, a hard spending cap and other issues, lawmakers said.

“The reforms have to be there,” said Assemblyman Anthony Adams, R-Hesperia.

“(We must be able) to tell constituents, ‘Look, we had to raise taxes, we had to go forward, but we’ve fundamentally altered the way in which Sacramento is going to be budgeted – and we will not have these problems again because of it,'” Adams said.

Obviously the wavering from business groups who are frightened by the prospect of the state’s looming insolvency is driving this.  But let’s take a look at what the Yacht Party wants as an exchange for their support on taxes, which would probably be regressive ones like sales tax hikes instead of the progressive tax solutions needed like eliminating loopholes for businesses and upping the top marginal rates on the wealthy.

They want a spending cap.  They’ve wanted it for some time.  In fact, it already EXISTS, and it has for 30 years.  But the Yacht Party wants tighter restrictions.  The CBP blog has provided a chart showing what they really want.

The chart shows how much state spending would have had to been cut in the past decade to comply with the kind of cap that Republicans have offered in the past.

Our analyses found that such a cap would have limited total state spending in 2008-09 to $39.7 billion below actual budgeted levels. The General Fund’s share of the necessary reductions would be $31.2 billion. What would it take to cut $31.2 billion out of the General Fund budget? Eliminating all General Fund support for higher education; the judiciary; child support services; health care services; resources – including fire protection; and environmental protection. Maybe that’s why the campaign to modify California’s original cap was led by then-Governor George Deukmejian, then California Chamber of Commerce president Kirk West, and then-California Taxpayers Association president Larry McCarthy.

So the price exacted for revenue increases is an end to basically every service California provides.  At that point, who needs the revenue increases?

Of course, the Yacht Party would have to get voter approval for a spending cap, so it’s a gamble for them.  But this movement should not be confused with a serious desire to actually serve the needs of a struggling citizenry.

This proposed Sen. GOP budget is a joke. Pure and simple, it is not acceptable. Period. Finito.

Here’s the statement from Speaker Bass on this ridiculous pile of personal affronts to our state:

“The Republican proposal isn’t a plan; it’s a blueprint for economic disaster. More than $5 billion in permanent cuts to education, $2 billion in borrowing from a phony lottery scheme, and $1.5 billion in cuts to the safety net for our most needy citizens — coupled with deficits for as far as the eye can see — are not reflective of California values. Our state is better than this.”

They say that a budget is a set of priorities and values.  Apparently the Republicans value personal hording of wealth over education and the future of our children.  They value deforming our budget process even more over making a system that works with for our state.

First, the spending cap is a non-starter.  They only describe it as “strict” in the press release, but one can be assured that left-leaning organizations will fight any “strict” spending cap tooth and nail. Why? A spending cap would mean that we would never be able to truly fund the important programs of the state, and the ever-increasing prison budget would end up gobbling greater and greater percentages of the budget.

The Republicans like to speak of responsibility, but as Dan Walters pointed out last week, they dug this hole themselves.  But, they’ll continue digging by adding more initiatives on this crap, and continue to propose more spending. And we’ll see services to those who didn’t commit crimes continue to plummet.  Good work GOP!

We’ll most assuredly get more details on this soon. But, really, what’s the point? It’s not like this thing has any basis in reality.

There are budget votes scheduled for Sunday, but given that the Republican effort to impose an unworkable spending cap died in committee yesterday, it’d be hard to see how this all gets resolved in a matter of days.  Clearly the GOP’s ACA 19 overreached to the extreme, throwing in practically every goodie on their wish list and expecting the majority Democrats to roll over.  This time, they didn’t.

They are holding out for a strict formula written into the state Constitution that would limit how much spending can grow in a year. They unveiled their plan, ACA 19, written by Assembly Republican Leader Mike Villines of Clovis, at a legislative hearing Friday. Democrats spent much of the 3 1/2 -hour meeting tearing it down, saying it would strangle government.

