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With credit markets in New York in crisis last week, California Gov. Arnold Schwarzenegger sent an extraordinary letter to Treasury Secretary Henry Paulson asking for $7 billion. Although the governor has since withdrawn that request, it testifies to the dire state of his budget. Yet days before penning his note, the governor told an audience at the Commonwealth Club of California not to worry about the state's budget crunch and to approve $9.95 billion in new debt on the November ballot to build a bullet train to connect Los Angeles to San Francisco: "Just because we have a problem with...

Gov. Arnold Schwarzenegger will meet with legislative leaders Wednesday to try to find ways to fill an immediate hole in this year’s budget that could be as large as $5 billion, according to estimates from Senate Leader Don Perata, D-Oakland. Perata said the deficit could swell to $15 billion or more by the middle of next year. The bleak outlook comes amid a weakening state economy and an unprecedented meltdown on Wall Street, which has pinched corporate and municipal credit. “The options are all bad,” Perata said Wednesday. “I am not very optimistic we will get a tax increase,” which...

SACRAMENTO -- The state budget approved only weeks ago is already falling into the red, and lawmakers may be forced to return to Sacramento this month to make emergency spending cuts and take other measures to keep California from running out of cash

California may need an emergency loan of up to $7 billion from the federal government within weeks, the Los Angeles Times on Friday quoted Gov. Arnold Schwarzenegger as saying in a letter to U.S. Treasury Secretary Henry Paulson. In the letter dated October 2, Schwarzenegger called for the passage of the $700 billion financial industry bailout plan which the U.S. House of Representatives is expected to vote on Friday, the Times said. “Absent a clear resolution to this financial crisis, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may...

SACRAMENTO -- California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks. The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.

California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks. The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent. The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state...

During the annual – or, perhaps, perennial – impasse over the state budget, those in and around the Capitol play a little guessing game, called the budget pool, on when it will be enacted. Gov. Arnold Schwarzenegger signed the budget Tuesday with none of the usual hoopla, symbolizing official embarrassment over both its record tardiness and its failure to close the chronic deficit. And now there's a new guessing game: How long until it falls out of balance? The answer: One nanosecond. Or as state Controller John Chiang says, "Today we adopted a $103.4 billion budget that was out of...

SAN FRANCISCO (Reuters) – California's sputtering economy is going to get worse, a report released on Wednesday said. The state's jobless rate will hold above 7 percent through next year as the homes slump grinds on and finance payrolls shrink, according to the UCLA Anderson Forecast. A "strong undercurrent of housing and finance generated weakness" is dragging down growth in the eighth-largest economy in the world, the report said. "Our near term quarterly forecast has things getting worse," it said. "Unemployment will continue to increase to the thin air of 7.4 percent by the end of the year and it...

Yes, that was a puff of white smoke floating over the Capitol Thursday afternoon; nearly 100 days past the state constitutional deadline for enacting a state budget and after false starts and detours too numerous to list, Gov. Arnold Schwarzenegger and legislative leaders agreed on a spending and revenue package. Unless there's another political hitch – and one can never discount that possibility – the deal will be ratified by the Legislature today and legislators can go wherever they go when they're not fouling up things in Sacramento, including an assemblyman who's scheduled to marry a television anchorwoman on Sunday....

SACRAMENTO -- Gov. Arnold Schwarzenegger and legislative leaders have reached a deal that would avert the governor's planned Friday veto of the state budget and allow California to begin paying its bills again.

Public criticism of the $106-billion spending plan emboldens Schwarzenegger to seek more concessions. SACRAMENTO -- State lawmakers' will to override a budget veto began to falter Wednesday, emboldening Gov. Arnold Schwarzenegger to press them for more concessions. Tough talk from lawmakers about quickly overriding Schwarzenegger's expected veto subsided as Republicans expressed reluctance to vote for borrowing from taxpayers -- a provision of the budget Democrats passed without them.   Budget battle: The full story California bills vulnerable to veto by governor The borrowing, in the form of a 10% increase in state tax withholding to be refunded later without interest,...

McClintock's grim take on the budget: 'We have now reached the terminal stage of a bureaucratic state' Tom McClintock, who has been the most consistently accurate analyst of the state's budget nightmare of recent years, was one of 11 no votes on the budget in the Senate. Here are his remarks before his no vote: According to the State Controller's reports, last year, our tax structure produced $96 billion in actual revenues - a record year. We budgeted $103 billion and spent $107 billion. In short, our spending exceeded our revenue by $11 billion and exceeded our adopted budget by...

