Hopes Dim for On-Time Delivery of State Budget

With California’s fiscal year ending Wednesday and state budget negotiations sputtering, Gov. Arnold Schwarzenegger acknowledged Saturday that he may fail to deliver on his repeated pledge to sign a balanced budget on time.

Schwarzenegger spokesman Rob Stutzman said the governor remained upbeat and expected to have the $102.8-billion spending plan in place within days of Wednesday’s deadline -- early enough to avoid the disruptions of government services caused by the chronically late budgets of the last few years.

“As much as there is disappointment at not signing a budget on July 1 ... [the governor] is very much satisfied, very pleased with the tenor of the talks, the spirit of cooperation and the hopes of resolving this hopefully within a couple of days into the new fiscal year,” Stutzman said.

Administration officials and lawmakers made the announcement after yet another high-level meeting at which they sought to hammer out a final budget deal but were unable to resolve all of the outstanding issues.

Unresolved questions include government pensions, local government funding and spending for social services and higher education.

In his election campaign and since taking office, the governor has dwelt on the importance of state government doing its job in a businesslike way and getting the annual budget passed and signed by July 1 -- the first day of the fiscal year.

As recently as Friday he said, “I will be staying here because I demand that we get this budget on time.”

Polls show that few things frustrate voters as much as late budgets. They were among the main complaints Californians cited in the recall of former Gov. Gray Davis from office last year.

But political analysts say Schwarzenegger does have some wiggle room. Compared with the last three years, when budgets were one to two months late, getting it done this year within days of the deadline would still likely be viewed as a significant achievement.

“It’s a setback, but it’s not necessarily fatal, particularly if the delay is fairly short,” said Jack Pitney, a professor of government at Claremont McKenna College. “Given past delays, if voters are grading on a curve, it’ll still be in the A range.”

“The longer the delay, the greater the political problem,” Pitney said, adding that the Legislature would shoulder the blame as well.

In fact, the governor could make a good case for blaming the Legislature right now. He delivered his draft budget plans on time in both January and May; reaching middle ground with Democrats is what has proved to be the problem.

But finger-pointing at this stage could lead to the delicate budget negotiations falling apart altogether, adding weeks of delay to the process.

So the administration is striking a conciliatory tone.

The governor had earlier talked about the November elections being the “stick” that would force Democrats to deal in good faith on the budget -- the implication being that he would campaign against lawmakers who held out. But Stutzman said Schwarzenegger at this point has no plans to turn up that kind of political pressure.

“The governor is clearly satisfied there is a process that is going to bring this to resolution pretty quickly,” he said. “If that were to change, what the consequences were to be for November might change.”

A senior aide to the governor, speaking on condition of anonymity, said it still may even be possible to beat the deadline. “I don’t think we’ve given up on that yet,” the official said. “Will we make it? You really don’t know until we have agreements on the bigger areas.”

Lawmakers and other administration officials, however, said Saturday that there was probably not enough time to reach a final agreement, draft the hundreds of pages of legislation that would go along with it and move it through the Legislature in time for the governor to approve it by the start of the new fiscal year.

One legislative leader says that though the framework of a deal could be reached as soon as today, lawmakers are insistent that they have at least a few days to review the bills once they are finally printed.

The biggest sticking point in talks at the moment appears to be the governor’s plan to cut the pensions of state workers. Democrats balked at his proposal to require all new state employees to pay an additional 1% of their salaries into their retirement plans. Under the governor’s plan, that money would be used to repay a $929-million bond to be sold next year to help pay down the deficit.

Democrats have presented their own alternative. It calls for the state to simply not contribute to the retirement funds of new government employees for their first two years on the job. Republicans, however, say that proposal is simply an accounting gimmick that doesn’t produce real savings, leaving future taxpayers to pick up the cost of the bond.

Senate leader John Burton (D-San Francisco) said he was preparing to work until a resolution on that and other issues was reached.

“I plan on not even leaving,” he said after a meeting with the governor Saturday. “I plan on sleeping in my office.”

Along with the pension bond, consensus is proving elusive on other issues as well. Democrats are still not satisfied with a plan the governor worked out with cities and counties. Under that plan, local governments would agree to cuts this year in exchange for support of a constitutional amendment that would protect their share of state revenues in the future.

Democrats say the amendment would lock into the Constitution problematic tax formulas.

Republican lawmakers are holding out for some things of their own as well. They object to more fees on timber harvesting and other industries, for example, and they are calling for repeal of a law that restricts the ability of school districts to hire private firms for noninstructional needs, such as transportation and cafeteria services.

“If it takes one more day, then it takes one more day,” said Assembly Republican Leader Kevin McCarthy (R-Bakersfield). “The governor did everything in his power.”

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Times staff writer Peter Nicholas contributed to this report.