“It seems to me the objective of this proposal is clearly to promote less government,” said Assemblyman Sandre Swanson (D-Alameda). “I don’t think your proposal allows any practical flexibility to deal with real-life crises.” […]

An analysis by the California Budget Project, which advocates for low-income Californians in the budget process, concluded that the GOP plan would make it impossible for the state to keep funding schools at the current levels approved by voters through Proposition 98.

The nonprofit further said the GOP plan would “ratchet down the state’s ability to support public services” as government spending failed to keep pace with the state economy.

Republican lawmakers argued that the naysayers were basing their criticism of the spending cap on unrealistic revenue scenarios. Democrats responded that the entire GOP plan is unrealistic. And so it went. The plan was ultimately rejected by the Democrats who control the committee.

This just doesn’t sound like two sides reaching an endgame, but of course stranger things have happened in Sacramento.  Plus there are deadlines for the state ballot that hit in a matter of days.

The worry here is that, as Frank Russo notes (and he’s a must-read in these times), the lobbyists who hold much control over what happens in the state will use the chaos to carve out some treats for their industries.

A prime example (pun intended) is California’s response to the subprime mortgage mess, where our state is experiencing one of the highest rate of mortgage foreclosures-something that has kicked our economy in the gut-and has exacerbated the fiscal problems we have with our budget.

Even Halper of the Los Angeles Times exposed in an article yesterday that the Schwarzenegger Administration at the bidding of the powerful banking industry in California is trying in closed door meetings, with the connivance of legislative Republicans, to hold the budget up and extract hundreds of millions for their friends. The article starts off:

“One reason California still has no state budget is a closed-door dispute over a tax proposal that could be a multimillion-dollar boon to banks that engage in subprime lending.

“The proposal, according to legislative sources and industry lobbyists involved in the private budget talks, was brought to the table by the Schwarzenegger administration at the urging of lenders and other corporate interests. The proponents argued that it would help offset costs to businesses that could result from other tax changes under consideration. “

Essentially this would happen by refunding tax hikes to those companies who did poorly in 2008, i.e. subprime lenders.  It’s complicated but the beneficiaries are clear.  High-tech industries are trying to repeal some worker rights as part of a deal.  In the waning hours there’s going to be a lot of opportunity for mischief.  And then there’s Schwarzenegger’s blue pencil to deal with.

It almost makes you think it’s a GOOD thing there’s no budget yet.

I will be on KRXA 540 AM at 8 this morning to discuss this and other California politics issues. Cindy Sheehan will be on at 9 – any questions you want asked?

The supposed budget deal that Don Perata claimed he had with Arnold and that we roundly denounced yesterday apparently was a figment of Perata’s imagination, according to the Sacramento Bee:

Senate President Pro Tem Don Perata began Wednesday saying he had made enough concessions to secure a budget deal with the governor and called for Republicans to sign on.

But the day ended with little progress, as Perata concluded that negotiations remained at “impasse.”…

In the five hours between Perata’s two comments, it became clear that Republican leaders were not joining Perata’s call for a vote. Neither were Assembly Democrats nor Schwarzenegger.

“I think we keep getting closer, but there are still issues to work out,” said Aaron McLear, Schwarzenegger’s spokesman. “We hope that the legislators have the same sense of urgency that we do. We need to get this done.”

Assembly Speaker Karen Bass was not ready to end budget talks, spokesman Steve Maviglio said.

“We’re continuing to negotiate on all the pieces of the puzzle,” he said. “Until they all come together, it’s premature to say what’s in and what’s out.”

Perata’s notion of a spending cap was apparently less rigid than the Republicans were demanding, although as far as I’m concerned any spending cap is a bad cap. Another sticking point is the Republicans’ insistence that any temporary increase in the sales tax to balance the budget be not only reversed after 3 years, but that the sales tax rate gets cut below its current level.

It should be made crystal-clear to California voters by Democrats that what Republicans are demanding is a further breaking of the budget process. They don’t want solutions, instead they are actively trying to make matters worse through a hard spending cap or a sales tax cut. Democrats need to be campaigning on the budget and turning the budget into a campaign, but it’s difficult to do that if you’re willing to agree to Republican-framed proposals like a spending cap, even if your details are different from theirs.

