This week’s podcast features three political issues in doubt: health care reform, an initiative to modify California’s term limits law, and a ballot measure asking voters to weigh in on the Iraq war.

Each made news this week. Health care negotiations dominated the week, but the rising chatter about what will… or won’t… be on the February 5 statewide ballot may have dominated the chatter among political junkies.

Anthony York of Capitol Weekly and I are joined this week by Laura Kurtzman, political writer for the Associated Press.

Related Information:

“Assembly speaker backtracks, avoided calling vote on health plan,” by Laura Kurtzman, Associated Press

“The term limits rumors explained,” by Anthony York, Capitol Weekly

[update: Anthony’s reporting on the fate of the term limits initiative for the February ballot continues, even after we wrapped up this morning’s podcast. His latest communique: “Word is that there is new optimism in the proponents’ camp. The Secretary of State is still expected to get LA today… LA is apparently doing some double-checking of their work. There is also the possibility that other counties can recheck, and revise, their numbers. No other county officials have indicated that revisions are coming, but keep in mind it’s a possibility.”]

The chance of a special session of the Legislature must be real enough to change Governor Schwarzenegger’s busy travel schedule.

This afternoon, the governor officially scrapped planned autumn trips to Great Britain and India. Schwarzenegger was supposed to attend a conference of Britain’s Conservative party later this month, and was planning a trade mission to India in November.

“While I am confident that we will be able to accomplish quite a bit before the end of the legislative session,” the governor said in a written statement, “I need to maintain the flexibility to call a special session. With only two weeks left, we need to finish the work we have begun on health care, a comprehensive water plan and redistricting reform.”

Two developments this morning on the health care front… Democrats will not put Governor Schwarzenegger’s health care proposal up for a vote in the Assembly, and another business group joins the call for a sales tax increase to pay for health care reform.

First, the non-vote. After several days of telling reporters the Schwarzenegger plan would be written in bill form and put up for a vote, Assembly Speaker Fabian Nunez has changed his mind.

“We are talking and making progress,” said Nunez spokesman Steve Maviglio in an email. However, Maviglio says Democrats will put the governor’s plan up for a floor vote if those negotiations don’t continue to make progress.

The Speaker has been telling reporters that the point of putting the governor’s plan up for a full vote in the Assembly was to prove to Schwarzenegger that it’s not politically viable; the proposal — never before introduced in the Legislature — has been scored as a tax increase by legislative lawyers and would need GOP votes to pass… votes that aren’t there.

Meanwhile, in the wake of yesterday’s announcement, add another business interest group to the call for a sales tax increase to pay for health care reform.

The California Retailers Association says it’s joining forces with the California Restaurant Association and the California Small Business Association in supporting the idea of a one penny hike in the state sales tax, which some analysts suggest could bring in enough money to make a major dent in the cost of health care reform.

The retailers, like the restaurant and small business folks, all prefer a sales tax increase to the assessment that would be levied on employers under the Democratic health care plan and the governor’s own proposal.

“We need to find stable and equitable funding sources,” said CRA president Bill Dumbrowski in a written statement.

It may be only a sidestory at this point to the health care reform debate, but it’s increasingly becoming an interesting one.

This morning, another business coalition jumped on the idea of a hike in California’s sales tax to help pay for a major expansion of health care access.

The California Small Business Association, which describes itself as a coalition of more than 200,000 small businesses across the state, today lent its support to a call for raising the sales tax by a penny to fund health care reform. The organization is lending its support to a call by the California Restaurant Association for a ballot initiative to make this happen.

“We believe that a one cent sales tax is the most equitable way to pay for health care reform,” said CBSA president Betty Jo Toccoli in a written statement, “as every Californian will be contributing to the system as well as benefiting from the system.”

The small business group opposes the Democratic legislation, AB 8, which would impose a new fee on businesses to pay for employee health care. However, the two business groups now calling for a sales tax increase won’t find any love in the Capitol from their usual allies in the Republican party; both GOP leaders say their party’s legislators are opposed to a tax increase.

