The Great 'Give Me Water or I'll Give You Vetoes' Showdown of 2009 is now over. And as is often the case around the Capitol, everyone lives to fight another day.

Just after 9:30 pm last night, Governor Schwarzenegger released a statement that ended the long-running saga over a deal on water issues, and whether lack of said deal would trigger a mass veto of legislation worked on all throughout the year.
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A cease-fire to the water wars that have lasted for most of California's modern existence. A prison overcrowding problem that's about to be yanked from state control by federal judges. A broad expansion of California's commitment to sources of renewable energy.

All that in ten days. Really?
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Well, you had to know it was coming.

In the wake of yesterday's all-budget special election, a former candidate for the Legislature has formally filed an initiative to knock the California Legislature back to part-time status, more than four decades after it became a year-round affair.
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[UPDATE 2:33pm - Apparently the governor was watching what happened, as described below. He's just announced three new members of the commission, thus filling all the vacancies. Schwarzenegger spokesman Aaron McLear says the governor supports the 10% lawmaker pay cut that failed to be enacted this morning, and says the guv was surprised that one of the standing commissioners voted against it. What do you think the odds are that these three new folks support the pay cut? --JM]

The intersection of populist anger, ballot measure directives, and unexpected legal intricacies could be found this morning at the scheduled meeting of the obscure commission that sets the salaries of elected officials.

When it was all over, those salaries remained just as they are... even as the state's finances keep crumbling down around them.
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Proving once again that in politics, perception often trumps all else, Assembly Speaker Karen Bass has canceled pay raises for staffers in the lower house.
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Not that you needed a formal audit of California government to know it, but today's detailed report gives some final clarity to how much the state took in last year... and how much more it spent.
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Will all those who are happy with the Legislature, its handling of the state's $40 billion budget hole, and the way it's communicating about what happens next please stand up?

I don't see anyone... and that's not just because I'm staring at a computer screen.

It's now been more than 24 hours since the buzzing began over a budget deal, and the slings and arrows are coming from all corners at the elected officials who hang their hats under the Capitol dome.

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It's not quite over, but there will be no surprise that the Democratic package of majority vote taxes and spending cuts will be on its way to Governor Schwarzenegger by mid-afternoon.

Then what?

The Schwarzenegger administration worked the phones of those of us in the press corps last night to insist that the guv will veto the package if it doesn't have certain things. And judging today's proposals by the list laid out last night, a veto seems possible.

Democrats are arguing that their concessions on infrastructure projects-- more private sector work, less environmental review -- are fair ones. But aides said the governor wanted such changes for more than just a small list of projects. And Schwarzenegger also reportedly wanted deeper cuts... including more long-term cuts, more cuts in the IHSS (in-home supportive services) program, and more state worker salary cuts (including possible furloughs).

At this juncture, there's a lot of complaining about who's going out further on a limb, the governor or Dems? The majority party certainly has some rank-and-file members who aren't voting for these bills as they move off the floor (about a half dozen at last count), and traditional Democratic interest groups... from labor unions to environmentalists... are grumbling.

On the other hand, Schwarzenegger's apparent willingness to entertain the "reduced calorie" (majority vote) tax proposal puts him squarely at odds with a lot of his occasional allies -- some of whom are already spoiling for a fight in court or at the ballot box.

On a lighter note: one blog reader says he and his colleagues started to clock some of the stem-winding floor speeches this afternoon... measuring the length of the speech against the governor's deficit clock. Ticking in at $470 more deficit every second, the reader offers a pricetag of $112,800 for the speech of Sen. George Runner (R-Antelope Valley) and about $100,000 for the speech of Sen. Mark Leno (D-SF).

Welcome back, Legislature. Man, don't we all feel rested?

Per the state constitution, today marks the convening of a brand new two-year session of the California Legislature, where more than two dozen rookies join seasoned vets under the Capitol dome for work on... what else... a budget crisis.

