Governor Sits Out the Budget Standoff

Oregon Gov. John A. Kitzhaber sent his regrets that he couldn’t attend a recent gathering of Democratic governors. He was stuck up in Salem because of that state’s budget crisis.

California Gov. Gray Davis, in the midst of an even worse crisis, took time out to make the trip. In fact, before heading to Los Angeles for the weekend, Davis on successive days last week spent an afternoon planning election strategy with Democratic governors at the Fairmont Hotel here, appeared at the state fair to tout television ads boosting California agriculture and announced a campaign to get tough on corporate misdeeds.

The deadline for having a budget in place came and went on July 1, start of the new fiscal year. But the Democratic governor is distant from the most pressing policy issue of the day in Sacramento--a budget deficit of historic proportions.

By leaving negotiations largely to legislators, Davis is shielding himself from being associated with a major problem, political observers say. Increasing numbers of lawmakers believe he must get more heavily involved if the standoff is going to end any time soon.

All along, the governor has been in full reelection campaign mode.

Last Tuesday when he appeared at the Fairmont, the Democratic Governors’ Assn. gave Davis’ reelection campaign another $200,000, pushing its total contribution to Davis to $650,000 since 1999.

Altogether, Davis raised $2.8 million during the first 23 days of August, nearly three times what had been his average haul of $1 million a month. He and his wife, Sharon, even took time earlier this month for a fund-raising swing through Austin, Texas, where he raised about $150,000.

On Monday, lawmakers and Davis will break the record 62-day standoff set in 1992, when Republican Gov. Pete Wilson did not sign a budget until Sept. 2.

Though Republican and Democratic legislators continue to talk, some experts fear that if there’s no spending plan in place when the legislative session is scheduled to end on Saturday, the state could enter uncharted territory, perhaps going without a budget until after the November election. “The governor has a political strategy of trying to kick the budget ball past the November election,” Senate Republican leader Jim Brulte of Rancho Cucamonga said, contending that the solutions are so severe that the governor would lose electoral support if voters became more aware of the problem.

Asked whether he believes the budget impasse will go on past the Nov. 5 election, Davis said: “I don’t know.”

The Assembly Republican and Democratic caucuses each have retained outside political consultants to handle budget strategy, an indication to some Capitol insiders that negotiations could drag into the fall election season. Former Wilson aide Dan Schnur is advising Assembly GOP leader Dave Cox of Fair Oaks. Gale Kaufman, onetime aide to former Assembly Speaker Willie Brown, and Democratic consultant Darry Sragow are advising Assembly Speaker Herb Wesson (D-Culver City). Schnur and Kaufman are veterans of Wilson-era budget fights.

Competing Fiscal Plans

On Tuesday, while Davis was accepting endorsements from law enforcement and crime victims groups, Assembly Democrats and Republicans offered competing proposals to end the impasse.

Although the two sides remained $3.5 billion apart, Wesson said Davis’ intervention is not necessary. The speaker contends that his plan of deeper cuts and spending caps will reduce, if not eliminate, deficits in future years.

Republicans, who hope to draw Davis more directly into the fray, countered by offering to agree to raise revenue by $500 million--they don’t call the proposal a tax hike. But the GOP plan falls far short of the $4.2 billion in tax hikes that Democrats have proposed.

“We still have a significant gap,” said Assemblyman John Campbell (R-Irvine), the Assembly Republicans’ point man on budget matters.

As it stands, California and Kentucky are the only states without a budget, according to the National Assn. of Budget Officers. California’s shortfall of $23.6 billion, a number that includes last year’s deficit and the projected gap for 2002-03, is roughly half the total shortfall for all other states combined before their budgets were settled this year.

“California is, if not at the top, near the top among all states in terms of fiscal stress,” said Scott Pattison, executive director of the National Assn. of State Budget Officers, a nonpartisan group in Washington, D.C. “It is among the hardest hit, and faces one of the most dire fiscal situations that any state is facing.”

Davis accuses Assembly Republicans of being unwilling to negotiate: “It is clear to me that Assembly Republicans are not interested in solving problems. They just are fixated against any tax of any sort, even a tax on smokers. You can’t fill a $23-billion shortfall without some revenue increases.”

