Mayors Join Debate Over Budget

The state budget impasse reached its seventh day Tuesday, as Gov. Arnold Schwarzenegger huddled with big-city mayors and legislators to consider revising a central part of his $103-billion spending plan.

Schwarzenegger summoned 10 mayors and about as many county supervisors to his office at the Capitol to see if they could resolve one of the remaining sticking points blocking passage of a state budget: financing for local government.

The question comes down to how much protection cities should get from future budget cuts if they consent to major cuts this year and next. Cities want solid assurances they will be spared, while the Legislature’s Democratic majority wants the freedom to tap local money if necessary.

After an edgy Fourth of July weekend, when the governor suggested that misbehaving lawmakers needed a “timeout” because they left the Capitol without voting on his proposal, all sides in the budget debate struck a more conciliatory tone Tuesday and voiced optimism that a compromise might be near.

Assembly Speaker Fabian Nunez (D-Los Angeles) said he would work through the night in hopes of forging an agreement. And the mayors designated two of their own -- Los Angeles Mayor James K. Hahn, a Democrat, and Fresno Mayor Alan Autry, a Republican -- to stay at the Capitol and press for a deal that deters the state from seizing local revenue.

“We’re going to work very hard to craft a compromise that we can all feel good about,” said Nunez, who attended the meeting with the mayors. “Local government wants to work out a compromise, so I think we’re in a very good place right now.”

One week into the new fiscal year, Schwarzenegger is increasingly eager to pass a budget -- and the people considered crucial to ending the stalemate are the mayors and county officials who assembled in his office. Their importance stems from a side deal the governor made in May.

Local officials had agreed to $2.6 billion in cuts over two years in return for a promise that local revenue would be protected down the road.

“We want an end to Sacramento’s ability to steal money from local governments. And any compromise has to recognize that fact,” Hahn said in an interview Tuesday.

Democratic lawmakers balked at that plan, crafting an alternative that would make it easier for the state to dip into local revenue in times of financial crisis. Late last week, Schwarzenegger appeared to shift his support to that proposal -- portraying it as a compromise that was essential to passing a budget.

But that move backfired. Local officials protested that they weren’t getting promised guarantees. Schwarzenegger quickly announced that he would not abandon his “partners” -- the cities and counties. Now all sides are trying to work out a mutually acceptable compromise.

One possibility mentioned Tuesday would work like this: The state would still be free to dip into local revenue, but on rare occasions and with a promise that the money be repaid. The state, for example, would be barred from tapping local revenue more than twice a decade. Another condition would be, “You can’t go in and take more money from them if you don’t pay off what you owe them,” said a senior legislative Democrat, speaking on condition of anonymity.

Oakland Mayor Jerry Brown, a former California governor who attended Tuesday’s meeting, said: “It would be a real tragedy if we become the piggy bank, or ATM, to a legislative problem. Their problem is they need more cuts, or more taxes. And that is a tough problem. But we shouldn’t be the fall guy to make that problem go away.”

Assuming he can placate the mayors and Democratic lawmakers, Schwarzenegger may still need to appease members of his own party to close out the first budget of his tenure. Senate Republican leader Dick Ackerman of Irvine said that in meeting with the governor Tuesday, he and other Republican leaders voiced qualms that the budget taking shape might saddle California with serious shortfalls down the road.

When it comes to higher education and health and welfare spending, Ackerman said, “The Democrats want to spend substantially more in both those areas” than Republicans.

“Everyone realizes this is going to be a two- or three-year project to get out of where we are,” Ackerman said. “It isn’t solvable in this year’s budget, but we want to take a step in the right direction.”

After a week of rising tensions, where a final budget deal seemed within reach and then collapsed, one of the most important developments Tuesday may have been the renewed pledge of cooperation.

“We are going to see if we can find common ground here,” Hahn said. “Local government has been complaining about this for a long time. Over $40 billion has been taken from local government [in recent years]. We’re willing to concede that shift, but we’re saying no more.”

Times staff writers Gabrielle Banks, Jessica Garrison, Evan Halper and Robert Salladay contributed to this report.