California Budget Heads Toward Deal as Deadline Looms

California’s Democratic-controlled Legislature is set to adopt a $92 billion budget, the largest state spending plan in the U.S., as Republicans threatened to walk out saying they weren’t given enough time to review a flurry of last-minute bills.

Governor Jerry Brown, 74, and his fellow Democrats remained about $200 million apart yesterday in negotiations to cut welfare and other programs for the poor to help close a $15.7 billion deficit, said Senate President Darrell Steinberg.

“A couple of hundred million dollars may seem easy, but they’re not just numbers on paper,” Steinberg said outside his Capitol office a day before the budget deadline. “They’re real lives.”

The cornerstone of the plan is a November ballot initiative being pushed by Brown that would temporarily boost income taxes on top earners to the highest in the nation, and raise state sales levies that already exceed all others. If the measure fails, the budget will be slashed $6 billion, mostly from schools.

The spending plan consists of a package of 11 bills. Democrats said they intend to approve the main budget bills, and any auxiliary bills that aren’t in contention, by the constitutional deadline today, and take up the rest later.

By passing the core budget measures, Steinberg said the Legislature will have met their obligation to adopt a budget on time. A 2010 voter-approved initiative strips lawmakers of their pay for each day they are late.

Simple Majority

That same ballot initiative also lowered the vote threshold to pass a spending plan to a simple majority from two-thirds. The provision makes it possible for Democrats, who hold majorities in both chambers, to pass a budget without any Republican votes.

Republicans boycotted yesterday’s Senate Budget and Fiscal Review Committee hearing, saying they hadn’t been given enough time to review the bills before they were brought up for a vote.

“The people of California deserve to see the majority budget plan before it is enacted,” said Senate Republican Leader Bob Huff of Diamond Bar. “Budgets thrown together in the middle of the night are one of the main reasons why California is facing deficits today.”

Four Republican senators yesterday sent letters to Controller John Chiang and Treasurer Bill Lockyer -- both Democrats -- asking that they officially review the budget proposal and verify that it’s balanced.

Question of Balance

Legislative leaders sued Chiang after he asserted that last year’s budget, while adopted by the deadline, wasn’t balanced, and docked their pay. A court later said he didn’t have the authority to impose his judgment on whether a budget is balanced.

An agreement today would mark only the fifth on-time budget in three decades. That, along with Brown’s support for increased revenue and a “balanced, honest” approach, should be viewed with favor by Standard & Poor’s, said Senator Mark Leno, a San Francisco Democrat who heads the budget committee.

“A number of important factors should positively impact the ratings agencies,” Leno said yesterday in an interview.

The wold’s ninth-biggest economy is rated A- by Standard & Poor’s, six levels below AAA and the lowest of any state. The yield penalty on California issuers relative to top-rated bonds rose as much as 16 percent in the past month, the steepest jump since March, Bloomberg Fair Value data show. S&P raised its outlook to positive in February.

Fewer Hours

Brown’s budget counts on reducing state employee costs by 5 percent, mainly by cutting workers’ hours. While the savings are written into the plan, unions still must agree to the change.

Brown also wants to slice $1.2 billion from health-care for the poor, $1.1 billion from welfare and in-home help for the elderly and disabled, and $500 million from courts.

Democrats in the Legislature built a $544 million rainy day reserve into the budget, about half of what Brown proposed. They would reduce education funding by $330 million by using a different method of calculating how much schools are due and take $250 million more than Brown from tax money that formerly flowed to the state’s now-abolished redevelopment agencies.

Brown spokesman Gil Duran had little to say yesterday about the Democrats’ package except that talks were continuing.

The major sticking point between Democrats and Brown is cuts to the state welfare-to-work program after Legislators and Brown reached a tentative accord on the level of cuts to the state’s program that provides in-home care to senior citizens, Steinberg said.

To contact the reporters on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net; James Nash in Sacramento at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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California Budget Heads Toward Deal as Deadline Looms

California Governor Jerry Brown with his revised budget proposal in Los Angeles. Photograph: Landov

California Governor Jerry Brown with his revised budget proposal in Los Angeles. Photograph: Landov