The narrative making its way through the Capitol this week is that the debate over health care reform, now down to the final days on the legislative calendar, has parallels to another last-minute deal struck in Sacramento.

The question is… which one?

Some say just look at last year’s global warming law, AB 32, and you’ll see how good things can happen as a result of last-minute negotiations. Others, though, say look at 1996’s energy deregulation fiasco, and you’ll see how bad things can happen in the final hours.

(To be fair, there are some that say AB 32’s impact is far from certain… ergo, it’s unfair to already call that “good.” So noted.)

For now, both theories are worth considering, because the health care debate is far from over… and yet legislators are scheduled to close up shop on September 14.

This morning, Governor Schwarzenegger and the four legislative leaders met for about an hour to discuss the status of health care reform. Speaking to reporters afterward, legislators described the meeting in terms that made the confab sound like it was only a general, even vague, overview.

And so two essential political questions remain unanswered: can Schwarzenegger find common ground with majority Democrats? And can either find common ground with minority Republicans?

For their part, Democrats sound as though they’re urging the governor to stop trying to persuade Republicans. “That’s the only solution I see right now,” said Assembly Speaker Fabian Nunez after the meeting. “Whether you agree or disagree with the Republican leaders, they have a point of view. And at some point, you’ve got to know when to stop barking up that tree.”

That “point of view,” say Republicans, is that the Democratic leadership’s bill and the governor’s own proposal are wrong to impose some sort of fee/tax/levy/assessment on either businesses or health care professionals.

Those objections have caused the Democratic leadership’s bill, AB 8, to be written in a way that only requires a simple majority to be placed on the governor’s desk. “We will give him the best work product we can, as a majority vote bill,” said Senate President pro Tem Don Perata.

Republicans admit they won’t vote for anything that smells like a tax, including a new proposal floated by the California Restaurant Association to hike the sales tax a penny and use the money for health care.

“I don’t think taxes, in general, are the way to solve the problem,” said Assembly GOP Leader Mike Villines.

And to put an even more fine point on it, Republican leaders suggested focusing on smaller pieces of the issue, like health savings accounts or expanding access to clinics.

“We suggested the governor may want to look at aspects of all the plans,” said Senate GOP Leader Dick Ackerman. “I don’t think we can get the entire plan done this year.”

So they’re telling Arnold Schwarzenegger to think smaller, not bigger? If so, that may be the toughest sell of all.

The financing of a new central health care facility for inmates at San Quentin State Prison is in limbo, after legislation to pay for the plan failed this afternoon to pass the state Senate.

At issue is a new $146 million medical care center at the prison, a project designed by Robert Sillen, the federal court-appointed prison health care receiver. Last month, Assembly Republicans demanded that the project be paid for out of the $7.9 billion in prison bond package approved by the Legislature and Governor Schwarzenegger earlier this year.

Legislation to do that, SB 99, passed out of the Assembly on July 12 by a vote of 72-5. But this morning, that plan ran smack into a wall of opposition in the Senate… opposition based on a myriad of reasons.

Some Republicans opposed the plan on principle, with Sen. Jeff Denham (R-Merced) saying it would provide for “state of the art medical care for the killers and rapists.”

Meanwhile, some Democrats said SB 99 is the wrong way to solve the problems related to prison medical care. “This bill,” said Sen. Mike Machado (D-Linden), “does not send a message of cooperation to the courts… This is nothing more than another game playing that’s taken place within the Legislature.”

(Machado was the author of a bill to float separate bonds for the San Quentin project. That bill, SB 943, was killed in the Assembly.)

When the votes were tallied, the San Quentin health care bond stalled 21-14, as it needs 27 votes to be sent to the governor.

The bill has been granted reconsideration — meaning it can be taken up again — but today’s debate clearly raises some warning signs about the financing for Sillen’s prison health care plans. And as the receiver said last month in a speech to the Sacramento Press Club, he’s prepared to do whatever it takes to get the cash.

The state budget is a done deal, the governor says it’s a responsible budget, everyone clapped as the document was signed, yada yada.

Let’s cut to the chase and talk about the vetoes, shall we?