Arnold Schwarzenegger has talked a good game about ending "crazy deficit spending" for five years, but he's been curiously unwilling to confront the Legislature over the state's hopelessly tangled budget. Belatedly, however, Schwarzenegger may be discovering his inner action movie hero, declaring "enough is enough," vowing to veto the ill-conceived budget that lawmakers approved early Tuesday morning, demanding big changes, and even threatening to reject "hundreds of bills" unrelated to the budget if the Legislature overrides his veto. It sets up a historic confrontation between the governor and legislators of both parties who have, it would appear, set aside their...

Just listened to a news conference held by California Governor Arnold Schwarzenegger. He says he's tired of the legislature treating taxpayers "like an ATM machine" and will therefore veto the budget just sent to him. He said that the budget pushes the problem into next year and that, if enacted, next year would require huge cuts in the school budget or huge tax increases. Schwarzenegger said that he expects the legislature to override his veto. If it does, he said, he will veto all the hundreds of other bills the legislature has sent him or will send him. After a...

Sacramento, Calif. (AP) -- Gov. Arnold Schwarzenegger says he will not sign the compromise budget proposal California lawmakers are considering unless they make more changes. His letter to the four legislative leaders says he wants more money put in a rainy day fund and tighter controls on when that money could be spent.

With little or no public input, California lawmakers are expected to vote late today on a closed-door weekend budget deal that depends largely on borrowing billions from taxpayers. A key element of the deal would increase by 10 percent the amount of income taxes withheld from working Californians, and from taxpayers who earn income from investments. The maneuver would generate about $3.8 billion to ease the budget crunch, but the plan calls for providing future refunds to affected taxpayers.

All of a sudden, lawmakers are in a rush. They've had 11 weeks to pass a budget. Now they are preparing to slam one through as soon as this evening. Why the hurry? They don't want the sunshine. The "get-out-of-town" budget deal they've hatched seems to be so based on shaky presumptions and gimmicks that lawmakers don't want to give the public and the media time to vet it. Otherwise it would implode. It should. Precise details are still sketchy, but to reduce the bulk of the $15.2 billion deficit, lawmakers would make about $9 billion in spending cuts. The...

Legislative leaders said today they at last have a compromise deal on an 11-week-late state budget that calls for no tax increases, no borrowing from local governments or other state special funds -- and which makes no one happy. Emerging from a weekend meeting in the office of Senate GOP leader Dave Cogdill, the quartet declined to give specific details of their compromise plan, saying they wanted to talk to their respective caucuses first. But they said the plan closes the $15.2 billion gap in the $103.4 billion budget for the fiscal year that began July 1 with $9 billion...

BUDGET DAY PLUS 71 -- Governor Schwarzenegger is keeping his poker face firmly in place, promising to reject any spending plan that doesn't reform the process of budgeting itself, and rejecting calls to ease the pressure for a deal by moving forward on a temporary appropriation for those state services that aren't being paid for. That was the general message of a ten minute one-on-one interview with Schwarzenegger this morning, one of several he's given to reporters in the past few days as a way of trying to stoke a new fire under the embattled Legislature. And on those calls...

On July 1, California entered fiscal 2009 without having enacted a state budget. Nothing new in that: Budgets have been late in 16 of the past 20 fiscal years. The cause was also not unusual: There was a budget gap, generated partly by the slump in housing, partly by the absence of enormous stock-market profits and partly by the ongoing boom in state spending. Nothing new in that, either. Meanwhile, the productive, private part of California's economy has been cyclical for decades, while the unproductive government part keeps growing, and spending money it doesn't have. The size of the gap...

SACRAMENTO – Anti-tax Republican legislators, blamed for what will soon be a record two-month state budget deadlock, answered their critics yesterday, proposing an alternative budget balanced without a general tax increase. The Republican plan replaces a one-cent sales tax increase backed by Gov. Arnold Schwarzenegger and Senate Democrats with $2 billion in lottery-backed bonds, $1.5 billion in spending cuts, and $1.5 billion in new tax revenue. The Republican plan, unlikely to quickly end the deadlock, was criticized for making painful spending cuts and failing to end years of state deficit spending. “We believe our plan is the responsible way to...

Don't read their lips when California's Republican lawmakers say 'no new taxes' – they've put it in writing, signed their names, essentially inviting their own party to oust them if they renege. Every GOP lawmaker except Fair Oaks Assemblyman Roger Niello has signed the "Taxpayer Protection Pledge" this year, casting a shadow on budget talks by making any vote to raise taxes a potential career killer. [snip] Opponents argue that such vows can torpedo budget talks by making the outcome intensely personal and hamper efforts to find tradeoffs in bridging the state's $15.2 billion deficit. "They've put themselves in a...

