State Budget Battle Fizzles

The Democrats who control the Legislature have abandoned their effort to add billions of dollars in programs to the governor’s proposed state budget, and are preparing to vote for a spending plan with no new taxes and no extra money for schools.

Shifting their focus to the coming special election fight, the lawmakers are surrendering to Gov. Arnold Schwarzenegger on the major spending issues that have separated the two sides for months. For the first time in years, they are rushing to meet their constitutional deadline for passing a budget today with a viable plan. Democrats fear that holding up the budget -- even for what they argue is the noble cause of trying to restore $3 billion that schools say they are owed -- would hurt them Nov. 8 and drive voters to approve spending controls the governor helped place on the ballot. They said they would try to secure the money by other means.

They say they will vote in favor of a budget that closely resembles the governor’s latest spending plan, issued in May. The strategy shift is an indication of the extent to which the special election, ordered by Schwarzenegger on Monday, already has begun to dominate decision making in the Capitol.

“We are not going to hold up the budget and have a protracted budget battle,” said Assembly Speaker Fabian Nunez (D-Los Angeles). “We want to send the message to voters of this state that we are serious about getting things done.”

A month ago, Nunez called Schwarzenegger’s budget proposal a “sham,” saying the governor “simply doesn’t get it” and is “not listening to the people.”

Several lawmakers said Tuesday that the Democrats changed strategy at the urging of the politically powerful California Teachers Assn. “No such decision was going to be made without them,” said Assemblyman Joe Canciamilla (D-Pittsburg).

The teachers group is gearing up for its own fight against a measure on the fall ballot that could clip the ability of state employee unions to fund political campaigns. The unions are among Democrats’ biggest backers.

The budget that lawmakers will vote on today includes Schwarzenegger’s plan to put $1.3 billion into stalled transportation projects throughout the state. It suspends for two years cost-of-living increases for welfare recipients.

The plan does not include some of the reductions in healthcare and social services that Schwarzenegger proposed. Those include cuts in the wages of workers who provide in-home care for the elderly and disabled, and a plan to move some recipients of state-subsidized medical care into HMOs. The restoration of these services would cost the state $208 million this year but tens of millions more beginning in the 2006-2007 fiscal year. The concessions Democrats are making have taken Republicans by surprise, because the special election had been widely anticipated and Democrats had given no sign of a willingness to compromise on issues important to the governor.

The ballot is expected to have eight initiatives, the centerpiece of which is the spending cap. That measure would limit the growth of the state budget and give the governor authority to make midyear cuts if the budget fell out of balance. Two other measures embraced by Schwarzenegger would lengthen the time it takes teachers to earn tenure and change the way California’s voting districts are determined.

Meanwhile, GOP lawmakers -- whose support is needed for a budget to be approved -- say they will withhold their votes until the Democrats make clear their education agenda for the rest of the legislative session. Senate leader Don Perata (D-Oakland) has said those plans may include putting on the November ballot a constitutional amendment that would raise taxes on wealthy Californians to generate money for schools.

In addition to the budget vote today, the Assembly will vote on a bill to levy that tax through the Legislature, but it does not have the needed Republican support.

“We want to see a total package,” said Senate Republican Leader Dick Ackerman (R-Irvine). “We don’t want to do this piecemeal.”

Some Republicans, however, said privately that they would vote for the budget if the governor gave it his blessing.

At a press briefing Tuesday, Finance Director Tom Campbell outlined some issues that concern the administration, such as the Democrats’ plan to put off paying $600 million the state owes local governments. Campbell said there is an additional $535 million of borrowing in the Democratic plan that the administration does not support.

But Campbell said those issues were “not insurmountable.”

Democrats say the budget now reflects Schwarzenegger’s priorities more than their own. “With very few changes, this is the governor’s budget,” Perata said.

The new fiscal year begins July 1. If the state budget has not been approved by then, the state will begin withholding payments to schools and vendors.

By far the biggest concession the Democrats are making -- at least for now -- is on education spending. They have scrapped their demand that the governor increase his schools budget by as much as $3 billion.

School groups agreed to cuts last year in exchange for the governor’s commitment to restore the money beginning next month. Facing a $6-billion budget shortfall, the governor opted not to restore the money in his 2005-2006 budget. Instead, his budget would provide only a modest increase in per-student spending.

Now, Democratic strategists and school groups fear that holding up the budget over that issue -- just as the special election campaign gets underway -- could backfire, fueling Schwarzenegger’s charge that the Legislature is dysfunctional. The governor already is campaigning for the measures he endorsed, which could dilute the Legislature’s power.

School groups say passage of the spending cap would be more harmful to them than losing the $3 billion this year. The measure would remove some education spending obligations from state law, potentially costing schools billions more. It would also give the governor the authority to unilaterally cut education any time the state budget falls out of balance.

Some Democrats, however, expressed surprise at the sudden about-face of their own caucus.

“Most of us were surprised there was such a quick change of heart,” said Canciamilla. “If this special election wasn’t going on, I don’t think we would be folding so quick.”

Asked about the teachers union’s involvement in the Democrats’ turnaround, union president Barbara Kerr would say only: “There’s a lot of talk. Bottom line is, we want long-range, stable financing for education.”

Kerr declined to discuss the strategy for getting that outside the Legislature’s budget process, in which Democrats have little leverage to get the Republican votes needed for a tax increase or to put a measure for a tax increase on the November ballot.

“We’re going to talk about a lot of options,” she said.