Governor Schwarzenegger's advisers say he's made it clear to Democratic legislative leaders that he will accept an alternate set of proposals from his $24 billion May deficit solution, one that neither eliminates entire programs nor raises taxes.
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No one around the state Capitol believes there's an additional $3 billion in easy spending reductions just lollygagging inside the recesses of the budget. Okay, almost no one.

But should the current budget deficit impasse drag on beyond midnight Wednesday, it appears that's how much more money will need to be found to satisfy anyone who believes in solving what we used to call the whole enchilada.
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You know it's been an odd week when the Legislature rejects a plan to buy itself more time.

But that's where things stand as of this morning, and this week's Capital Notes Podcast examines the week so far, from stalled spending cuts to the specter of IOUs and beyond.

Capitol Weekly's Anthony York and I also take a look at the big news about the mayor who's not going to run for governor in 2010.

(And yes, the podcast was recorded late Thursday... so beware the shelf life should some budget breakthrough happen from here on out.)

You're not really surprised that things turned out this way today, are you?

Of course, that's not to say that some parts of today's budget news weren't unexpected. And few would venture a guess as to what happens next... though indications are the Legislature will be spending the final weekend of June in session.

For a formal look at today's events, dial in to The California Report tomorrow morning. In the meantime...
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Audio from budget vote September 9, 2008

Few expect that today's debate and votes in the Legislature will produce a final resolution to California's historic fiscal crisis.

But by day's end, there will hopefully be a better sense of where we're headed... and when. Can lawmakers strike a deal before the state runs out of money in less than five weeks time?
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One of the most often quoted stats about California is that, were we a nation, we'd be the world's eighth largest economy.

But such power can also work in reverse, say economists. And now, there is speculation that whatever ugly deficit deal state lawmakers strike, its necessary slashing of public services could either slow, or stop, the economic recovery of the entire nation.
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Dramatic writers know that once you've turned the corner from Act One -- where you set up the point of your story -- and towards Act Two -- things start to get interesting. And complicated.

And that's a good description of where we find ourselves in the debate over resolving California's fiscal crisis.

On this week's Capital Notes Podcast, Capitol Weekly's Anthony York and I examine the Democratic budget proposal, the road ahead for negotiations over compromise, and the uncertainty of how much time lawmakers have... before the state runs out of money.

At the suggestion of my editors (who are trying to keep tabs on things here in Sac Town like everyone else), this is the first of a new, and hopefully short-lived, feature: an end-of-the-week look at where things stand with the budget deficit debate.
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In the theater or the movies, we'd call this the beginning of Act Two. In baseball, it's probably the sixth inning.

We now have two relatively complete looks at how to resolve the gaping hole in the state budget -- one from Governor Schwarzenegger, one from legislative Democrats -- with the Dem plan headed for a vote on the floor of each house as soon as Monday.
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My interview yesterday with Governor Arnold Schwarzenegger included a new assertion from the chief executive: that his willingness to break his anti-tax stance earlier this year was a one-time deal to which Democratic legislative leaders agreed.
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