Don't read their lips when California's Republican lawmakers say 'no new taxes' – they've put it in writing, signed their names, essentially inviting their own party to oust them if they renege. Every GOP lawmaker except Fair Oaks Assemblyman Roger Niello has signed the "Taxpayer Protection Pledge" this year, casting a shadow on budget talks by making any vote to raise taxes a potential career killer. "If you break the pledge, the people who voted for you will say, 'Excuse me, not only did you raise my taxes but you lied to me,' " said Grover Norquist, president of Americans...

The Golden State had a recall almost five years ago. California had a huge budget deficit at the time and soon-to-be-governor Arnold Schwarzenegger was promising to “cut up the credit card.” By the March 2004 primary, Schwarzenegger, by then governor, was promoting the passage of ballot Propositions 57 and 58. Prop. 57 was a $15 billion deficit bond designed to refinance the short-term debt California incurred under Democratic Gov. Gray Davis (with a few billion left over for future needs, the last $3 billion of which was borrowed a few months ago). Prop. 58 was a supposed spending cap of...

Sacramento -- Gov. Arnold Schwarzenegger, who promised not to sign any bills until lawmakers reach a budget deal, reversed his position today and signed a bill for a statewide bullet train system that he strongly supports. The governor also wants to make exceptions for three other proposals that he has been promoting: budget reform; changing the state lottery to allow California to borrow against future ticket sales; and a bond proposal for water infrastructure. The high-speed rail legislation will replace a $10 billion bond measure on the November ballot with a revised version of the proposal that makes the bullet...

Much has been written about the August budget put forward by Governor Schwarzenegger last week. At his press conference announcing his plan, the Governor said that his budget plan was "a fiscally responsible compromise" and will "put our state on the road to fiscal sanity." In reality, after spending some time looking it over, and discussing it with state policy experts .., the Governor's proposal will do nothing of the sort. It includes more borrowing and higher taxes on Californians... The Governor said that more borrowing in the budget is "not a wise idea and I will not do that."...

"You can't cut the whole $15 billion," Schwarzenegger said, referring to the gaping hole in a $102-billion general fund. "You'd have to severely cut into education, which I don't think is the right thing. You would severely cut into health care, which is not the right thing to do. You would severely have to cut into prisons, and we can't do that." A good Republican trade-off for a one-cent-on-the-dollar sales tax increase for three years, he asserted, would be a long-term budget fix: A constitutional amendment requiring the state to transfer 3% of its annual revenue to a rainy-day fund...

Some things never change in the Golden State. Weeks into the fiscal year, California still has no budget and faces a Pacific Ocean-sized $15 billion deficit. On Wednesday, Governor Arnold Schwarzenegger offered a "compromise" plan that kicks the legs out from his own party with a big new sales tax increase. "It's time to put ideology aside," he insisted. [Arnold Schwarzenegger] Now he faces a revolt from Republicans in the legislature who think this is precisely the time to be ideological. "Any tax increase plan won't pass with Republican votes -- absolutely not," a defiant Mike Villines, minority leader of...

Gov. Arnold Schwarzenegger went public Wednesday with yet another state budget proposal, one that he said reflects a true compromise between Republican and Democratic goals for a spending plan. The proposal includes a three-year, one-cent increase in the sales tax, an effort to build a bigger state savings account for rainy days, and more spending cuts than he proposed when he released his last set of ideas in May. With no budget agreement in sight in the Legislature 51 days into the fiscal year, Schwarzenegger said the lack of a budget is "shameful." "Many Medi-Cal hospitals are not getting paid,...

(snip) The Republican governor took a lashing from the popular conservative Los Angeles duo as they pressed him on his proposal to raise the state sales tax by one cent. ... Schwarzenegger tried to defend new taxes as necessary because the state was still paying off debts incurred by predecessor Gov. Gray Davis. But the hosts pressed further and suggested that Schwarzenegger abandoned his original mission of fixing the state's fiscal situation in order to pursue environmental goals. That seemed to upset the governor, who maintained that his environmental policies had nothing to do with the state budget. "This is...

