A Breaking News Report from Gov Schwarzenegger


Video today July 17, 2009

Schools will likely get the promise of an $11 billion paybck, but they’ll be cut beyond what the governor proposed in his first May Revise. Expect the May revise cuts plus an additional $680 million in school cuts.

Gov. Arnold Schwarzenegger and the four legislative leaders may have found a way around their impasse on school funding that has held up budget negotiations for weeks, though talks broke off late Friday night.

An agreement to guarantee that the state would pay back public schools and community colleges $9.3 billion in cuts from the past several years could pave the way to a wider settlement on fixing the $26.3 billion budget deficit, sources said.

Though the Big Five won’t meet again until Sunday night, there was some optimism a deal could be wrapped up by the end of the weekend and readied for a vote next week.

“I think that you can see the smiles on both of our faces because we come out very optimistic today,” said Assembly Speaker Karen Bass, D-Los Angeles, referring to herself and Senate leader Darrell Steinberg, D-Sacramento.

“We had a very good session,” Bass said. “It is premature to say there is a deal. We do not have a deal yet, but we do think things are moving along well.”

The Big Five is as close to a deal as it has been since negotiations began, said Aaron McLear, the governor’s press secretary.

“I don’t want to overplay this, but we’re certainly in a position where we could close this very quickly,” McLear said. “They made a lot of progress today, but they still have issues to work out.”

Budget staff will meet today to draft language that can then be ironed out by the leaders when
they reconvene Sunday.

The Big Five would also have to come to an agreement on the size of the state’s rainy day fund. Democrats have proposed a $400 million fund, while Schwarzenegger is pushing for a minimum of $1 billion.

In arriving at a possible solution on school funding, budget staffers appear to be relying on some budgetary tricks by reaching back into the 2008-09 fiscal year and reconfiguring the base of Proposition 98 — the law that sets out minimum funding for schools. The move would allow officials to shift $1.6 billion of last year’s base funding level into this year’s budget, in effect reducing the amount owed schools from $11 billion to a lower figure the state would be constitutionally obligated to pay back.

“They finessed the issue,” said Bob Blattner, an education consultant who works with legislators on school financing. “It’s a promise to pay.”

A guarantee to pay public schools and community colleges back would be a major victory for the California Teachers Association, the state’s largest teachers union, which had sought a guarantee in writing that not only would the $9.3 billion in recent cuts be repaid but that schools would be made whole after future downturns. Schwarzenegger had resisted writing that commitment into law, saying a change to Proposition 98 must be approved by voters.

The proposed compromise also would be a significant development for Democrats, who otherwise have had to play largely by the governor’s rules in the budget talks. They’ve been unable to persuade Republicans to go along with any tax increases and have had to sign off on a number of agonizing cuts to programs such as children’s health care, Cal Grants for college students and CalWORKs, the state’s welfare-to-work program.

As talks restarted, the effects of California’s fiscal crisis were being felt throughout the state.

Most state agencies, including the Department of Motor Vehicles, were closed Friday as part of the three-day-a-month furloughs ordered by Gov. Arnold Schwarzenegger. Prisons, state hospitals, highway patrol and firefighting agencies remained staffed.

Healthy Families, which offers reduced-cost medical coverage to low-income children, began putting new applicants on a waiting list because of a projected shortfall of at least $90 million. It was the first time the program had done so since it was started 12 years ago.

The key to an agreement, said Sen. Joe Simitian, D-Palo Alto, in an interview, is that lawmakers can avoid suspending Proposition 98 for the second time in five years.

“You begin to wonder if (the minimum guarantee) is worth the paper it’s printed on,” said Simitian, a member of the Senate Education Committee.

Schwarzenegger apparently may be ready to resolve the school funding issue because he could agree to repay schools the $9.3 billion without having to rewrite Proposition 98 to address future shortfalls.

However, it was still not clear late Friday whether the top Republican lawmakers were on board. They met with Schwarzenegger late Friday afternoon, before Democrats joined them.

Whether an agreement reached among the Big Five would carry into wider support among legislators is also unclear.

One Democratic lawmaker, Assemblyman Sandré Swanson, D-Oakland, said he planned to vote against the budget fixes regardless of any agreement, saying cuts to schools go against a pledge he took as a first-time candidate in 2006.

The governor’s proposal to outsource social services and the massive cuts to welfare programs are also “deal breakers,” said Swanson, who lost his chairmanship of the Assembly Labor Committee earlier this year after he voted against a series of budget bills pushed by Assembly Speaker Karen Bass, D-Los Angeles.

“They may have enough votes without mine, but I’m not willing to compromise on these issues,” Swanson said. “One reason we got here is because Republicans said on principle they’re not voting on any new revenues. Well, it’s time for Democrats to stand on principle, too.”

Source:  Mercury News wire


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