No budget limits, no budget

At the center of this year’s state budget impasse is a heated dispute over what California should do to save itself from drowning in red ink again the next time the economy falters.

Other states have avoided the financial pain California is now suffering by enacting laws that limit spending binges when revenues soar. Lawmakers are heeding Gov. Arnold Schwarzenegger’s call to do the same here -- the governor has said he won’t sign a budget unless they do -- but more than six weeks into the new budget year, there is little consensus on how to go about it.

The stakes are high. Some needs of government are unpredictable, and placing strict formulas on how the state spends its money could ultimately squeeze schools, healthcare services, the prison system and other government programs that polls suggest voters want the state to invest in. But failing to impose more discipline on a Legislature that has shown little aptitude for financial planning won’t help the state shed its distinction for perpetual budget dysfunction.

“California’s politicians have proven time and again that if you give them $1, they will spend $1.05,” said Assemblyman John Benoit (R-Palm Desert).

None of the proposals being debated would do anything to get the state out of this year’s mess. But Democrats, who have defeated past spending restraints in the Legislature and on the ballot, now appear prepared to give.

They are eager to pass new taxes to help close the state’s $15.2-billion shortfall, and are seeking to leverage support for some form of spending restraints in exchange for the GOP votes needed to raise the revenue.

Republican lawmakers, however, are balking at a plan Democrats and the governor are drafting. That proposal, which would bolster the state’s rainy day fund when revenues boom, is expected to be made public Sunday. Republicans have already denounced it, saying it’s full of loopholes that would allow lawmakers to continue to spend at will.

They are holding out for a strict formula written into the state Constitution that would limit how much spending can grow in a year. They unveiled their plan, ACA 19, written by Assembly Republican Leader Mike Villines of Clovis, at a legislative hearing Friday. Democrats spent much of the 3 1/2 -hour meeting tearing it down, saying it would strangle government.

“It seems to me the objective of this proposal is clearly to promote less government,” said Assemblyman Sandre Swanson (D-Alameda). “I don’t think your proposal allows any practical flexibility to deal with real-life crises.”

Assembly Budget Committee Vice Chairman Roger Niello (R-Fair Oaks) argued that the proposed constitutional amendment would do the opposite. He said it would force lawmakers to prioritize spending, preventing them from burdening taxpayers with costly new programs whenever there is a little extra money in the treasury.

He defended the GOP formula, saying it allows for enough spending growth to steadily increase investments in education and healthcare.

The healthcare and education lobbies, however, did not see it that way. They urged lawmakers to reject the proposal.

An analysis by the California Budget Project, which advocates for low-income Californians in the budget process, concluded that the GOP plan would make it impossible for the state to keep funding schools at the current levels approved by voters through Proposition 98.

The nonprofit further said the GOP plan would “ratchet down the state’s ability to support public services” as government spending failed to keep pace with the state economy.

Republican lawmakers argued that the naysayers were basing their criticism of the spending cap on unrealistic revenue scenarios. Democrats responded that the entire GOP plan is unrealistic. And so it went. The plan was ultimately rejected by the Democrats who control the committee.

As both sides retreat to their corners, time to strike a deal is running out. Voters would have to sign off on any spending restraint measure, and the secretary of state’s office has indicated the deadline for getting it on the ballot could pass next week. The governor’s office said repeatedly this week that the failure of lawmakers to reach the ballot deadline would result in a “total meltdown” of budget negotiations.

As the bickering in Sacramento intensified Friday, Schwarzenegger was out of town much of the day as the host of a conference of border governors at Universal City. But the governor said the budget was on his mind.

At a media event, Schwarzenegger said he raised the issue of California’s financial misery with his fellow governors.

“I had a hat go around for each one of them to put some money in for California so I can take it to Sacramento,” he said.

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evan.halper@latimes.com