Arguing that the furloughs of tens of thousands of state workers is "costing the state money and further hurting the economy," the leader of the state Senate says he intends to push a plan to trim the three days of furloughs every month down to two.
(more...)

That was the assessment of Assembly Speaker Karen Bass as negotiations over the state's massive budget deficit ended tonight with no deal, a major change in tone from earlier in the day when a deal seemed imminent.

The 'Big Five' meeting of legislative leaders and Governor Arnold Schwarzenegger ended just before 10:00 p.m., with Democrats saying that future payments to public schools are now a key sticking point.
(more...)

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.
(more...)

Generalissimo Francisco Franco is still dead.

If you missed that cultural reference, then here's the straight ahead approach: the budget impasse is still an impasse.

Democratic legislative leaders summoned reporters this afternoon to announce that have now sent their recently approved budget package downstairs to the office of Governor Schwarzenegger (along with this letter).

You thought they'd already done that, right? Nope. The package of bills, including the now legally challenged majority-vote-tax increase, was being held in hopes that Dems could strike a deal with the guv to avoid him making good on his promise to veto the proposals.

Apparently, that plan of attack is now over. "We have agreed to virtually all of the governor's demands," said Senate President pro Tem Darrell Steinberg. "If he vetoes the bills, we'll await for him to tell us exactly what he will sign."

Steinberg claimed that an agreement was in the works this past weekend (a "common framework," said Steinberg), only to fall apart last night in talks with Schwarzenegger.

That's not how the big guy remembers things.

"We're not sure what they're referring to," said gubernatorial spokesman Aaron McLear. "We've not moved any more close with the Democrats in the negotiations the past several weeks."

As reported many times before... many... many... you get the point... the clash continues to be over whether the Democratic proposal goes far enough on jump starting the state's weak economy and whether it offers enough spending cuts to justify the corresponding tax increases. Dems insist the governor keeps, in their words, "moving the goalposts" or that he getting "cold feet" about the tax increases.

You can imagine the administration's response to that. Enough said.

In which case, we're still where we were. Franco is still dead. Now back to our regular programming.

There's a chance the budget hole just got deeper, if the courts side with the man tapped to resolve problems with health care in California's prisons.

Clark Kelso, the federal court appointed receiver for prison health care, decided today to pull the trigger on formal legal action to get $8 billion he says is needed to bring medical standards up to a constitutionally guaranteed level.

The action comes after legislative action stalled back in May on a bond package to pay for prison health care. Kelso's filing with the court asks for $6 billion to build new health care facilities, and another $2 billion to complete projects at existing facilities.

And as for the headline... that's a factoid mentioned by Kelso today designed to get the attention of lawmakers, who remain at loggerheads over a new budget. He estimates that if a court rules against the state in this new lawsuit, the costs in the current 2008-09 fiscal year would be $3.1 billion... potentially bringing the budget shortfall up to more than $18 billion.

For now, it seems, Governor Schwarzenegger is maintaining optimism. "The administration will continue to work cooperatively with the receiver and the Legislature to provide the necessary funding for the receiver's efforts," said gubernatorial spokesman Aaron McLear.

BUDGET DAY PLUS 35 -- As various state agencies continue to decide which workers would, and would not, be exempt from Governor Schwarzenegger's executive order suspending all but minimum wages for their work in August, there's now word that two departments are completely off limits.

Late Monday night, the governor's office confirmed that no employees of either the California Highway Patrol or the California Department of Forestry and Fire Protection would have their paychecks cut back... assuming Schwarzenegger's order ends up going into effect (something that was hotly debated yesterday).

"Employees with critical public safety roles, including all of CalFIRE and CHP, are exempt from the governor's executive order," said gubernatorial spokesman Aaron McLear by email.

Still unclear, however, is how many employees of another public safety entity -- the state Department of Corrections and Rehabilitation -- would be exempt from a minimum wage-only paycheck. The issue of prison employees remains unresolved... in part, after the federal court-appointed receiver for prison health care, Clark Kelso, suggested almost 90% of the department's 66,000 employees should be exempt... due to the critical nature of their jobs.

Kelso's statement drew a quick response last week from Schwarzenegger's top lawyer, Andrea Hoch, who wrote to Kelso that such a determination is "beyond your authority."

Nonetheless, the "who is and who isn't exempt" issue across all state agencies is important... because it has a real impact on whether the governor's payroll actions can actually save the state the money his advisers said it would, money he says is needed to keep from running out of cash.

[UPDATE: For more information, see new posting on "Schwarzenegger v. Chiang?"]

If you're one of those folks who are following the latest discussions about the fiscal troubles of the state, a word of advice: believe everything. Or nothing. Or something in between.

Spending and revenue estimates in Sacramento are always like the latest fad in fashion... they come and they go. They're hip one day, tragically dated the next. That's been true for years, way before Governor Schwarzenegger took office.

But few other chief executives have sparked so much chatter... and offered so many estimates about the budget... in so few days.

The latest guesstimate came on Monday, when Schwarzenegger told an audience in Garden Grove that the state budget is "$20 billion out of whack." That would lead to a budget crisis second only in magnitude to the shortfall that helped spark the recall of former governor Gray Davis in 2003.

As of yesterday, the official word was that the governor was "speaking rhetorically." Might that then mean that the governor's numbers aren't necessarily rooted in reality? After all, my handy Webster's Dictionary offers one definition of rhetoric as "the use of exaggerated language; bombast."

But today, Capitol reporters were told that the number could, in fact, be real.

"[Schwarzenegger] has internal estimates" that show as much as an additional $10 billion in budget red ink, according to gubernatorial press secretary Aaron McLear. "That's why we need to start working on this now."

McLear declined to reveal any more about those internal projections, though may have more later on whether this is a lack of revenue, an abundance of spending, or both.

But he did lay out a rationale for how you'd get to $20 billion:

The governor's budget team believes that as of this winter the state faced a $7.4 billion deficit in fiscal year beginning in July, down from $16 billion and thanks to a series of possible money saving proposals were enacted. Add to that $2.8 billion, says Schwarzenegger spokesman McLear, for the governor's desired rainy day fund. Then add on the still nebulous $10 billion in new problems... and you get pretty close to $20 billion.

Of course, the rainy day fund isn't really part of the deficit... i.e., an actual shortfall in revenues or an abundance of mandatory expenditures. Take that out and the governor's new number maxes out at a little more than $17 billion.

Now, the caveats. We're still waiting for a clearer picture of revenues. And while the April 15 checks are still being totaled over at the Franchise Tax Board, there's new word that things might be looking better than (or not so bad as) expected. That, however, is only one piece of the revenue pie: there are also corporate tax revenues and sales tax revenues that figure into the issue.

But if the deficit projections start inching toward the big two-oh, it's hard to see how even the governor's 10% across-the-board cuts (strongly opposed by Democrats) would erase the problem. And yes, that probably brings us back to a debate over some kind of a ____ increase.

You can fill in the blank, can't you?