Billions at risk over prison flap

A court- appointed receiver vowed Thursday to raid California’s depleted state treasury for billions of dollars as the state Senate’s minority Republicans blocked -- for the second time in three days -- his plan to build prison medical beds.

The developments threatened to severely worsen the state’s fiscal crisis while setting up a showdown with federal judges who have declared the standard of healthcare in state prisons to be unconstitutional.

The receiver, J. Clark Kelso, a normally sedate law professor, sent a harshly worded letter to Michael Genest, director of the state Department of Finance, in which he announced that he would demand $7 billion over three years and branded state officials as liars.

“I can no longer stand idly by while the state continues its pattern of prevarication,” he wrote.

Kelso, who declined to comment Thursday, said in an interview early in the week that he had been given reason to believe that the Senate would authorize his plan, although he declined to reveal who had assured him. Lawmakers first rebuffed his proposal Tuesday.

Republican legislators said they also intend today to reject the proposed settlement of a federal court case related to prison healthcare and overcrowding that would have diverted tens of thousands of convicted criminals and parole violators into local treatment programs and jails rather than state lockups.

That deal, the subject of months of negotiations, would have averted a trial before a three-judge panel that could result in a mass release of inmates.

The Republicans said they would not settle the court case or vote for the receiver’s plan, which they criticized as too expensive, in isolation.

They are calling for a comprehensive package on prisons to be negotiated with Democrats and Gov. Arnold Schwarzenegger’s administration that also would require changes to a prison construction plan approved last year.

That way, they say, state officials can resolve the prison crisis and the court case on their own terms.

“We can remove the oversight and the threats of the federal courts,” state Sen. George Runner (R-Lancaster) told colleagues. “We can control our prisons, rather than a liberal federal court.”

Democrats warned that it would be foolish to think that the state could forestall the receiver and federal judges in multiple pending lawsuits on medical care, mental health, dental care and disability access.

A lawsuit filed by mentally ill inmates has been ongoing for 18 years, and the judges have long expressed frustration with state inaction.

“This is a dangerous game of chicken,” said incoming Senate leader Darrell Steinberg (D-Sacramento), addressing Republicans on the Senate floor. “I hope that you all know what you’re doing.”

Kelso’s plan entails renovating existing prison clinics and construction of 10,000 beds in up to seven new facilities for sick and mentally ill inmates.

The bill providing the funding, SB 1665, would have authorized $6.9 billion in debt to be repaid over 25 years, and $100 million from the state’s general fund. The plan employs a type of bond that does not need voter approval.

Schwarzenegger, a Republican, had endorsed the receiver’s plan. U.S. District Judge Thelton Henderson, who appointed Kelso, wrote a letter last week urging lawmakers to pass it quickly.

The bill needed support from two-thirds of the Senate, or 27 votes, because it would have taken effect immediately. But it failed, 23 to 15, on a mostly party-line vote. Only one Democrat, state Sen. Ron Calderon (D-Montebello), voted against it. One Republican, state Sen. Abel Maldonado (R-Santa Maria), abstained.

In a statement, Schwarzenegger spokeswoman Lisa Page said the administration would keep working with lawmakers and the courts to provide funding to bring prison healthcare up to constitutional standards, build new beds and make changes to the state parole system, which crams the prisons with parole violators.

“We need to act quickly on all these issues,” Page said.

Kelso, who is empowered by the court to take whatever he needs from the state treasury with a judge’s consent, said he would demand $3.5 billion in the current and upcoming fiscal years, and $3.5 billion more in the next two years. He plans to begin construction early next year and finish by 2013.

Schwarzenegger administration officials said they were still hopeful that lawmakers would pass legislation to borrow the nearly $7 billion. Otherwise, the direct hit to state coffers would swell the budget deficit from $15.2 billion to $18.7 billion.

“Right now it looks like a game of brinkmanship,” Genest said. “It would be disastrous if we had to pay $3.5 billion all next year. It would be catastrophic.”

On Wednesday, Senate minority leader Dave Cogdill of Modesto approached state Sen. Michael Machado (D-Linden), who sponsored the receiver’s bill, with a potential deal.

The proposal was to establish a bipartisan commission of the Senate and state Assembly to examine changes to last year’s prison plan, for instance by streamlining the construction process; and to approve the plan for medical beds.

The agreement would have been conditional on the panel of three federal judges agreeing to drop the overcrowding case without removing inmates from state prisons.

Democrats rejected the idea. Machado said the judges would not accept that solution.

“We’ve seen delay and ignoring the reality of what we have to face,” he said.

The three-judge federal panel on overcrowding is scheduled to hold a hearing today in San Francisco. The state, inmates’ lawyers, local law enforcement officials and Republican legislators, who are all parties to the court case, are to report the status of their settlement talks.

Cogdill and Runner said the Republicans would not agree to the settlement, which was crafted by mediators to limit the prison population, on the grounds that it would threaten public safety. If there is no agreement, the judges -- including Henderson, who appointed Kelso -- could set a trial date.

The Republican lawmakers have said that if the judges order a release of prisoners, they will appeal to the U.S. Supreme Court.

“I don’t think we want to let people out of prison that we shouldn’t be letting out of prison,” Cogdill said. “If we need to provide the facilities, then let’s find a way to do it, and do it in the most cost-effective manner possible, rather than just have somebody hold a gun to our head and say, ‘You will do this or else.’ ”

Donald Specter, director of the Prison Law Office, the nonprofit legal agency that represents inmates in the federal case, said he was dismayed because the lawmakers had representatives at the settlement talks.

“We’ve been working for months, and then they come out and reject this whole thing,” Specter said. “We thought we had reached consensus. This is not a constructive way to resolve this crisis.”

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michael.rothfeld@latimes.com

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Times staff writer Evan Halper contributed to this report.