State's budget crisis opens rift between unions and Democrats

Labor wants to offset some cuts with new or higher taxes; legislators don't.

By Shane Goldmacher and Evan Halper

7:06 PM PDT, June 7, 2009

Reporting from Sacramento, California — The Capitol's usual political alliances are being tested by the state's severe financial problems as interest groups scramble to hold onto as much as possible of the state's shrinking coffers.

The relationship between Democratic leaders and some of their labor benefactors has turned particularly frosty: Many of the programs union members rely on for paychecks -- and the unions rely on for dues -- have been slated for deep cuts.

For example, there are pledge forms being passed around to lawmakers by a major labor union that might have attracted takers in budget battles past. The union, the American Federation of State, County and Municipal Employees, wants the legislators to sign statements of support for up to $44 billion in new or higher taxes on the wealthy, oil companies, tobacco and other industries, products and people.

But so far the drive hasn't produced a single signed form, even from the Democrats who normally march into California's budget fights in lock-step with organized labor.

The friction started when the Democrat-dominated Legislature produced a budget in February that raised taxes but also cut programs and included a GOP-driven plan to put the brakes on state spending. A handful of labor groups then spent millions to help defeat the May ballot measures that the budget spawned.

"Many public employee unions, teacher unions [are] thinking that they were thrown under the bus in the last budget," said Assemblyman Charles Calderon (D- Montebello). "So now they're asking themselves: If these Democrats are not going to stand up for us, then what good is it to have them there?"

The union leaders say they are appalled that Democratic leaders are talking openly now about decimating government programs without first making a stand for bigger, broader tax hikes that could substantially offset budget cuts.

"Democrats came to Sacramento to help people," said Marty Hittleman, president of the California Federation of Teachers. "I know they did not go there to destroy government. For some reason, they are unwilling to stand up and say 'This is not what I was elected for.' "

But even some of the most liberal Democrats say some union leaders are ignoring the reality of an angry public, a sour economy and a state government approaching insolvency. Moreover, more taxes would require Republican support in the Legislature, and the minority party has made clear that there will be none.

"We have an economy which is in intensive care, and another round of tax increases . . . would put that patient in cardiac arrest," said Assembly GOP leader Sam Blakeslee of San Luis Obispo.

The Democratic leadership has largely accepted the governor's framing of the budget crisis as one requiring deep cuts, quickly. Any taxes they may push for are expected to be limited.

"Of course there are going to be cuts," said Senate leader Darrell Steinberg (D-Sacramento). "This is the worst drop in revenue since the 1930s. We're going to try to be as surgical as we can in making very difficult decisions, but we will make the decisions."

Sen. Gloria Romero (D-Los Angeles), a veteran lawmaker and former caucus leader, said, "When someone tells us 'No new cuts,' I say, 'Look, don't tell me that.'. . . . There is the sense that we must do what we must do to keep California solvent."

When the Democrats struck their deal with the governor and Republicans to raise some taxes temporarily, they also agreed to put on the ballot the measure to restrain state spending and proposals to borrow billions and divert money away from social services.

The Democrats had just pushed through the first substantial state tax increase in 18 years, and the influential California Teachers Assn. sided with them, spending millions to support two of the ballot measures.

But a quartet of labor heavyweights -- the American Federation of State, County and Municipal Employees, the teachers federation, the California Faculty Assn. and the state council of the Service Employees International Union -- complained that the Democrats had given away the store. The four launched campaigns against parts of the ballot package, putting about $3.5 million into the fight against the spending cap that was the linchpin of the proposals. The measures failed, expanding the state's deficit by $6 billion.

After the election, the relationship between the Democratic leaders and labor deteriorated further. The unions released an analysis of public opinion polls they conducted, concluding: "Voters are frustrated and dismayed at the leadership void in California and clearly want legislators to do their job."

Nothing in the special election results, union leaders said, suggested that Californians preferred deep cuts in government programs to an increase in taxes.

"That is not what the voters said, and it is not the approach that the Democratic leadership should take," said Willie Pelote, political director of the public employees federation.

Indeed, some rank-and-file Democrats are pressing, alongside the unions, for higher taxes. So far, they have been rebuffed.

Gov. Arnold Schwarzenegger's latest proposed budget revisions include the phasing out of Cal Grants, the financial aid the state gives to low-income students of the faculty association and teacher federation members. And state-paid home healthcare services, whose 300,000 workers are largely members of SEIU and the public employees federation, stand to be slashed.

Some accuse the governor of seizing on the rift between Democrats and labor as he tries to dismantle parts of the state's social safety net. Schwarzenegger says he is willing to look at any alternatives that will balance the budget -- except more taxes.

Democrats are working on their own proposal, for release later this month, to close the projected $24-billion deficit. While their cuts are not expected to be as deep as those Schwarzenegger wants, there are certain to be serious reductions in the programs most important to unions.

"There is a tremendous amount of pain ahead for labor and everyone else," said Larry Gerston, a professor of political science at San Jose State University. "We've got all these groups fighting over increasingly scarce resources."

The next step for unions could be going directly to voters. One labor-backed group, the California Tax Reform Assn., has prepared a possible ballot measure to repeal the three corporate tax cuts Democrats agreed to in the last year to get GOP support for the budget.

"It's ready to go," said Lenny Goldberg, the group's executive director.

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