The “alternative” budget proposed today by Assembly Democrats held few surprises… except for what seems like a pliable position on new taxes.

Assembly Speaker Fabian Nunez and Assembly Budget Chairman John Laird unveiled the Democratic budget at a local school here in Sacramento, the same school where Governor Schwarzenegger announced his now infamous deal on education funding in 2004.

The bulletpoints of the Democratic budget: agreement with Schwarzenegger to boost transportation funding while cutting CalWORKS grants and cost-of-living increases for SSI recipients… no new cuts in salary for state workers, and no attempts to shift the state’s portion of teacher retirement contributions to local schools.

And although the document handed out to reporters didn’t reflect a full restoration of the disputed Prop 98 funding for schools, Democrats say they will push to do just that.

So what are they willing to do to pay for it? It depends.

Nunez said his party’s intention is to reinstate the top tax brackets that existed under former governors Ronald Reagan and Pete Wilson. That would raise, they say, about $2.6 billion in extra revenue next year and about $1.3 billion in the years after that. And Nunez said that money was essential to meeting the promise made for school funding.

But at the same time, the Speaker said if Republicans wouldn’t go for the tax hike, then he’d advocate borrowing more money from the Prop 57 deficit bonds. That, however, would probably only be a one-time fix. And Assemblymember Rick Keene, the GOP budget point-man, says that would only increase deficit pressures in years to come.

Still, Democrats seem ready to make this, as Nunez said today, a debate about having “the courage to do the right thing.”

Budget negotiations among Democrats and the Republicans in the Legislature are expected to begin in earnest tomorrow.

“And we just disagree,” goes the chorus from the old Dave Mason song.

After reading the new poll from the Public Policy Institute of California, you could say that pretty much describes the state’s citizens when it comes to how to fix our government.

Find the poll here.

When you read past the headlines (governor’s approval ratings largely unchanged, special election unpopular), you find fascinating details that may explain why state government continues to be out of balance.

The PPIC pollsters asked respondents to pick one of the following statements that they most agreed with. Check out the numbers of who chose what:

“I’d rather pay higher taxes to support a larger state government that provides more services”: 46%

“I’d rather pay lower taxes and have a smaller state government that provides fewer services”: 46%

With that kind of split down the middle, it’s hardly surprising that the lawmakers who represent those citizens have failed to solve the state’s chronic budget problems.

Other thought-provoking findings:

* Most voters surveyed are willing to erase the deficit through higher taxes for the wealthy (68% favor) and for corporations (60% favor), but not by raising sales taxes (71% oppose) or by broadening what services are charged a sales tax (63% oppose).

* 55% of all adults surveyed don’t like the way Proposition 13 makes a new homeowner in a neighborhood have higher property taxes than an established homeowner– although that number drops down to 46% opposition from likely voters, a subgroup which may be the only one that matters to lawmakers.

* When it comes to making long-term budget and government reforms, a whopping 72% of those surveyed would rather have voters make decisions on the ballot, not lawmakers here in Sacramento.

One of the more intriguing items inside Governor Schwarzenegger’s revised budget seems to imply that the governor only supports restoration of Prop 42 funding if his package of transportation bills is passed by the Legislature.

You can hear more on the issue this morning on The California Report.

To be fair, the administration adamantly denies any intention of linking Prop 42 money to the “GoCalifornia” package of bills. Those bills would give Caltrans the power to work with private companies on building new toll roads and toll lanes, as well as make changes in the design-build process used in transportation projects.

But it’s the language on page 65 of the May revise that started the whole thing. “The May Revision proposes that these measures be considered budget trailer bills and link their passage to the availability of the Proposition 42 funds.”

Democrats say it sounds a little bit like what happened last summer, when Republicans argued for linking two policy bills to the Big 5 budget negotiations (schools districts contracting with private firms for non-educational services, and an effort to end the “sue your boss” workplace lawsuits). Democrats argue that tacking policy bills to the budget is the wrong way to go.

But again, the administration denies there is a link. Budget spokesman H.D. Palmer says there’s no plan to try and hold back Prop 42 money if the bills don’t get to Schwarzenegger’s desk, instead calling the idea of linkage only a “recommendation.”

And he says there is, in fact, precedent for placing policy items in the budget process– pointing to then Governor Pete Wilson’s call for class-size reduction in the ’90s as an example.

One of Governor Schwarzenegger’s favorite media blitz strategies is to take to the airwaves of talk radio. And listening to those chit-chats, it becomes easy to see why the governor likes them– because he’s rarely challenged on anything that he says.

