Budget Promises Feel Like “Crying Wolf” Tale

Meeting scheduled with Big Five Monday

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AP

The state budget is beginning to play out like the children's fable "The Boy Who Cried Wolf." 

Every other day, someone is telling us that a deal is imminent only to be strung along for another day or week depending on who is making the promise.

The latest wolfcry came over the weekend, with a near promise that a deal could be made Sunday night during a meeting with the Big Five.

In the end, the meeting didn't even happen, thus making zero progress.

Gov. Arnold Schwarzenegger is blaming state Assembly Speaker Karen Bass.  But she says it's his fault the meeting didn't happen.

The "Big Five" group consists of the top four legislative leaders, plus the governor.  It's up to them to get a budget deal hammered out before it goes to lawmakers for a vote.

Now we are told the group will meet Monday starting at 11 a.m. and once again both sides say they "will" have a deal and soon.

The group reported "huge progress" late Friday following talks in the governor's office.

Saturday, staff members tried to work out legal language that could resolve the remaining issues.

We aren't sure what really happened Sunday. 

Schwarzenegger and legislative leaders remain at odds over how to close California's $26.3 billion budget shortfall.

Even when a deal is made, that does not mean the budget is complete. It still has to be approved by state lawmakers.

Lack of a budget agreement and a drop in state revenue has forced California to issue IOUs to cover bills from thousands of state vendors.

Remaining pitfalls include how much money to borrow from local governments, whether to guarantee that schools will be repaid money they lose during poor economic times and how much money to save for future budget emergencies.
   
This was not the first time this week that word of a "deal" has been batted around in Sacramento. Schwarzenegger nearly promised one on Wednesday.

President Pro Tem Darrell Steinberg, D-Sacramento, and state Assembly Speaker Karen Bass, D-Los Angeles, said schools are expected to be among the hardest hit when the deficit is solved, and they want to ensure that they are repaid the money they are owed after the downturn. Democrats want a written guarantee the funds will be repaid but they said Schwarzenegger wanted to offer his word instead.

Aaron McLear, a spokesman for Schwarzenegger, said the governor was prepared to sign legislation guaranteeing the school funding but would not agree to Democrats' demands to revise the state constitution to do so.

"Democrats want to slip in a constitutional change without the vote of the people," McLear said.

California already has a budget for the fiscal year that began July 1, thanks to an unusual midyear session in February. But the recession has clobbered the state's economy, putting its budget out of balance within weeks.

The shortfall has grown to more than a quarter of the state's general fund, which pays for daily expenses.

As tax revenue has plunged, the state has begun issuing IOUs to state contractors, a practice it may have to expand to government workers if a balanced budget isn't in place by late August. Contributions to the state pension funds also may be in jeopardy.

Lawmakers said they were aware of the frustrations over their inability to strike a deal.

"People say, 'Why does it take so much time?"' Steinberg said. "We understand the question and the concern. Every number represents a family. Every number represents a child or an elderly person. And you know we're going to get this done, but it is worth fighting for those people."

Schwarzenegger and the Republican leaders of the Assembly and Senate say they will not increase taxes, a point the governor has been making in a commercial that began airing last week.

That means he and lawmakers must close the gap with spending cuts and other measures, which could include accelerating income tax collections, borrowing tax money from city and county governments and shifting money between existing government accounts.

The outstanding issues include funding for education and health and human services, the size of any reserve fund and whether California should raid local government accounts.

The state's credit rating continues to sink as lawmakers try to find common ground.

Last Tuesday, Moody's Investor Services downgraded California bonds to near-junk status, from A2 to Baa1, and placed the state's credit rating on watch for possible further reductions. The credit rating agency said the budget deadlock had put constitutionally required payments to bond holders at risk.

The administration also notified state employee unions that the state would cut 2,000 jobs on top of 4,600 layoff notices issued previously.

Schwarzenegger said he wants to avoid a budget-balancing plan that addresses only the state's current fiscal problems. He instead wants to begin streamlining government and weeding out waste and abuse.

Democrats have agreed to allow the governor to study whether California should privatize its welfare eligibility system, as other states have done. Currently, counties determine who is eligible for welfare.

Copyright AP - Associated Press
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