Republicans counter that Davis’ budget won’t solve the state’s fiscal problem. They point to the legislative analyst office’s estimate that, if lawmakers approve the spending plan proposed by Davis, the state will face multibillion-dollar deficits for years to come. Davis’ own Department of Finance has asked departments to plan for 20% cuts starting next year.

Some fellow Democrats grumble that Davis must become more deeply involved if the state is to have a budget any time soon. The phone-book-size document, after all, is titled “The Governor’s Budget.”

“It is on a flat spin right now,” Sen. Don Perata (D-Alameda) said. “The governor has to step up. If he gets some of these [holdouts] in his office and applies a little pressure their heads would pop off.”

Not all the implications of a delay past election day are known. But Controller Kathleen Connell, who must pay the state’s bills, warns that the state could run out of cash by October, when she must begin repaying a $7.5-billion short-term loan. Wall Street rating agencies could downgrade California’s credit, which would cost the state millions more in interest payments when it tries to borrow money, Connell and others say.

More directly, hundreds of private vendors who sell products to state government cannot be paid until a budget is place, and spending cuts and tax hikes that were part of the Davis’ budget proposal and were supposed to take effect in July and August are adding $5 million a day to the state’s deficit.

“Here we are in third week of August and we are worlds apart, philosophical canyons apart,” Connell said, adding that Davis “absolutely” should become more directly involved.

Budget standoffs are nothing new in Sacramento. In the 1990s, Wilson routinely failed to have a signed budget in place by the July 1 deadline. But during those fights, Wilson remained in Sacramento, presiding over closed-door meetings of the legislative leaders that went long into the night and often spilled into weekends.

“I don’t understand how [Davis] can cavalierly ignore the process you are supposed to lead,” Wilson said in an interview, adding that by avoiding leadership talks, Davis is “trying to sell to the public that this is not his problem.”

From appearances, Davis’ task would seem easier than Wilson’s. Wilson, a Republican, dealt with a Legislature controlled by the opposing party. Democrat Davis is dealing with overwhelming majorities of Democrats in both houses. With the Senate having already approved the spending plan, Davis needs only four Republican votes to attain the necessary two-thirds majority in the 80-seat Assembly.

Davis has not met with Brulte, the most influential Republican in Sacramento, and has had only a few meetings with Assembly GOP leader Cox.

The governor’s strategy of winning Senate approval, where Democrats hold 26 of the 40 seats, then obtaining a handful of votes from Republicans in the Assembly, has failed so far.

Targeting Republicans

Assemblyman Keith Richman (R-Northridge) is among the Republicans targeted by the administration as one who might vote for the spending plan. Richman, however, left the conversations resolute in his opposition to Davis’ budget, saying his suggestions for more cuts and different approaches to tax increases failed to budge Davis or other Democrats.

“They can’t pick me off,” Richman said. “They haven’t moved one bit. They’re unwilling to negotiate in a constructive manner. In fact, I’m not even sure if they know how to do that.”

Despite the delay, there is little outward sense of urgency to attain a budget deal.

One reason is that virtually all lawmakers running for reelection have safe seats. Few fear they will lose their elections by failing to approve the budget.

At the same time, Republicans who might consider voting for the governor’s budget know they would face their party’s wrath. Senate Republicans banished from their caucus the lone Republican who has voted for the spending plan, outgoing Sen. Maurice Johannessen (R-Redding).

Additionally, the lack of a budget has caused almost no pain for most California voters. Virtually no one other than private vendors has noticed there is no budget. And though budget gridlock in the early 1990s was major news and hurt Wilson, this year’s impasse has attracted far less attention. That may be attributed in part to how Davis has handled the situation.

“Davis and his advisors decided that the reason Pete Wilson was hurt was because of the extent to which he involved himself in the budget,” Schnur said. “The governor and his aides have decided that by keeping him at arm’s length, he can protect himself against any short-term political damage.”

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Times staff writer Julie Tamaki contributed to this report.