Gov. Arnold Schwarzenegger has taken on an unlikely role as one of the Capitol's most steadfast champions of a tax hike, spurning his fellow Republicans' uncharacteristic effort to borrow their way out of budget trouble. In an interview with The Times on Tuesday afternoon -- 50 days into the new fiscal year -- Schwarzenegger said resistance to tax hikes had led GOP lawmakers down a reckless path. He said they wanted to balance the budget by raiding local governments and public transportation accounts for billions of dollars. That money, under state law, would have to be repaid with steep interest....

Budget negotiations between Gov. Arnold Schwarzenegger and four Legislative leaders fell apart Tuesday when one of the Republican leaders stormed out of the meeting, angrily charging that the talks "are not helpful." "Frankly, I was very frustrated when leaving that meeting," Assembly Republican leader Mike Villines from Clovis (Fresno County), said in an interview. "I'm tired of walking into (these meetings) and the only thing that's being talked about is more tax increases." Tuesday's meeting between the "Big Five" - the governor, and the Democratic and Republican leaders of the Senate and Assembly - was the group's first in more...

SACRAMENTO — Assemblyman Sandre Swanson is convinced that the only way to avoid lengthy budget stalemates in the future is to strip the minority party of what he calls its out-sized influence. The Oakland Democrat is among a handful of East Bay lawmakers who want voters to overturn the constitutional requirement that two-thirds of the Legislature must approve the budget. Now in its 50th day, the budget standoff is threatening to spill into next month as both parties remain far apart on finding a solution to the state's estimated $15.2 billion deficit. "It just has to change, and citizens will...

In the latest episode of Capitol punishment, Assembly Speaker Karen Bass tossed Assemblywoman Nicole Parra from her office on Monday morning after the Central Valley Democrat failed to vote for the budget on Sunday. In a twist, Parra hasn't been reassigned to more cramped quarters in the Capitol itself - but booted straight across the street to the Legislative Office Building. She will be the only member of the Legislature whose office is not housed in the Capitol. "I knew going in Sunday that if I didn't support the budget, something was going to happen," Parra, D-Hanford, said in an...

SACRAMENTO (AP) -- California's Republican lawmakers on Sunday rejected a Democratic proposal for $6.6 billion in tax increases on the wealthy and corporations despite an offer to boost the state's rainy day fund. The failed vote now pushes California's budget impasse into its eighth week with no compromise in sight. The 45-30 vote in the state Assembly was the first since the state began its new fiscal year July 1 without a budget. It came after four hours of debate during which 49 of the Assembly's 80 members spoke. Democrats offered a revised tax plan that's smaller than the $8.2...

With a budget vote looming, Assembly Democrats this afternoon released a summary of the key proposals they will push.The Assembly is scheduled to vote today on a new budget, 48 days after the state began the new fiscal year with no spending plan.Republicans are not expected to support the budget proposal because its centerpiece is an income tax increase on California's wealthiest residents. Today's vote is politically important, nonetheless, because it could show whether any Assembly members are wavering on their party's position. The state Senate is not expected to meet.Assembly Speaker Karen Bass characterized the budget proposal as a...

California's unemployment rate soared to 7.3 percent in July, with nearly 400,000 more workers in the jobless ranks than a year earlier, indicating that we still haven't hit bottom in this recession. What started out as a sudden meltdown in the housing industry has spread to many other sectors, most obviously retail sales. Auto dealers are closing their doors throughout the state, and the Mervyns department store chain has sought bankruptcy protection, to cite but two examples. Steve Levy, who runs the Center for the Continuing Study of the California Economy, has devised a "misery index" of unemployment and inflation...

If you've been paying attention to California's chronic budget problems, you know that they fundamentally stem from a disastrous decision in 2000 by then-Gov. Gray Davis and legislators of both parties to squander a one-time windfall of revenue on permanent spending increases and tax cuts that could not be sustained over the long haul. It was, however, just one of three similarly irresponsible decisions during Davis' governorship, which was cut short by his recall in 2003. A second was to sharply increase state worker pensions on the assurances of the union-dominated California Public Employees' Retirement System that they could be...

Cancel those Sunday plans: The Assembly and the Senate have tentatively scheduled floor votes on a budget bill that day. It does not mean a deal is imminent. Lawmakers want a floor vote by this weekend to meet a deadline set by Secretary of State Debra Bowen for placing measures on the November ballot. Many see the deadline as a moving target, however, and believe the vote Sunday may be the first in several floor exercises before a final deal is struck. Assembly Speaker Karen Bass, D-Los Angeles, said lawmakers plan to vote Sunday on a modified version of the...

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." So goes the topsy-turvy world of California's budget standoff amid a $15.2 billion deficit. "We're huddling now and trying to see what our next step will be," Perata told reporters Wednesday afternoon. Hours earlier, Perata described a compromise with Gov. Arnold Schwarzenegger that would temporarily increase the state sales tax by 1 cent and restrain future...

