Icy Divide on Budget Thaws in Capitol

The icy divide that separated Gov. Arnold Schwarzenegger and the Legislature only two days ago abruptly thawed Monday as the sides reversed course and quietly resumed talks on shaping a financial recovery plan.

At various points in the day, Schwarzenegger met with legislative leaders, talked by phone to at least 14 lawmakers eager to reach a deal and canceled a fundraiser scheduled for Monday night.

“He was upbeat and indicated that he wants for the benefit of all of California to try to work out some kind of an agreement,” said Assemblyman Tom Harman (R-Huntington Beach), one of the lawmakers who spoke to Schwarzenegger about resuming talks.

“Nothing real specific was discussed; just the people on the conference call indicated they wanted to work with him.”

Schwarzenegger’s spokesman, Rob Stutzman, said after the call that the governor “was not brimming with optimism,” and “discussions have not moved anywhere today.”

“The news today is discussions have continued, and now will continue for at least two more days,” he said.

With the governor’s encouragement, Harman and a bipartisan group of 18 other legislators -- mostly moderates but also a few liberals and conservatives -- wrote Secretary of State Kevin Shelley, asking for more time to strike a budget deal. Lawmakers missed Shelley’s original midnight Friday deadline for passing a borrowing plan and constitutional spending cap.

The Republican governor had called the Legislature into special session to place such measures on the March ballot. Lawmakers failed to do so, working up to midnight Friday.

The long night ended with both sides trading barbs, and with Schwarzenegger aides threatening to take an even tougher spending cap proposal directly to voters in November.

To place such a constitutional amendment on the March ballot would require a two-thirds vote of the Legislature, which Democrats dominate. But proponents could go around lawmakers by shifting their efforts to the November election and gaining time to qualify a measure through voter signatures.

The lawmakers who wrote Shelley for a deadline extension -- 12 Democrats and seven Republicans -- asked for an unspecified amount of time.

“While we recognize that Dec. 5 was a reasonable deadline, we request that you extend it to help resolve the current fiscal crisis,” the lawmakers wrote.

Shelley responded that the Legislature could afford itself a few more days to negotiate by whittling the number of days the public has to review the title and description given to the ballot measures. Election law provides 20 days to check and challenge the accuracy of the descriptions and analysis given to voters in official ballot statements.

To accommodate the Legislature with last Friday’s deadline, Shelley already had assumed that period would be shrunk to eight days -- the shortest display period ever adopted, he said.

“The Legislature could reduce the public display period to fewer than eight days,” Shelley wrote in response to the lawmakers.

But attorneys advise against it, he warned, because the legislative analyst and attorney general need time to properly analyze and prepare ballot labels.

“If sufficient time is not provided for the compilation of these materials,” he continued, “the smooth administration of the March primary election could be compromised.”

Schwarzenegger had planned a fundraiser Monday in Sacramento, but canceled it “to keep his schedule clear for worthwhile discussions with legislators,” said Margita Thompson, a spokeswoman for the governor.

She said Schwarzenegger is open to “good-faith negotiations with lawmakers who are still interested in taking a spending cap and bond measure to the March ballot.”

Schwarzenegger called some legislative leaders together suddenly Monday night. After a 45-minute meeting, Assembly Speaker Herb J. Wesson Jr. (D-Culver City) said there was a commitment to continue talking, and that more meetings could take place through the evening.

“Us not being able to come to an agreement by Friday was a loss for California,” Wesson said. “So we’re going to try and see if there’s something we can do over the next couple of days. I don’t know for sure if it can be done.

“I thought we were close and everyone had a weekend to think about it. Maybe we get lucky.”

Senate President Pro Tem John L. Burton (D-San Francisco) said he would return to Sacramento today to meet with Schwarzenegger.

He said he was pessimistic about striking a deal in the next few days, but added, “Nothing ventured, nothing gained.”

“We’re waiting for them to come up with a proposal,” Burton said. “It is their deal, their proposal, their special session.”

Schwarzenegger had demanded that the Legislature put two measures on the March 2 ballot -- a plan to borrow up to $15 billion to balance this year’s budget and a permanent spending cap intended to prevent future budgets from getting severely out of balance.

The two sides had appeared close to agreement on the bond; some Republicans preferred a Democratic proposal that would have saved the state in interest costs by dictating repayment over seven years, rather than the 30-year term in Schwarzenegger’s proposal.

But talks broke down over the spending limit. Democrats rejected the Schwarzenegger plan as being too rigid by setting baseline spending for next year at $72 billion, a 16% cut from the current level of $86 billion. Future expenditures would adjust with population and per capita income growth.

Under a Democratic alternative, the state spending limit would be $83 billion next year and change thereafter depending upon the cost of living.

Schwarzenegger aides charged that the Democratic proposal would “institutionalize the overspending,” while Democratic lawmakers countered that the governor’s plan would too severely crimp spending on education, health care and the developmentally disabled.

After talks broke down close to midnight Friday, Schwarzenegger aides said he would launch a campaign to gather signatures and take his spending cap to voters in the November election.

“So we go on without the Legislature in every way that we can,” Stutzman, the governor’s communications director, had said late Friday, when it was clear the governor’s package would not pass.

“And that will mean going directly to the ballot” and allowing “the people to do the work that the Legislature is unwilling to do.”

Legislative leaders said they assumed that negotiations were over. “I know in my heart and in my soul ... that we did the best job that we could,” Wesson said early Saturday. “We negotiated down to the final second.”

But Some lawmakers questioned the finality of the Friday deadline set by Shelley.

One of the lawmakers who asked for more time, Assemblyman Keith Richman (R-Northridge), said Shelley’s response and Schwarzenegger’s call to lawmakers restarted talks that many had figured were over Friday night.

“The important point is we have at least a day or two or three,” Richman said. “Shelley wasn’t specific in his letter, but it’s not over.”

Richman said that even if the Legislature has to waive election law and shrink the public review period, voters will still have two months to weigh the ballot measures. “I think it’s critical that we get this resolved and put it on the March ballot,” he said.