California voters deserve to know that Republicans are trying to implement Grover Norquist’s “drown government in a bathtub” agenda. Because as far as I can tell, budget negotiations are no further advanced than they’ve been in weeks, and since this is likely to drag until the fall, Democrats need to mobilize the electorate against Republican hostage-taking. We’ve begun to see some campaigning on the budget but it needs to be massively expanded and made a core element of the Sacramento Democrats’ daily routine.

It’s also time to mobilize the unions and other stakeholders, who have been quiet of late on the budget. The model for action must be the 2005 special election, which revolved around many of the same issues. Californians don’t want Republican budget proposals, but they won’t reject them unless Democrats ask them to do so.

Finally, it’s time for Don Perata to go. His “budget deal” stunt makes him look even more ridiculous than before and suggests he has no strategy or grasp of political reality and, as a lame duck Senator, has no place in these negotiations. He should hand over power to Darrell Steinberg now, not next week, and allow the state to get on with business without Perata’s silly theatrics or distracting legal issues or his unfortunate tendency to sell out the Democratic base.

David mentioned this below, but it deserves deeper elaboration. Don Perata’s agreement on a spending cap is one of the worst possible outcomes of the budget crisis. A spending cap has been a core demand of the Grover Norquist far right.  In Colorado, where a spending cap had been in place for several years, it nearly destroyed state government and had to be suspended.

If Democrats agree to this, they will be agreeing to the destruction of the state of California, finishing the job Prop 13 started 30 years ago. I cannot stress strongly enough how bad an idea this is.

It’s also unpopular with voters. Arnold’s spending cap, Prop 76, went down in flames in 2005 with 62% of voters rejecting it.

But what is the spending cap about? And why is is such a horrible idea? An excellent LA Times article from 2005 explains how spending caps are at the core of the right-wing plan to drown government in a bathtub:

Hard-line fiscal conservatives say they hope to reinvigorate the types of populist uprising that led to the approval by California voters of landmark protections against property tax increases through Proposition 13 in 1978 and the passage of term limits on politicians here and in several other states….

The proposals put strict limits on how much state budgets can increase each year. Anti-tax activists see such controls as a means to scale back spending on education, healthcare and social-service programs that even the staunchest free-market Republicans have been reluctant to cut.

Schwarzenegger and his advisors, already battling charges that their spending cap is part of a conservative agenda the governor is trying to force on Californians, have resisted forming alliances with the national groups. But the groups have eagerly embraced the governor’s crusade.

“We think California is very important,” Armey said. “It is a trend-setting state. Getting it done in California will set a very good example for all these other states.”

The article also mentioned the impact on Colorado, which enacted a spending cap in 1990. By the 2000s the cap was gutting government, as intended. The problem is that the spending cap readjusts to a lower level during a recession – but cannot be easily increased once the recession ends, meaning the spending that was cut during the lean times can’t be restored.

It is Grover Norquist’s way of drowning government in a bathtub. Even though Prop 13 has had a destructive impact here in California, leading to a structural revenue shortfall, we have been able to muddle through and protect education, transit, and health care from total collapse. Norquist’s spending cap would deal the final blow to those services.

It would not solve our budget problems – as Colorado found it would make them much worse. In November 2005 Colorado approved a 5-year suspension of the cap, as even Republican governor Bill Owens realized the state couldn’t survive with the spending cap in place.

For Democrats to consider accepting a spending cap is unconscionable. If Democratic leaders agree to a cap as part of a budget deal they deserve to be recalled from office. The current budget crisis is severe, yes. And we need a solution. But a spending cap will produce worse budget crises in future years while leaving California public services in ruins.

Dems should take comfort from the 2005 special election results. Californians do not want a spending cap. Don Perata is totally and completely wrong to agree to one. Let’s hope other Democratic leaders, especially those in the Assembly, refuse to give away the state to the Norquist crowd.

