Governor, Legislators Strive for Resolution as Budget Deadline Nears

With just days left in the fiscal year, lawmakers planned to work through the weekend negotiating the final points of a state spending plan with Gov. Arnold Schwarzenegger in the hopes of reaching agreement before the Wednesday deadline.

The governor and legislators expressed optimism. If they make the deadline, it will be the first time since 2000.

“Things are moving forward,” Schwarzenegger said after meetings Friday with Senate leader John Burton (D-San Francisco) and Assembly Speaker Fabian Nunez (D-Los Angeles). “We don’t want to lose that momentum now.”

Nunez predicted a final deal on a $102.8-billion spending plan would be reached sometime over the weekend. “A lot of what remains to be done is really just crunching numbers,” he said.

But some nagging disagreements remain.

Democrats are balking at the governor’s proposal to save $929 million by cutting the pension contributions for government workers. Legislative leaders also remain unsatisfied with the details of an agreement the governor struck with local governments through which cities and counties accept cuts this year. And they are demanding more money be put in the budget for higher education and social service programs.

“Sometimes you get to a sticking point,” Schwarzenegger said outside his office Friday. “But you have to fight through that sticking point.... I’ll be staying here because I demand that we get this budget on time.”

Polls suggest that few issues anger voters more than late budgets. The deadline has been blown eight out of the last 10 years. Chronic delays have resulted in payment holdups for schools, local governments and vendors. Organizations that rely on the state for money have also been unable to move forward with their own planning.

Schwarzenegger has promised repeatedly that he would bring an end to late budgets.

The governor has hinted over the last couple of days that he is ready to meet most of the Democrats’ wishes on higher education and social services. He says the main sticking points now are the pension and local government proposals.

Schwarzenegger has begun putting pressure on state employee unions in the hope of forcing a resolution on the pension issue.

“We’ve seen the sacrifices made by other groups: local government, higher education, the trial courts,” he said. “Everyone came in and helped us, so we want [the unions] to come in and help us. We want the union leaders to say this is the time we have to give something back to the state and make sacrifices and this is what we’re asking them to do.”

The governor himself has softened his demands on pensions.

He initially called for changing the contracts for all new state workers, so they pay 1% more of their salaries into their pensions. That plan would have provided enough money to pay back a $929-million bond the state would sell this year to help close the deficit.

But Democrats say they will not vote for such a change unless it is sanctioned by state employee unions. And the unions have shown no sign of supporting it. “Benefits cuts are traditionally negotiated across the table,” said Assembly Budget Committee Chairman Darrell Steinberg (D-Sacramento).

Now, Democrats are pushing a plan under which the state would delay contributing to employee pension accounts until a worker has been a state employee for two years. Fiscal conservatives, however, say such a proposal is merely an accounting gimmick that would not save much.

Administration officials and lawmakers are also working to keep a deal with local governments from falling apart. Under the agreement, cities and counties would accept $1.3 billion in cuts over each of the next two years in return for support of a constitutional amendment that would protect their share of state revenues in the future. Democrats warn that the amendment the local governments are demanding would lock into the state Constitution a problematic tax formula.

But cities and counties have been resistant to the changes the Democrats are seeking.

“It’s one of those things where you negotiate and negotiate,” Schwarzenegger said. “Then it goes backward a little bit. Then it moves forward, better than you expected. Then you get some push back again. Then all of a sudden everything stalls.”