Politics

SACRAMENTO (AP) ― Democrats and Republicans painted starkly different pictures of the negotiations over how to solve California's $15.2 billion budget deficit on Monday, as the state entered the second month of its fiscal year without a spending plan.

The four legislative leaders again failed to compromise on a spending plan after meeting Sunday evening with Gov. Arnold Schwarzenegger.

"We're at an impasse," said Assembly Minority Leader Mike Villines, R-Clovis. "The difficulties right now are very deep, and I'm hoping we can get past them."

Democrats are seeking a combination of spending cuts and $8.2 billion in higher taxes, while Republicans want long-term reforms to the state's budget system and oppose any new taxes.

On that, "nothing has changed since June 15," Villines said.

Assembly Speaker Karen Bass sounded more optimistic about the
progress of the talks.

While Democrats oppose a firm cap on spending increases, Bass said they are willing to consider rewriting Proposition 58, the Schwarzenegger-backed rainy day fund voters created in 2004.

Bass, D-Los Angeles, said it could be strengthened to prevent the governor and lawmakers from easily transferring money out as they do now.

Schwarzenegger has said he will not sign a budget that fails to include structural reforms, which could include a spending cap and rainy day fund.

Democrats were hoping to broker a deal that lets them boost taxes in exchange for reforms that would win over enough Republican votes in both houses to reach the two-thirds majority required to pass a budget. Republicans so far aren't persuaded.

"We fundamentally do not believe in taxes and won't go there," said Senate Minority Leader Dave Cogdill, R-Modesto. "We've not seen any language that would indicate they are serious about budget reform."

The governor has grown frustrated by the delay and said he is worried the state will run out of cash if a deal isn't reached soon.

He increased the pressure last week by signing an executive order that laid off more than 10,000 temporary, part-time and contract workers and could roll back the salaries of thousands more to the federal minimum wage of $6.55 an hour. They would be repaid after a budget was signed.

But the wage rollback seems unlikely to take effect. State Controller John Chiang, who issues employees' paychecks, has questioned Schwarzenegger's legal authority to order the temporary pay cut. On Monday, he repeated his contention that it would take months to reprogram his agency's outdated computers to distribute paychecks based on the federal minimum wage.

At a hearing Monday, Chiang testified that it was unwise for the state to put its workers in financial jeopardy "for a situation that will be resolved in the next two or three weeks."

He has said the state has enough cash to last through September. Nevertheless, he and administration officials have met with Wall Street investment firms to discuss loans that would get the state through until a budget is adopted.

Those loans could cost California hundreds of millions of dollars in additional interest and fees.

The clock is ticking either way. Bass noted that changes to Proposition 58 and a proposal by the governor to raise money by borrowing against future lottery profits require voter approval in November. The deadline to add initiatives to the ballot is Aug. 16.

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