Budget +54: Swaps And Swipes?

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Photo: Schwarzenegger Twitter Pic

It should be noted at the outset that when budget deals are struck, things happen fast. It can be a matter of hours or days between a handshake and a signature on an enacted spending plan.

Still, we're starting to climb into the rarefied air of budget impasses. Tomorrow will make this the second longest impasse during the tenure of Governor Arnold Schwarzenegger, and the fourth longest in history. Give it another week, and it could be nudging up to #2.

And with that, only two things are really out there to chew on -- a swap of tax revenues and a theoretical swipe of pension funds.

First, the swap... as in tax swap. Senate President pro Tem Darrell Steinberg told reporters this morning to expect a revised version of the Dems' tax swap plan by as soon as midweek. You'll remember the first version, a lowering of sales tax rates and a hike in income and car tax rates, was sold as a win-win for residents who would get to deduct those state tax hikes on the 1040 IRS forms sent to Uncle Sam. But the plan took a big PR hit when the nonpartisan Legislative Analyst's Office calculated that it would still result in an effective tax increase for a broad swath of Californians, including many middle-class folks.

So how do the Dems lower the middle-class tax bite?

"It may generate a little less revenue," said Steinberg.

The obvious translation there is that, okay, then that means more budget fixes somewhere else. But keep in mind that the Democrats believed their original proposal would net the state's coffers $1.8 billion, but the LAO scored the proposal as a net revenue gain of $3.1 billion. So can the Dems lower some of the tax bite on the middle class and still end up with the amount they first thought they were getting? Perhaps. The Senate leader didn't offer any more details, so we'll wait to see what develops.

Meantime, the end of last week saw a different kind of development, thanks to some crack reporting by Kevin Yamamura of The Sacramento Bee: a proposal supposedly floated by the Schwarzenegger administration to wipe out $2 billion of the budget deificit with a loan from the public employee pension system, CalPERS. Yamamura reports that the proposal may hinge on taking a cash advance on pension savings now being negotiated with labor unions. Such a concept sounds much like (philosophically, not policy-wise) Schwarzenegger's 2008 comments that bonds are "a gift from the future."

Democrats say there's no real vetting yet for any kind of pension borrowing proposal, so mark this one down as another possible creative fix. But just the mention of such an idea, especially to the tune of $2 billion, does seem to reinforce this idea that Democrats and Republicans are still nowhere near finding other more traditional fixes.

Which is what probably led Steinberg to say this today about the buzz on borrowing from the pension fund: "Well, I don't reject it out of hand."

UPDATE 2:58 p.m. And one more budget impasse impact to report -- an additional $2.9 billion in payments to schools and counties will be delayed an extra month, due to the need to preserve operating cash. The decision was made today jointly by Controller John Chiang, Treasurer Bill Lockyer, and gubernatorial finance director Ana Matasantos. A PDF copy of their letter to legislative leaders is here.

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About John Myers

John Myers is senior editor of KQED's new multimedia California Politics & Government Desk.  He has covered California politics for most of the past two decades -- serving previously as Sacramento bureau chief for KQED News and, most recently, as political editor for KXTV News10 (ABC) in Sacramento. He moderated the only gubernatorial debate of 2014, and was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.

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