Upon returning from my vacation, I was impressed upon by some Capitol insiders that there was a "problem" within the Senate Republican Caucus -- and that we may no longer have a unified team to oppose a tax increase. As you know too well from last year, it takes a two-thirds vote to pass a budget, as well as to pass a tax increase (or place one on the ballot). That means that only two GOPers need to "go south" before the entire defense against new taxes shifts over to the Assembly where six votes of Republicans (or perhaps seven...

It's still a long way from being fully cooked, but the fuzzy outline of a deal on the much-delayed, deficit-ridden state budget is becoming visible as the deadline for placing measures on the November ballot draws near. Secretary of State Debra Bowen says Saturday is the deadline, but Capitol types believe it could be stretched a week or two. And the deadline, whenever it may be, is an important ingredient in any budget deal, because at least one of the pending elements would have to be placed before voters. The central element is what Gov. Arnold Schwarzenegger calls "budget reform"...

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. The ball is in...

Sacramento, CA (AP) -- Gov. Arnold Schwarzenegger and state Controller John Chiang (Chung) are headed for a court fight over the administration's attempt to cut the pay of state workers. Lynelle Jolley, a spokeswoman for Schwarzenegger's Department of Personnel Administration, tells The Associated Press that a lawsuit against Chiang will be filed later today. The Republican governor issued an executive order on July 31 directing that the pay of nearly 140,000 non-security, rank-and-file employees be cut to the federal minimum wage of $6.55 an hour. The order would be in effect until lawmakers approve a state budget. About 30,000 management...

A new survey of corporate executives considering relocating their firms provides fresh reasons to worry about California's economy. The Development Counsellors International survey found CEOs ranked California dead-last in attractiveness among the 50 states because of its high taxes and business-hobbling regulations. California's reputation is likely to grow even worse in the next few weeks when a 2008-09 state budget is finally adopted, given the probability it will raise taxes. But what is truly depressing to contemplate is what happens come January 2011, when Gov. Arnold Schwarzenegger departs and is likely to be replaced by a Democrat. We have griped...

SACRAMENTO – Seven years of deficits have left the state budget so far out of balance that a Republican legislative leader is saying that closing a huge budget gap with cuts alone is unworkable. Senate Republican leader Dave Cogdill of Modesto said he remains staunchly opposed to tax increases and is now proposing that the state borrow – possibly from funds for local government, transportation and other programs – and quickly repay the loans with money from bonds backed by the lottery. “What we would like to do is see the state get its spending in line with its revenue,”...

But if history is a guide, governors and legislators across the country will seek to avoid the difficult choices that are required. Instead, they will likely pass the costs of the services that we enjoy today on to our children and grandchildren, through creatively deceptive budgeting. This is a time-honored practice. In 1991, the State of New York sold Attica prison to none other than itself. The buyer was a state agency that financed the $200 million purchase price by issuing bonds. The agency then leased the prison back to the state, with the lease payments being equal to the...

Arnold Schwarzenegger, it would appear, just can't help himself. The man who achieved success as a bodybuilder and action movie star with over-the-top, attention-getting stunts keeps trying to make them work in politics – and keeps failing. The governor's latest political stunt is a grandiose order that thousands of part-time and temporary state employees – including student interns – would be laid off and everyone else on the state payroll have their salaries slashed to the federal minimum wage of $6.55 per hour because the state lacks a budget. The lack of a budget, he said last Thursday, "leaves me...

Gov. Arnold Schwarzenegger said Wednesday he will refuse to sign any bills that reach his desk until the Legislature sends him a budget agreement. "At this point, nothing in this building is more important than a responsible budget to fix our broken budget system," he said at a hastily called afternoon press conference. "So until the Legislature passes a budget that I can sign, I will not sign any bills that reach my desk." Schwarzenegger acknowledged that his decision "means some good bills will fail." But he said with a cash crisis looming, the late budget takes on even greater...

Overall, Democrats deserve credit for being forthright about intending to close much of the state's budget deficit with new taxes, in contrast with Republicans who say they want deep reductions in spending but refuse to say what should be cut. That said, the details of how Democrats would generate more than $10 billion in tax revenues, roughly two-thirds of the projected 2008-09 deficit, leave much to be desired – even if one accepts the underlying premise that the state's fiscal problem is essentially a lack of revenues. The plan's core is tapping the most affluent Californians through higher income taxes,...