Schwarzenegger to veto Democrats’ public transit cuts

Reporting from Sacramento — 

Gov. Arnold Schwarzenegger, taking aim at what remained of a deficit-cutting package drafted by Democrats, said Tuesday he planned to veto $1.1 billion in projected savings realized largely through cuts to public transit.

Democratic lawmakers had approved the measure as part of a package they said would have addressed $4 billion of California’s estimated $20-billion deficit.

Combined with Schwarzenegger’s veto last week of a larger component of the plan, the announcement puts Capitol politicians back at square one on the deficit.

The gridlock has come despite the cuts on the table being among what all sides acknowledged as the easiest budget options. Many of the toughest choices -- how deeply to cut education, health and human services, for instance -- were put off until the summer amid hopes that an economic recovery would lessen the need for those cutbacks.

In a sharply worded letter to top lawmakers, Schwarzenegger chided them for failing to do more faster to address the shortfall.

He also demanded they pass his job-creation package, which includes tax breaks for home buyers, businesses and the green tech sector.

“Californians don’t have months to wait for action by the Legislature,” he wrote.

Senate President Pro Tem Darrell Steinberg (D- Sacramento) struck a strident tone in responding to the “mini-budget impasse” created by the governor’s vetoes.

“We’re just not going to negotiate under a barrel of a gun. And we’re just not going to negotiate by threats and posture,” Steinberg said. “He’s got, whatever, nine months left,” referring to the governor’s status as a lame-duck.

Still, Steinberg signaled he would go back, however grudgingly, to the negotiating table, though he accused Schwarzenegger of being unfocused in his final year in office. “He is sort of at 30,000 feet right now and it’s been a little difficult, frankly, to engage,” he said.

Republican lawmakers, whom majority Democrats were able largely to bypass in writing their budget plan because it did not raise taxes, cheered the governor’s planned vetoes.

The centerpiece of the legislation Schwarzenegger said he would reject Tuesday is a complicated change in the way California taxes gasoline, allowing lawmakers to divert money from mass transit to pay down the deficit.

Schwarzenegger said he would reject the lawmakers’ gasoline tax plan because it differed from the proposal he first made in January. Schwarzenegger’s plan would have lowered gas taxes by 5 cents per gallon. The plan Democrats pushed through the Legislature would keep gas taxes at their current level.

Democratic lawmakers said they doubted oil companies would pass along to consumers the savings projected by the governor.

Instead, the Democratic plan had left some gas tax money in the state budget for public transit. The governor’s plan eliminated it.

“I cannot sign this flawed legislation,” Schwarzenegger wrote.

Last week, the governor vetoed a $2.2-billion deficit reduction bill that would have cut the state payroll by 5%, reduced prison medical expenses and asked the governor to commute prison sentences for undocumented immigrant inmates.

In Tuesday’s letter, the governor pressed lawmakers to rewrite a bill that would ease taxes for Californians who lost their homes in short sales last year.

Schwarzenegger has said he will veto that legislation because it contains penalties for those who abuse tax credits, arguing that current penalties are sufficient. Steinberg promised that lawmakers would “do right” by those who face outsized tax bills after selling homes for a loss.

But Steinberg questioned the governor’s job-creation package, saying tax credits for home buyers and businesses would deepen the state’s deficit. Democrats are moving forward with their own package, he said.

One glimmer of good budget news came Tuesday. The Department of Finance said revenues in February exceeded expectations, the second month in a row that has happened.

For the fiscal year, tax collections have outpaced forecasts by nearly $2 billion, a trend that could help shrink the deficit.

shane.goldmacher@latimes.com