Deadlines involving getting measures on the state ballot (which may be necessary for finishing the budget) are leading to speculation about a budget deal in Sacramento.  Of course, I’ll believe it when I see it.  But here’s the latest:

Expectations are that there will be a temporary sales tax, some kind of spending cap perhaps like the one recommended by the Legislative Analyst’s Office, and that local governments will take a hit, possibly those permitted under Proposition 1A that allows local property taxes to be borrowed and requires repayment within two years.

Since at least some of these actions require a ballot item on the November ballot, the calendar requires action this week. This Saturday, August 16, is the drop dead date that Secretary of State Debra Bowen has written the legislature that ballot measures need to passed, even with a legislative passed exemption from deadlines that are in current law. The time is needed in order to print ballots and a supplemental pamphlet in time to get these to the voters.

Indeed, time is also running out on Prop 1, the high speed rail bond, and efforts to amend and strengthen it. There may be a deal which would place a separate measure, Prop 1A on the ballot that has these changes.

Dan Walters is hearing the same thing.  Sounds like a Sacramento compromise where the conservatives that dug in feel no pain for their intransigence, all the solutions are temporary, nothing structural is addressed, the GOP extracts a MAJOR concession in a spending cap, and local governments get robbed.  Considering that Schwarzenegger can blue-pencil out anything he wants after the fact, and the final deal may give him MORE authority to cut spending, giving up the Orwellian-titled “budget reform” without structural and not temporary revenue reform would be a mistake, especially if it bears a strong resemblance to the budget reform proposition that was soundly defeated by voters in 2005.  But we don’t have all the details yet.

I’m not seeing much of a strategy here to campaign on the budget, aside from a few outside groups.  The 2/3 requirement is the only way out of this vicious cycle.  We can talk about “more leadership” but really the answer is to make Republicans pay.  

UPDATE: And as if on cue, a new email from the CDP:

The ultimate budget solution

As California faces a massive structural budget problem this summer, the ultimate solution to our budget woes is within our grasp. We need to pick up more Democratic seats in the state legislature.

With Barack Obama at the top of the ticket and an energized and enthusiastic volunteer base, Democrats are poised to change the political map in California this year. We have an unprecedented opportunity to elect Democrats up and down the ballot everywhere in the state, even in traditionally Republican areas. Help make this happen.

They’re asking for low-dollar contributions.  If the high-dollar contributions didn’t go to members’ legal defense funds, it’d be a strong message.  What’s interesting here is that they specifically cite winnable seats:

Alyson Huber, Assembly District 10

Joan Buchanan, Assembly District 15

John Eisenhut, Assembly District 26

Marty Block, Assembly District 78

Manuel Perez, Assembly District 80

Hannah-Beth Jackson, Senate District 19

John Eisenhut, a farmer from Stanislaus County, is an interesting case.  What I like here is that the CDP is actually making some target decisions. (I hear AD-36 and AD-59 are interesting cases as well.  2/3 in the Assembly is reachable in a wave election)

UPDATE II: Perata sez they have a deal.

Senate President Pro Tem Don Perata said today that Democrats have negotiated key points of a compromise state budget with Gov. Arnold Schwarzenegger and that he considers negotiations over.

“I think we’ve, frankly, gone about as far as we can go,” the Oakland Democrat said.

Perata said the compromise plan includes a major concession by Democrats – a spending cap to limit annual state expenditures.

Republicans have been insisting on a spending cap as part of any budget pact.

“The question continues to be, are there Republican votes for it?” Perata said of the compromise plan […]

“We’ve said to the governor, ‘What do you need in order to move forward?’ So we’ve negotiated on that point,” Perata said.

“I’ll guarantee you that there won’t be anybody in the house that’s going to be happy with the conclusion. But it is a compromise – new revenues and program cuts, and no borrowing.”

You’ll recall that this is EXACTLY what Perata said last year – that nobody will be happy with the conclusion.  Yet he pissed away the only opportunity for a decent conclusion by intervening in two State Senate races (SD-15 and SD-12) and virtually ensuring that Democrats won’t be able to reach 2/3 in the chamber.  Open shoe, insert gun onto foot.

The spending cap is a horrible idea.  Analysis to come.