Lawmakers See Slim Chance of Meeting Budget Deadline

By Evan Halper and Nancy Vogel

June 11, 2003 12 AM PT

Times Staff Writers

SACRAMENTO -- California lawmakers threw up their hands Tuesday and acknowledged there is little chance they will make the June 15 constitutional deadline for passing a budget that would rescue the state from its $38-billion shortfall.

Some staff members involved in the process said that at this point -- five days before the midnight Sunday deadline -- it would be impossible to have a spending plan ready for a vote, even if legislative leaders were making progress. And there was no sign of that Tuesday.

“I think it’s extremely unlikely we are going to get a budget by the deadline,” said Assemblyman Keith Richman (R-Northridge), who has been working with Democrats on potential budget solutions. “I don’t think that the difficult decisions that need to be made are being made.”

The sentiment was echoed by seven other lawmakers who are key players in the budget debate.

“It has turned into a political crisis that has implications for a meltdown,” said Assemblyman Mark Ridley-Thomas (D-Los Angeles.)

The only official to publicly express confidence in breaking the partisan deadlock was the governor.

“Ask me whether or not we get a budget in by July 1, and I am optimistic we will,” Gov. Gray Davis said, referring to the start of the new fiscal year. “This will affect not only who gets funded in the upcoming budget, but how people view California as a place to live, work and invest. There are a lot of eyes on us and we have to rise to the challenge.”

But Davis acknowledged that little progress was made at a private meeting Tuesday with top legislative leaders.

Minutes after the meeting began, an agitated Senate President Pro Tem John Burton (D-San Francisco) shouted loudly enough that his voice was heard through a wall, and then he stormed out of the room. Burton would say later only that he was feeling ill.

The inability of lawmakers to make progress on the budget will bring a heavy price tag today, as the state sells $11 billion in short-term loans just to generate enough cash to keep government operations running through August. The state’s weakened financial standing will result in borrowing costs as high as $270 million -- enough to pay 5,000 teachers for a year.

In years past, the June 15 deadline has come and gone without approval of a budget partly because the state Constitution does not provide any consequence for missing the date. Lawmakers say the more genuine deadline for action is July 1, when state workers’ salaries, vendor bills and other government expenses could stop being paid in full if a budget has not been signed into law.

But this year, the stakes for the early deadline are higher because Wall Street is looking for a sign that California lawmakers are serious about bringing the budget into balance.

At a closed-door caucus lunch, Republicans were warned yet again that straying from the party’s anti-tax stand could damage their political careers. Last week the threat was made by Senate GOP leader Jim Brulte (R-Rancho Cucamonga). This time a more subtle warning came from a caucus guest, Stephen Moore, president of Club for Growth, a political action committee based in Washington that spent $338,000 to help defeat Republican Mike Briggs of Clovis in his run for Congress last year. Briggs was one of a handful of Republican assemblymen who voted with Democrats for a tax increase shortly before his run for Congress.

“I said we’ve got the knives out for any Republicans who would agree to raise taxes and vote with Gray Davis,” Moore said of his presentation.

Democrats said they would go on the offensive today by releasing a report from a series of town hall meetings on the budget that they have held around the state. Their finding: Voters would rather see modest tax increases than drastic cuts in education, aid to the poor and disabled, and Medi-Cal. The meetings, however, were organized by Democrats who invited supporters to attend.

Previous budget proposals put on the table by both parties have relied on about $10 billion more in loans from New York to roll the deficit over into the next five years.

A representative from one major bank reiterated that, without a new tax, the money for rolling over the deficit might not be there. That banker’s institution and others have already put that in writing to the governor. Republicans have accused those banks of bluffing, and say that other institutions are ready to lend the state money without a new tax.

“If those other banks put their position in writing, fine, let’s talk about it,” the banker said. “So far we haven’t seen that.”

Assemblyman Tony Strickland (R-Moorpark) said it would be better to blow the budget deadline than fold on taxes. Democrats “have to come to the realization that a tax increase will not happen in California,” he said.

The appearance of Moore before the Republican caucus angered Democrats, who complain that the budget is being held hostage by the minority Republicans thanks to another constitutional provision, which requires a two-thirds vote for a tax increase. Democrats want to raise $8 billion in taxes on sales, vehicles, tobacco and high earners but need eight GOP votes for passage.

“They are clearly tone deaf,” Assemblyman Ridley-Thomas said of Republicans. “They fail to hear the voice of the people of the state, who want a timely solution to constructively get us out of this.”

One thing Republicans and Democrats agree on is that the effort to recall Davis from office has made the problem worse, prompting the governor to take a background role just when strong leadership is needed.

“The governor might usually be cautious -- now he is almost paralyzed,” said Board of Equalization Chairwoman Carole Migden, a San Francisco Democrat who played a lead role in budget negotiations until she left the Assembly last year.

The lack of movement in today’s meeting between legislative leaders and Davis backed up the point. Administration officials continue to say the recall effort has not affected Davis’ ability to govern. There are few places for lawmakers to turn to negotiate the budget, other than Davis. Republicans complained that a bipartisan conference committee, which was expected to wrap up Tuesday night, has been a failure.

“We have taken basically no significant action,” said Sen. Dick Ackerman (R-Tustin), a member of the committee.

Many lawmakers are now saying the state could easily wind up with the kind of “get out alive” budget that was passed last year, full of accounting maneuvers and deferrals to push the headache off another year. The problem: The fiscal crisis deepens with every year of delay in dealing with it.

“It’s increasingly clear that both sides will jump at a one-year fix,” lamented Assemblyman Joe Canciamilla (D-Pittsburg), who has been pushing lawmakers to deal with the structural imbalance in California’s budget process. The state annually spends more than it collects in revenue.

Department of Finance Director Steve Peace warned that the state is heading down a dangerous path, and already some on Wall Street are analyzing California politics as they do politics in the Third World.

“We move from people questioning our credibility to having no question about our lack of credibility,” he said. “And we’ll have to build back up. That will be incredibly expensive and time consuming.”

Times staff writers Carl Ingram and Dan Morain contributed to this report.

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Dates of Budget Passage

The California Legislature has passed the state budget on or before the constitutional deadline of midnight, June 15, only four times in the last quarter-century. By fiscal year:

On time

1986-87: June 12...3 days early

1985-86: June 13...2 days early

1981-82, 1984-85: June 15

Late

1999-00: June 16...1 day late

2000-01: June 22...7 days late

1982-83: June 25...10 days late

1988-89, 1989-90, 1993-94:

June 30...15 days late

1987-88: July 1...16 days late

1994-95: July 4...19 days late