Schwarzenegger did five radio interviews today, with all but one being talk shows. As you read the transcripts of the broadcasts, two things become very clear. First, the governor spends a lot of time repeating the same messages– even almost the same phrases and words– as he has over the past few days and weeks.

And second, the hosts of the talk radio programs are very good at pitching softballs to the chief executive:

* On Bakersfield’s KERN Radio, talk show host Scott Cox: “The California Teachers Association is telling everybody that you reneged on a promise, that you’re lying about what you’re going to do with the money. But that’s not true at all, is it?”

* On Fox Radio, talk show host Tony Snow: “All these stories about your poll ratings going down and you’re talking about all these things. Are your opponents misunderestimating [sic] you, as they do the president?”

* And on Sacramento’s Y92 FM, the discussion covered everything from whether the governor would ever make a movie with former wrestler “The Rock” (aka Dwayne Johnson)… to pending legislation that would ban smoking in state building courtyards, like the one housing Schwarzenegger’s famous cigar tent. The governor has apparently invited Y92 radio hosts Paul Robbins and Phil Cowan to join him for a stogie. Their response: “We’d better do it before these namby-pambies take your tent away.”

Governor Schwarzenegger has weighed in against one of the Indian tribes attempting to build a casino in the Bay Area, with his advisers arguing that the project would “offend” the state’s public policy.

The governor’s office has released a letter sent late last week to the regional director of the federal Bureau of Indian Affairs, in regards to a proposal from the Scotts Valley Band of Pomo Indians to build a casino near the city of Richmond.

The Scotts Valley tribe is one of four tribes that wants to bring a casino to the urban areas surrounding the San Francisco Bay. And three of those tribes– Scotts Valley, the Guidiville Band of Pomo Indians and the Lower Lake Rancheria Koi Nation– are also trying to get non-tribal land placed into federal trust. The fourth tribe, the Lytton Band of Pomo Indians, has ended (for now) its effort at a casino in the city of San Pablo.

The letter from the governor’s legal affairs secretary, Peter Siggins, argues that any more casino projects in the Bay Area would run counter to the intent of 2000’s Proposition 1A, which Siggins says was designed to allow gaming only on “remote” Indian lands.

At the very least, the letter reaffirms the deal that Schwarzenegger struck with the Lytton tribe last summer (although it seems as though the governor and Siggins couldn’t resist another jab at the congressional action Schwarzenegger says forced him to negotiate the Lytton deal in the first place).

That agreement, even though it went nowhere in the Legislature, gave the Lyttons a “zone of exclusivity” for Bay Area gaming… a zone that would exclude the Scotts Valley (Richmond), Guidiville (Richmond’s Point Molate), and Lower Lake (Oakland) projects.

It’s already rare when federal officials agree to take new land into trust for a tribe to build a casino… and it probably doesn’t help a tribe when a governor weighs in against the request.

The initial analysis of the governor’s revised budget is out from Legislative Analyst Elizabeth Hill and her researchers.

Headline: the revised budget’s tendency toward spending one-time money on one-time costs is good.

Digging a little deeper:

*The LAO still thinks long-term revenues will be a little higher than Schwarzenegger. She also thinks the administration has overestimated tax receipts in the 2004-05 year.

* Hill continues to raise doubts about some of the governor’s budget assumptions– namely, negotiating $408 million in state employee contract savings; shifting $469 million in teacher retirement costs to local school districts; and paying $525 million in pension obligations by selling bonds.

You can find the full report here.

POST-NEWS CONFERENCE UPDATE: Two other items that will no doubt remain on the radar– Hill now estimates the structural deficit reappearing in 2006-07 at $5 billion, up from $4 billion in her February analysis… and the much disputed “did he promise to pay or didn’t he” amount for K-12 education, Hill says, is now roughly $3 billion.

The initial analysis of the governor’s revised budget is out from Legislative Analyst Elizabeth Hill and her researchers.

Headline: the revised budget’s tendency toward spending one-time money on one-time costs is good.

Digging a little deeper:

*The LAO still thinks long-term revenues will be a little higher than Schwarzenegger. She also thinks the administration has overestimated tax receipts in the 2004-05 year.

* Hill continues to raise doubts about some of the governor’s budget assumptions– namely, negotiating $408 million in state employee contract savings; shifting $469 million in teacher retirement costs to local school districts; and paying $525 million in pension obligations by selling bonds.

You can find the full report here.

POST-NEWS CONFERENCE UPDATE: Two other items that will no doubt remain on the radar– Hill now estimates the structural deficit reappearing in 2006-07 at $5 billion, up from $4 billion in her February analysis… and the much disputed “did he promise to pay or didn’t he” amount for K-12 education, Hill says, is now roughly $3 billion.

