In Icy Budget Talks, a Thaw Begins

After Gov. Arnold Schwarzenegger’s partisan attacks left legislative Democrats refusing to meet with him for an entire day, the budget deadlock broke Tuesday with both sides beginning to make concessions.

Perhaps most significantly, Democrats began working with Republicans on drafting amendments to two labor laws the GOP had been demanding be repealed as part of any deal. The demand had been the source of some of the most bitter fighting in weeks of budget negotiations.

“These have been issues that have been holding people back,” said Assembly Republican Leader Kevin McCarthy (R-Bakersfield). “We have been able to move them forward, and we think that will bring momentum to other issues as well.”

The progress came only a day after Senate leader John Burton (D-San Francisco) had warned that the governor’s calling Democrats “girlie men” and “obstructionists” would set the process back two weeks.

“We’ve got a job to do, and we’re going to keep doing it as best ‘girlie men’ can keep doing the job,” Burton said.

The resolve on both sides to strike a deal intensified as the state ended its third week of the new fiscal year without a budget. If the $103-billion spending plan is not passed in some form by July 28, state officials will be prohibited by law from making hundreds of millions of dollars in payments to schools.

Burton said putting a budget together is more important than holding a grudge.

“I’m not going to beat a dead horse,” he said after his first meeting with the governor since the weekend’s partisan attacks.

Nevertheless, Schwarzenegger was scheduled to show up at a San Diego restaurant today to put more pressure on Democrats.

“The governor will be out in San Diego to continue to take his case to the people,” said Rob Stutzman, the governor’s communications director.

Meanwhile, Democrats were planning to put their own version of the budget to a vote in the Senate. That budget is destined for defeat because it does not have the needed Republican votes, but the move is in an attempt to paint GOP members as barriers to reaching agreement.

“There will be no Republican votes for it,” said Senate Republican Leader Dick Ackerman of Irvine. “This is a political drill.”

Despite the partisan exercises, there is movement in the background. It began after intense back-channel negotiations Monday. Bonnie Reiss, a senior advisor to Schwarzenegger, and another aide visited Assembly Speaker Fabian Nunez (D-Los Angeles) and invited him to come down to Schwarzenegger’s office and resume negotiations.

Aides to Schwarzenegger, striking a tone of contrition, made overtures to Democratic leaders throughout the day. Democrats said they were getting signals from Schwarzenegger that he was not eager to launch another round of partisan attacks and wanted to pull a deal together quickly.

Nunez said he received some hostile e-mail messages over the weekend after Schwarzenegger’s rallies. One message referred to him as a “rotten piece of slime.” Another -- sent within an hour of the governor’s rally at a shopping mall in Ontario -- read: “Sign the budget or lose your seat” and referred to Nunez as an “immigrant” whose job is to represent California, “not Mexico.”

“What type of people are the ones who are his [Schwarzenegger’s] staunch supporters?” Nunez asked in an interview Tuesday. “And who’s his audience? It’s divisive politics at its best. All you have to do is look at the e-mails. These are not rational people.”

Aside from the dispute over the labor laws, the other major roadblock to a budget deal is how to protect local government from future cuts. Lawmakers reported progress on that issue as well.

The protection would come in return for cities and counties agreeing to accept $2.6 billion in cuts over the next two years to help balance the state budget.

The governor had been demanding a constitutional amendment that would prohibit the state from borrowing from local governments in the future, even during a fiscal emergency, without approval of three-fourths of the Legislature.

Democrats say that is too great a barrier. The deal being worked out now, according to Democrats, would allow an emergency loan from cities and counties no more than twice every 10 years. The first loan could be taken with a two-thirds vote, and the second would require 70% approval.

Democrats are especially eager to reach a budget agreement so they can attend their party’s national convention in Boston, which begins this weekend. That deadline also affects GOP lawmakers. Burton made clear that if Democrats can’t go to Boston, they will schedule the legislative session to run through next month, forcing Republicans to miss their convention in New York City.

Republicans are facing pressures of their own.

The California School Employees Assn. began running radio advertisements in vulnerable Republican Assembly districts accusing the GOP of holding up the budget for Laidlaw International, a private bus company that could gain millions of dollars in new business if the wage law is repealed.

The ads say that the lawmaker in the district where they are running is “holding up the budget to help Laidlaw, and the bill Laidlaw wants is not even related to the budget.”

It also warns that if the lawmakers continue to hold out, “schools and community colleges won’t get their checks” and “child-care centers won’t get the funds they depend on.”

“All this to benefit one single out-of-state corporation?” it concludes.

Hundreds of union school bus drivers, cafeteria workers and janitors descended on the Capitol on Tuesday, making similar charges. The workers, some hanging out the windows of parked school buses, chanted and waved signs. Then they roamed the hallways of the Capitol lobbying lawmakers.

“He says he loves California, but he’s done everything to show that he doesn’t love us,” Velma Butler, a secretary for the Los Angeles Community College District, said of the governor. “How can taking these people’s jobs affect the budget? He probably spends more on his cigars.”

Legislative leaders ultimately agreed to change that contracting law to allow schools to hire private bus companies that pay the prevailing wage in the area where their drivers work. That amount would be determined by calculating the average pay for all bus drivers, both union and nonunion.

The compromise was fashioned with the help of Laidlaw. Company officials say the change would not guarantee it new business; it would merely let the company compete for existing jobs.

Democrats also agreed to roll back some of the provisions in a law that make it easier for workers to sue their employers. They are working on a proposal that addresses GOP concerns that the law has opened the floodgates for frivolous lawsuits.

Critics say the law is being used to file multimillion-dollar lawsuits against companies for such minor violations as using the wrong type size on posters that inform workers of their rights.

Republican leaders McCarthy and Ackerman, in an effort to show that negotiations were back on track, wheeled down a $2,000 Jura espresso maker that GOP members had purchased for the governor.

They pasted a sign on it that said: “Back in service.” The lawmakers were playing off Burton’s refusal to bring the governor whipped milk from his own machine, which had become Burton’s practice until the weekend blitz by Schwarzenegger cut off the gifts.

“He took a picture of it, and he’s going to send it up to Burton right now,” Ackerman said.

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Times staff writers Gabrielle Banks, Jordan Rau and Robert Salladay contributed to this report.