$1.5 billion worth of vetoes in all (that’s the state’s general fund, special and bond funds, and federal funds)… 109 total vetoes… leaving a state budget for the fiscal year of $145.5 billion.

The line-item vetoes are probably more important this year than most years, because legislative Republicans — especially in the state Senate — made them a major issue. They had to be real cuts, they said; Governor Schwarzenegger needed to be fiscally prudent, they said.

Well?

I won’t pass judgment on the list, which you can view in all its glory here (at the end of the document). I will observe, however, that the single biggest cut is not so much a cut… as it is a “reduction.”

I’m not being cute. The governor’s largest line-item veto was $322 million less funding for the state health program Medi-Cal. But Schwarzenegger’s budget team told reporters this afternoon that the program has essentially been over funded the past few years, and they’ve simply brought the program’s budget more in line with reality. “Over the last three years,” says the governor’s veto message, “Medi-Cal expenditures have been more than $400 million General Fund lower than the estimate.”

If that’s true, then this is the most painless “cut” of all… and one that seems like it could’ve been made weeks ago.

Other substantial vetoes include $55 million for a program designed to help the mentally ill homeless; $72 million in “unallocated” reductions for general government (to help the state afford the recently hiked salaries of its workers); $15 million in maintenance at state parks: $12 million in funding for Adult Protective Services; and $20 million in grants for for cleaner-burning construction equipment.

Then there are those cuts that, when viewed in context to the size of the state budget, amount to pulling up the couch cushions and searching for loose change. Some that are notable mostly for what they affect include $500,000 for a new UC center in Mexico (an item on the Senate GOP cut list); $3 million for agricultural and oceanographic research institutes; and $1 million to the state Department of Justice related to global warming lawsuits.

That last one deserves particular notice. The governor slashed Attorney General Jerry Brown’s budget to pursue global warming lawsuits. Hmmm, something tells me that one goes over quite well with the Gang of 14.

And when all is said and done, another sobering bit of budget news. The governor’s top fiscal adviser told reporters today that he expects the state’s red ink to amount to $6.1 billion in the 2008-09 fiscal year. Ouch. That’s worse than the projections commonly used around the Capitol in recent weeks. But the governor’s team denied any contradiction to Schwarzenegger’s often repeated claim of a “zero deficit.”

“We’re not going backwards,” said Department of Finance director Mike Genest.

A California budget postmortem is the focus of an early edition of this week’s Capital Notes Podcast. Actually, we’re calling it a happy hour postmortem.

No, we didn’t record it in a bar… or on the patio of Chops. It just means we sat down to hash out the “budget season that was” after work on Wednesday, as opposed to early Friday morning.

Anthony York of Capitol Weekly and I take a look at the good, bad, and the ugly. By next week, we’re eager to move on to any other political news but the budget!

The new state budget was the focus of KQED’s daily public affairs program Forum this morning, hosted by Michael Krasny.

Senate President pro Tem Don Perata and Senate GOP Leader Dick Ackerman were the featured guests, with further discussion from Steve Maviglio, deputy chief of staff to Assembly Speaker Fabian Nunez, and Jon Fleischman, publisher of the GOP Flash Report blog.

And yes, some overview of the debate from yours truly.

The fact that only there are only 16 days left on the 2007 legislative calendar has a lot of Capitol watchers wondering whether the year’s big policy issue — health care reform — can actually be pulled off in time.

Maybe so. But nonetheless, Governor Schwarzenegger told me today he’s willing to call the Legislature back into a special session after mid-September, so that legislators could have more time to craft a health care proposal.

The governor made the comment after a late morning speech at a health care rally sponsored by the AARP.

Schwarzenegger said he would do so “if we need it.” But then he added: “I think we have a shot to get it done before the session is over. If everyone has the will, I think we can get it done.”

The current proposal for a compromise deal, AB 8, was heard in the Senate Appropriations Committee this morning. The bill, now co-authored by Assembly Speaker Fabian Nunez and Senate President pro Tem Don Perata, would establish a system where employers either provide health coverage or pay a 7.5% payroll assessment into a state-sponsored health care pool.