If the issue wasn't front and center on its own, Governor Schwarzenegger put it there by declaring a fiscal emergency -- the second of his tenure, and a power given to him under 2004's Proposition 58) and by calling the new Legislature into special session, which runs concurrently with the regular session that began today.

(A sidenote: Schwarzenegger made the announcement in Los Angeles, after his private jet was grounded by fog here in Sacramento. While some in the press may wonder why the public doesn't understand the problem, perhaps we might want to look at ourselves; at least one LA reporter could be heard asking the guv just what a "fiscal emergency" is and how it works.)

It's hard to call any of what happened today at the state Capitol truly different; in my conversations with a few new legislators this morning (more on that tomorrow on The California Report), it was clear that the political battle lines seem pretty much intact.

And yet, there are small sprinklings of a new approach. One was found in today's announcement that the budget committee in the Senate will now consist of all 40 senators, a "committee of the whole," as it were. That decision was announced by new Senate President pro Tem Darrell Steinberg.

"We all own the problem," he said in his floor speech this afternoon. "Let's have the institution begin acting like it."

Steinberg also called on legislators to complete their budget negotiations in 2009 by May 15. "Let's use the [governor's] May revise not as the beginning point of budget negotiations," he said. Steinberg further challenged lawmakers to strike deals on several thorny issues, from water supply protection to renewable energy, in the first 120 days of the session.

And back to the budget... Assembly Speaker Karen Bass says she wants to convene a joint session so that the state's financial experts can discuss the budget crisis with all 120 legislators in more detail.

Meantime, the governor threw some water on one idea that's been getting a lot of ink lately: asking the feds for money to solve the state's fiscal woes. Schwarzenegger is expected to travel to Philadelphia tomorrow for an event featuring President-elect Barack Obama; but it doesn't sound like he'll be asking for cash.

"I would never ask the federal government to help us before we straighten out our own mess," he said today.

One of two things will happen as the Legislature convenes today to consider solutions to the state's big budget mess: either a handful of Republicans will cross party lines and do something they've never done before... or we'll be right back at square one tomorrow morning.

That's the overview, in a nutshell, of what to watch for as Democrats in the Assembly and Senate put up a $17.1 billion proposal to deal with the budget gap now projected over the next 18 months.

The proposal, outlined for reporters in a background briefing with Democratic budget staffers, is split down the middle between cuts and taxes. The $8 billion in cuts relies on a $4 billion whack to proposed K-12 education spending, and a number of cuts to higher education, social services, transportation, and state employees.

The $8 billion in new revenues relies in a full restoration of the vehicle license fee (VLF), the infamous "car tax" of yore, and a suspension of this year's scheduled indexing of personal income tax rates; the latter means that most taxpayers would not see the lower state income tax rate they're scheduled to get when filing for 2008 (is that a tax increase, or the cancellation of a tax cut? Ah, semantics). For people whose adjusted gross income (AGI) is $50,000 a year, the reported cost is about $79, rising to $200 for those whose AGI is $100,000 a year.

The vehicle license fee hike, a tripling of the current rate from .65% of a vehicle's value to 2% (which is where it stood until 1998), would reportedly bring in about $5.7 billion over the 18 month budget period. The income tax indexing plan would bring in about $2.4 billion.

None of these proposals are new. Many of the cuts are smiliar in dollar amounts to those proposed by Governor Schwarzenegger earlier this month. The VLF is a perennial favorite when it comes to revenues. Even the income tax indexing idea, or at least a version of it, was pitched by Democrats this past summer during budget negotiations.

And the "usual suspects" nature of the plan brings us back to the first paragraph above; something truly unseen in recent years -- Republicans bucking their party leadership for one reason or another -- will have to happen if we're not going to all be right back here tomorrow... or next week... or in January.

If that wasn't depressing enough, then here's one more body blow: approval of this package would still leave the state budget in a big hole... another $10 billion over the next 18 months.