California Legislature finally approves new budget
Reporting from Sacramento -- Voting at dawn to end a three-month impasse, the California Legislature passed a budget package that addresses the state's massive deficit with billions of dollars in new taxes and program cuts after Democrats and Gov. Arnold Schwarzenegger reached a deal with a GOP holdout.
Sen. Abel Maldonado of Santa Maria provided the final Republican vote needed to pass a spending plan, which includes more than $12 billion in tax hikes. In exchange, Democrats agreed to rewrite election rules that Maldonado said had allowed the Capitol to become paralyzed by partisanship, leading the state to the brink of financial ruin.
The plan came together after midnight, following seven unsuccessful votes held throughout the day and into the night in the Capitol, which Sen. President Pro Tem Darrell Steinberg (D-Sacramento) had locked down Tuesday, barring senators from leaving. California's financial state had deteriorated to the point where Schwarzenegger ordered layoffs of 10,000 state workers and the suspension of hundreds of public-works projects. Early income-tax refunds have been delayed, and public anger has grown.
"I'm very relieved for the people of California," Steinberg said. "There's not a lot of good news to come out of a $41-billion budget deficit, except that we in fact solved it."
The final plan includes most of the framework of the original budget compromise from Democratic and Republican leaders. There are billions of dollars in cuts to schools, healthcare institutions, higher education and programs for the poor. If signed by Schwarzenegger, who helped devise the package, it also would raise personal income taxes and the state sales tax, although a 12-cent per-gallon increase in gasoline taxes was eliminated in the final hours. The gas tax would be replaced with federal economic stimulus money.
"This is a very difficult budget, but we have turned this crisis into an opportunity to make real, lasting reforms for California," Schwarzenegger said in a statement. He has long been a proponent of the election-law changes included in the final package. "Some special interests may not like this budget -- but like I always say, what's good for the people is not always good for special interests."
Schwarzenegger, who was initially swept into office as an anti-tax crusader, has come under attack from other Republicans for embracing tax hikes to solve the state's fiscal crisis. But despite intense lobbying by the governor, Senate Republicans had continued to hold out.
Soon after the spending plan passed, Schwarzenegger stepped outside his office and dismantled a debt clock he had installed that displayed how much money the state was losing each day the state failed to take action on the deficit.
Democrats initially said Maldonado's call for "open" primaries, in which voters could cross party lines and candidates of all parties would compete in the same primary, followed by a runoff of the top two vote-getters, was too substantial to be pushed through in a budget deal. But Maldonado said the current budget stalemate proved that California could not return to fiscal sanity without fundamental changes in the way it elects its representatives.
"Without an open primary, we're going to be here again and again and again, voting on budgets," he told reporters. "This system is broken and we need to reform it."
Modeled on election rules in Washington state, the change -- if approved by California's voters next year -- would undermine the influence of political parties. It was unpopular with Democrats, but their leaders pressed them to accept it as the price of ending the political logjam.
"My caucus understands we have to do some things we don't like," said Assembly Speaker Karen Bass (D-Los Angeles).
Wednesday had begun in uncertainty, with Dennis Hollingsworth of Murrieta elected as the new Republican leader in the state Senate shortly after a midnight coup unseated Dave Cogdill of Modesto. Hollingsworth promptly insisted that months of negotiations over how to close California's deficit budget talks begin anew and lawmakers abandon the sales, income and gas taxes hikes that were part of the fiscal package Cogdill helped negotiate.
"We should reopen negotiations and we should pass a no-tax budget," Hollingsworth said. "The majority of the Senate Republican caucus said we want to stand for a no-tax budget."
But they ultimately marginalized him and the 10 GOP senators who had already ruled out any new taxes. Democrats and the governor refocused their efforts away from the caucus leadership and on the small group of GOP dissidents who signaled they were prepared to vote for their budget package. Cogdill remained in support of it, as did Sen. Roy Ashburn of Bakersfield.
The Senate convened every few hours Wednesday, but the debate on the chamber floor was unproductive. Democrats read letters from constituents beseeching them to pass the budget so state services could resume. Republicans parried with correspondence from their backers decrying the imposition of higher taxes on already struggling families.
Behind the scenes, negotiators stayed focused on Maldonado and GOP Sen. Dave Cox of Fair Oaks, both of whom had indicated they might be persuaded to cross the aisle and vote with Democrats to pass the budget. Legislative leaders and Schwarzenegger's aides pored over wish lists from both senators.
After lunching on salmon and swordfish with Schwarzenegger at an Italian restaurant a few blocks from the Capitol, Maldonado emerged enthusiastic.
