Holding budget ransom may be Schwarzenegger’s last hope

With fewer than 140 days left in office, Gov. Arnold Schwarzenegger is making a final stand for goals that have eluded him for nearly seven years, clinging to an overdue state budget for a last bit of leverage before he fades from relevancy.

Already, the state’s budget is 54 days overdue. But Schwarzenegger has said he won’t sign a spending plan until the Legislature retrofits the broken fiscal system that has bedeviled California — and him — for years.

He is demanding cutbacks in public pensions, a new constraint on spending and an overhaul of the way the state collects taxes. If those conditions go unmet, Schwarzenegger has said, he will leave the budget in his successor’s lap.

Some have likened his wish list to a gubernatorial ransom note, being used to polish his tarnished fiscal legacy.

“This is a governor that holds the state hostage,” said Assemblywoman Noreen Evans (D-Santa Rosa). “How irresponsible is that?”

The effects of the budget impasse are cascading across California.

State worker furloughs resumed Friday, forcing Department of Motor Vehicles branches to reschedule more than 15,600 appointments so they could close that day and again next Friday. An emergency fund to pay health clinics that serve the poor has run dry; the final payments go out Monday.

And state Controller John Chiang has warned that IOUs could be as little as two weeks away, repeating last year’s “shameful chapter of California history.”

Schwarzenegger says his final budget is a last chance to fix the state.

“I have two choices as governor, especially since this is my last year,” Schwarzenegger told a group of Bay Area business leaders this month. “Do I want to go and just make everyone happy and … go along with them, or do I want to go and, you know, wage this battle?

“I promised the people in 2003 that I will go and bring some kind of order into our budget system, so this is why I’m fighting,” he said.

But Schwarzenegger has failed to align spending and revenue, and this summer’s budget, which will have to eliminate a deficit estimated at $19.1 billion, is unlikely to change that. He still faces a hostile Legislature.

Meanwhile, the fall elections — particularly the showdown between fellow Republican Meg Whitman and Democratic state Atty. Gen. Jerry Brown, who are vying to succeed him — are increasingly sucking up the political oxygen in Sacramento, much as Schwarzenegger’s celebrity did in his first years in office.

“Once this budget is done, I think he’s done,” said Assemblyman Tony Mendoza (D-Artesia). “That’s one of the reasons he is delaying.… He doesn’t want to face that his end is coming and we’re all waiting” for it.

Earlier this month, Schwarzenegger briefly referred to his governorship in the past tense. “Yes, it was difficult, the most difficult thing I’ve ever done, but it was rewarding,” he told the Bay Area group.

Still, he remains empowered when it comes to the budget and he is using that influence to press for structural changes to “put our finances on solid ground for future generations to come,” as he argued in an opinion piece in The Times recently.

The governor wants public pensions to be rolled back to 1999 levels and is negotiating givebacks with every state employee union except prison guards. He has already struck six contract agreements, representing about 37,000 workers, that include pension concessions long anathema to powerful labor unions.

He wants lawmakers to put money in a rainy-day fund and pair such a move with a spending cap to limit the growth of state government. Voters have rejected two recent attempts to enact similar limits.

Schwarzenegger also wants a tax system overhaul to rein in the wild revenue swings California has endured for the last decade, beginning with the dot-com bubble that grew and then burst. He backed a reform commission’s 2009 plan to rewrite California’s tax code, but that proposal succeeded only in uniting the Legislature against it.

Even Republicans acknowledge that these demands, which Schwarzenegger made clear when he unveiled his revised budget proposal in May, are a tall order for a lame-duck governor.

“They’ve been on the table now ever since he first got here,” said state Sen. Bob Dutton (R- Rancho Cucamonga), who will soon become leader of the Senate’s GOP caucus.

Democratic lawmakers have chafed at the governor’s ultimatums, arguing that this year’s fiscal imbalance needs to be tackled first. Democrats are pressing for more than $4 billion in tax hikes to balance the books. Schwarzenegger wants more cuts: elimination of California’s welfare program and daycare for 142,000 children of low-income families, further paring of education funds and deep cuts in money for home health aides to help the elderly, blind and disabled.

“If he wants to achieve some of the legacy items that he consistently refers to, it’s not going to be done — will not be done — with the kinds of cuts that he is calling for,” Senate President Pro Tem Darrell Steinberg (D-Sacramento) told reporters recently. “Period.”

The current budget impasse is the fifth longest in California history, with no breakthroughs on the horizon, although Schwarzenegger has said repeatedly that he wants to strike an accord.

“It’s not just my way or the highway,” he has said.

But some lawmakers see it exactly that way.

“I don’t feel the negotiation part,” said San Francisco Assemblyman Tom Ammiano, a Democrat, as he sat in his fourth-floor Capitol office.

Glancing down at the governor’s famed smoking tent, where past budget deals have been struck and dignitaries feted, Ammiano added, “I guess that, too, will be gone.”

shane.goldmacher@latimes.com