What happens when backers of two government services– both strongly supported by voters– say they should get first dibs at an unexpected increase in revenues?

Stay tuned this week… and next… for the answer.

Governor Schwarzenegger weighed in on the debate this afternoon, by formally proposing to not divert some $1.3 billion of transportation funding towards other state budget items, using instead the extra revenue for those items.

Schwarzenegger made the announcement in a short appearance at the annual meeting of the California League of Cities here in Sacramento. These are city leaders who have been loudly complaining about the pothole effect caused by all of the transportation cuts. And after several weeks of bad PR, the standing ovation from local officials in the room was probably just the photo op that the governor and his advisers wanted.

But the governor’s endorsement does not solve the woes caused by several years worth of borrowing money voters earmarked for transportation under Proposition 42. His proposal would only restore next year’s funding. In fact, it sounded like the governor had to correct himself on that very point during his speech; after saying he would “fully refund” Prop 42, he hesitated and quickly changed it to say “restoring” Prop 42.

Fully refunding the last 5 years worth of transportation money that was siphoned off for balancing the state budget would probably cost another $2 billion or so, according to transportation experts.

Nonetheless, the decision to remove Prop 42 borrowing from the 2005-06 budget solution raises some interesting questions.

No one knows exactly what number the governor’s staff is using when budgeting for all of the unexpected revenue… although it’s generally considered to be somewhere between $2 and $3 billion. If transportation gets its slice, then what about the money that was borrowed from K-12 education?

Education funding has been a political hot potato this spring, but it’s also a tricky policy problem. Consider the following scenario, floated by budget advisers to Assembly Democrats: a portion of the unexpected revenues are from a one-time tax amnesty program. But those tax receipts are counted as revenue that occurred in the tax year for which they were due, NOT this year. That would mean the funding formulas which are based on revenues in years past might have to be revised upward. And the most prominent of those… is the constitutionally protected school formula in Proposition 98.

As was stated above, stay tuned.

It came as no surprise when legislation to place the issue of a gay marriage ban before the voters died this afternoon in the Assembly Judiciary Committee.

But what was interesting was some of the debate over the bill– specifically, what the bill’s language would mean for local governments.

ACA 3 by Assemblymember Ray Haynes (R-Murietta) would ask voters to amend the state Constitution by restricting marriage to one man and one woman. It also, however, contains language that says the “benefits” of marriage may not be conferred upon any other “union or partnership.”

And that, to many of the committee’s majority Democrats, raised a separate issue: if a city chooses to offer all the same benefits to a gay employee and their partner that are offered to a heterosexual employee and their spouse… then would that city be in violation of the state Constitution (assuming ACA 3 was approved by the voters)?

The issue prompted a testy exchange between Haynes and several Democrats, including Assemblymember Noreen Evans (D-Santa Rosa). Haynes asserted the bill would not ban those benefits, while Evans argued the bill’s language was silent on the issue. Haynes later dismissed the debate as a “red herring” raised by Democrats who weren’t going to vote for his bill in the first place.

And they didn’t let him down. ACA 3 was defeated on a party line vote… the same kind of vote that led the committee to approve Assemblymember Mark Leno’s AB 19 allowing gay marriage just a few weeks ago.

There wasn’t a lot of surprise when the pro-Schwarzenegger group Citizens To Save California announced this morning that they had begun submitting signatures on their budget process initiative known as “Live Within Our Means.”

The committee says it will end up having as many as 1,000,000 signatures by the time the submission process ends next week. CSC co-chair Allan Zaramberg today characterized it as “mission accomplished.”

But given that an initiative campaign at this juncture is really a county-by-county task… when is it fair to declare victory?

CSC officials admit it may actually be next Tuesday before all of their signatures are submitted to county elections officials across the state, who in turn verify those signatures and certify the totals to the Secretary of State.

But members of the the anti-Arnold, pro-labor committee Alliance For A Better California believe those budget initiative signatures will come in even later, so late as to possibly force Governor Schwarzenegger to push back his plans for a special election as far as December.

Opponents argue if the mission really were “accomplished”, why would the initiative still be on the streets this weekend for more signatures? (CSC officials confirm it’ll be on the street “in a few counties,” according to spokeswoman Joanne Monaco)

Zaremberg dismissed any notion that the signature gathering/verification process will thwart a November special election… and pointed to data from elections in years past as proof that the process of verifying signatures will not take anywhere near as along as critics suggest.

By the way, another reason we should all be thinking about getting into the petition business: CSC campaign manager Rick Claussen told reporters today that some workers might get as much as $4 per signature in the next few days. Labor unions claim they’ve heard the offer has topped $5… either way, it’s one of the priciest per-signature offerings ever in California.