"The governor is on board with my constitutional amendments," Maldonado said, referring to his request that state election law be changed to help moderate politicians such as him and to penalize lawmakers when the state's budget is late.
"If everybody is happy with the drafts, we'll have a budget for the state of California," he said.
Maldonado's proposal did not go down well with many Democrats. Many lawmakers in both parties hold safe seats that would become competitive if Maldonado's request were enacted.
Others said they objected to rewriting California's fundamental rules of democracy in the middle of the night, all to secure a vote to keep the state from financial ruin. They also accused Maldonado, who is in his last term in the Senate, of trying to leverage his budget vote to make a future statewide run easier.
"I'm not here to worry about Abel's political future," said Sen. Gloria Romero (D-Los Angeles).
Maldonado denied such a motive, and the final version appeared to have little use for his aspirations for statewide office in 2010, because it would not take effect until 2012.
Democrats remained dubious.
"I'm open to discussion on the merits of the open primary," said Sen. Joe Simitian (D-Palo Alto). "But I'm hard-pressed to understand what on earth it has to do with solving the state budget deficit."
Sen. Denise Moreno Ducheny (D-San Diego) said Maldonado's suggestion that legislators' pay be docked whenever the state budget was not on time was "particularly offensive" and could give wealthy legislators inappropriate leverage in negotiations.
"You could have rich people telling everyone else, 'Vote now if you want to feed your family.' " Ducheny said. "I think it's unethical . . . to tie your pay to your vote."
Maldonado ultimately agreed to drop that measure out of the package. This morning, Democrats agreed to another provision pushed by Maldonado that would keep legislators from getting pay raises in years when the state ran a budget deficit.
Just before 5 a.m., the Senate approved the open-primary measure. Several Democrats were so resistant to the notion that the Senate had to recess while they were coaxed into giving their support. Near tears, Romero called it "a disgusting process" and "not good government" as she changed her vote to yes.
The sun had risen when the state Assembly passed the tax bill at 6:30 a.m. Assembly GOP leader Mike Villines of Clovis, Roger Niello of Sacramento and Anthony Adams of Hesperia provided the three GOP votes to put the measure over the top.
"Mark our words: There's not going to be any more taxes from this body," Villines said.
Dissenting Republicans -- who have been warning for years that California was spending recklessly -- told their colleagues that this budget also would develop holes.
The deal with Maldonado emerged Wednesday after negotiations with Cox deteriorated. Schwarzenegger and Democrats never agreed to Cox's call to postpone enactment of California's landmark law limiting greenhouse-gas emissions.
That law, which won Schwarzenegger international acclaim, is one of the governor's proudest achievements. But many business groups in California complain that it would be expensive to implement.
Democrats also did not budge on other Cox demands: to give employers more leeway in scheduling meal and rest breaks for their workers, and his insistence that legislators reduce some of the $14.4 billion in taxes contained in the budget package. Maldonado, however, incorporated that latter issue into his demand, and Democrats stripped out the gas taxes, worth about $2 billion.
The final version of the plan would raise the state sales tax by 1% and nearly double the vehicle license fee, to 1.15%. It would also reduce the dependent credit Californians are allowed to claim on their taxes. The package would increase personal income tax rates by 0.25%.
"It's just plain wrong," Hollingsworth said just before the vote.
Ashburn took to the floor to recall Ronald Reagan's decision to raise taxes in 1967 as California governor. "As president of the United States, my hero, my role model, the person who I have looked at for inspiration, raised taxes three times," Ashburn said.
He said his fellow GOP senators had failed to understand the difference between being a politician and being an elected official.
"You know this deficit cannot be solved by cuts alone," he told them as they closed their eyes or looked away. "What would Ronald Reagan do? Ronald Reagan would vote yes."
After his speech, Democratic senators came over and hugged Ashburn, who had negotiated $100 million in tax credits to help home builders and tax breaks for horse-racing tracks.
All the taxes in the budget package would last for two years, but they would be extended another two years if voters approve a permanent spending cap that would be placed on the May 19 ballot as part of the complex deal worked out with Republican leaders over several months. That spending cap would prevent future legislators from hiking state spending when California's treasury is flush and instead deposit that money into a giant rainy-day fund for unexpected deficits. Only when that reserve exceeded an eighth of the state's revenues could legislators dip into it for other purposes.
The open-primary measure would go on the June 2010 ballot, giving opponents plenty of time to work up opposition. The rules would apply not only to state legislators but also to members of Congress, who may tap their ample war chests to defeat it.
Sen. Mark Leno (D-San Francisco) predicted: "It is going to get killed for sport."
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