As legislative leaders Tuesday moved toward a deal that could wipe out the state's $42-billion deficit with temporary tax hikes on retail sales, cars, gasoline and personal income, Gov. Arnold Schwarzenegger threatened to lay off as many as 10,000 state employees if a new budget is not passed this week.
State workers will begin receiving pink slips Friday, absent a fiscal agreement by then, administration officials said. The layoff process generally takes about six months for state employees due to union rules and other considerations, such as bureaucratic procedures the state must follow. The move would save the state $750 million annually if the jobs are eliminated by July 1, according to Aaron McLear, Schwarzenegger's spokesman.
"This is not a [negotiating] tactic," McLear said. "This is simply out of necessity. The state is running out of money. The governor has very few options at his disposal that he can unilaterally use to cut back on state spending."
While legislative leaders and the governor said they have not agreed on a fiscal plan, Senate President Pro Tem Darrell Steinberg (D-Sacramento) said negotiations are just about complete and a vote will be held in the Senate by Friday. He and Assembly Speaker Karen Bass (D-Los Angeles) made PowerPoint presentations to their caucuses that outlined the major elements of the plan they expect to bring to the Legislature floor.
They expressed confidence that the plan would ultimately get at least three GOP votes in the Senate and three in the Assembly, the minimum needed for passage, as well as Schwarzenegger's signature.
Republican leaders, however, reiterated that no deal had been struck.
"There is no agreement on anything," said Jennifer Gibbons, a spokeswoman for Assembly Republicans.
The plan Democratic leaders laid out in confidential meetings with rank-and-file lawmakers would temporarily increase sales taxes by one cent, bringing the overall sales tax rate in Los Angeles County to 9.75%, according to legislators who were present. Motorists would pay 12 cents a gallon more for gasoline.
Vehicle license fees would nearly double, jumping from the current rate of 0.65% to 1.15% of the value of a car or truck. Such a hike would represent a major turnabout for Schwarzenegger: He rode a tide of anger against steep vehicle license fees to the governor's office in 2003, and his first official act in Sacramento was to slash those fees.
The plan also includes a temporary personal income tax surcharge. The surcharge would be a quarter-percent of taxes owed.
All of the taxes would be in place for at least two years. They would remain in effect for five years if lawmakers agreed to put tough new spending restraints, demanded by Republicans, on the ballot and if voters approved them. The spending cap, limiting how much state government could grow, would appear on the ballot this year along with other budget-related measures.
Steinberg, who declined to confirm the details of the potential budget plan, reiterated that there would be a vote this week.
"We want to do everything we can to avert those layoff notices," he said. "We are going to have a vote by the end of this week and we are going to get this done."
The layoff threat comes as the governor is forcing most state workers to take off two Fridays per month without pay -- the equivalent of an approximately 9% pay cut. The first mandatory day off for state workers was last Friday.
McLear said that about 20,000 workers could receive layoff notices, though only half as many positions would ultimately be eliminated. Many of the job cuts would occur through layoffs, but some could take place through attrition.
Administration officials said the extra notices must be sent because the state might not be able to legally lay off some of the workers who get them; other employees would be moved into other state jobs. The layoffs would affect mostly workers with the least seniority.
Yvonne Walker, president of the Service Employees International Union Local 1000, which represents 95,000 state employees, called the layoff announcement a ploy designed to put pressure on lawmakers with whom Schwarzenegger is negotiating behind closed doors. Her union is in the midst of negotiations with the state over the worker furloughs.
"The governor's announcement today is just another mechanism to instill fear and uncertainty in our membership, so he can get in secret what he can't get in an open public forum," she said in a statement.
Administration officials are asking state employee unions to give up two paid holidays a year. McLear said the layoffs might not be necessary if unions make other concessions to save the same sum of money.
The layoffs could be difficult to achieve in some respects, said Jason Dickerson, an expert in state government at the nonpartisan Legislative Analyst's Office.
Many of the affected employees would be those at state prisons. Dickerson said it would be impossible to eliminate many of those jobs without implementing policies to reduce the inmate and parole population -- a development unlikely to occur by July -- or without allowing "major compromises of health and safety for prison staff and inmates."
McLear said no employees would initially be exempt from the pink slips, although that could change.
Late last month, Schwarzenegger told reporters he was resisting the idea of firing anyone. He presented the twice-monthly furloughs as a measure of last resort, "where everyone takes a little haircut rather than laying people off."
"That's the last thing I want to do, is lay people off," he said. "I love our state employees. They are very dedicated individuals, they are doing incredible work and we owe them a lot because they make the state run."