budget

The state simply does not have enough money in our bank accounts to pay our bills. That means we will need to borrow a bunch of money. Bloomberg:

Jan. 24 (Bloomberg) -- California may need to borrow as much as $9 billion later this year to pay bills, as the most populous U.S. state faces its biggest cash shortage since 2003, a budget official said.

Governor Arnold Schwarzenegger's finance office estimates the state will need to sell $9 billion of short-term notes in September to cover cash needs for the fiscal year that begins July 1. That compares with $7 billion borrowed in November for this year's operations.

The cash crunch springs from slowing revenue growth over the last 12 months following the worst housing market slump in 16 years. Schwarzenegger last year saw a budget surplus transformed into a $14 billion deficit. Fitch Ratings has warned that California's credit ratings on $49 billion of debt are in danger because of the cash shortage.

The worse our credit ratings, the more expensive it is for us to borrow, just like any other borrower. This is somewhat routine for the state, but it is a jarring number all the same.

The governor has finally come around to reality. Reforming California's school system will require a huge investment in our children's future and we simply do not have the funds to do that this year. Arnold said this and more in an interview with the LAT editorial board.

But he also talked about investing more in some of the same government programs he once complained were bloated and inefficient.

The message has ceased to be that schools can do more with less.

Now, he said, properly reforming the state's education system could come with a hefty price tag.

Because of the need for funds, Schwarzenegger said, he would put off his plans for an ambitious overhaul of the state educational system until more money is available.

"We have to analyze and bring everyone in the education community together and look at all the reforms and look at if that means we need extra money to do all those things," the governor said.

"To say: 'The funding we leave off the table completely . . . because we don't have any money, but we want to do those reforms,' that is not the way it works."

He is sounding all the right notes at the moment with regards to his plans for his "Year of Education". The same cannot be said of his approach to the budget. He has already lined up the schools as a target for huge cuts.

Here is a clear sign that the speculation about Arnold's intentions in proposing a grossly unacceptable budget has some merit. He told the SacBee that he does not expect that they actually close the 48 parks he had called to close in his budget.

Gov. Arnold Schwarzenegger said Wednesday he proposed closing 48 state parks to "rattle the cage" at the Capitol, but fully expects lawmakers to come forward with alternatives -- including higher fees -- to keep parks open.

"The budget is always a proposal ... There's the reality, and the reality will rattle the cage," Schwarzenegger said during a meeting Wednesday on a wide range of issues with the Bee's editorial board.

Last week the governor released a $101 billion general fund spending plan that was balanced largely through government spending reductions. Closing 48 state parks would eliminate 136 positions and help the parks department save 8.9 percent of its budget -- or $13.3 million.

That is $13.3 million out of a $15 billion budget deficit. This was a very high profile proposal, with little fiscal gain, designed to fire up people. It worked.

Current analysis suggests that increasing fees will drive down attendance exacerbating the problem, not solving it.

The governor continues to maintain his high approval ratings according to a new LAT poll. While the voters do not approve of his approach to the budget crisis, they are blaming the legislature rather than the governor for it. They still view him as the outsider shaking things up, when he has been anything but when it comes to this budget. In general, voters have a gloomy outlook on the state.

Interestingly, there are some strong parallels to what is going on now and what happened in early 2005.

Mark Baldassare, president of the Public Policy Institute of California, notes that voters remained pleased with Schwarzenegger in the weeks after he unveiled those plans -- much as they do today, following the release of his tough budget blueprint. In 2005 it was months later, after the details sank in and opponents had organized their campaign against the governor, that Schwarzenegger's approval rating sank to 37%.

"We're following the same pattern that we did in January of 2005," Baldassare said. "When he rolled out his plans, they were surprising to a lot of people and not what they wanted, but they didn't initially take it out on him. As he started getting attacked by teachers and interest groups, his numbers fell."

The parallels are so strong that his approach to the budget is perplexing. The governor seemed to learn some lessons in 2006, but appears to have regressed again. It's bizarre and it is what is fueling the this is all a ruse to drum up support for tax increases Capitol analysis.

The non-partisan Legislative Analyst, known as the "budget nun" has reinforced what I and most other progressives have been saying: Arnold's budget is a terrible proposal and the solution to our budget deficit is to increase revenue. LAT:

The state's chief budget analyst warned Monday that Gov. Arnold Schwarzenegger's proposals for closing a $14.5-billion budget gap fail to properly prioritize how the state should spend its money, use questionable accounting methods and would be unnecessarily disruptive to schools and community colleges.

Schools in particular need stable funding levels. They cannot easily expand or contract their budgets. Teachers must be hired in advance, supplies must be ordered. That is why Prop. 98 was passed in the first place, insulating them from the ups and downs of our state's finances.

Legislative Analyst Elizabeth G. Hill, whom Democratic and Republican legislators look to for unbiased advice on fiscal issues, is particularly critical of the governor's plan to spare almost no agency or program in calling for state spending to be cut immediately by 10%.

"It reflects little effort to prioritize and determine which state programs provide essential services or are most critical for California's future," Hill wrote in a report released Monday morning. She also said the proposed spending plan cuts too deeply into state services, and she called on the Legislature to offset some of the governor's suggested reductions by raising fees and taxes or by scaling back existing tax breaks.

California has a revenue problem. Our state bonds are being downgraded, making it more expensive if not impossible to borrow our way out of this problem.

Soon after Hill released her report, a major bond rating agency put the state on notice that it was at risk of a downgrade. Fitch Ratings, expressing concern that the Legislature would balk at the steep cuts advocated by the governor, said failure to take action to balance the budget soon could lead to a downgrade of California's rating on approximately $43 billion of outstanding debt.

Administration spokesman H.D. Palmer said the Fitch warning "is as clear a statement as I have seen that there will be consequences for inaction."

If the governor had actually chosen a responsible path, instead of direct confrontation with the Democratic controlled legislature there would not be these fears. Instead he picked the least acceptable path and set us on a path for major conflict not resolution. That is all on the governor.

George Skelton spends much of his column today rejecting the comparison Arnold has been trying to make between himself and FDR, while I wholeheartedly agree with Skelton on the preposterousness of the comparison, I would like to focus on the elected officials who match up more closely with our governor. LAT:

The historical figure that Schwarzenegger should be trying to emulate is Ronald Reagan, a fiscal conservative but pragmatist.

I know, I know, but bear with Skelton.

To plug a huge deficit his first year as governor in 1967, Reagan raised taxes by a then-record $1 billion. He never had to worry about red ink again. Back then, the total budget was only $5 billion. The budget Schwarzenegger just proposed hit $141 billion, even with 10% across-the-board cuts.

We are only short about $15 billion, way less of a percentage of the total budget than what Reagan increased revenue by during his tenure. There are other Republicans that Arnold should be comparing himself to.

A more recent role model for Schwarzenegger should be his political mentor, Pete Wilson. In 1991, the new governor faced a $14-billion hole in a $43-billion general fund. (Schwarzenegger's proposed general fund is $101 billion.)

Wilson raised taxes by a staggering $7 billion -- on income, sales, cars, liquor, candy. Name it. Then he filled the rest of the gap with cuts and magicians' tools.

Schwarzenegger's draconian plan "is a wake-up call for the public," says Assembly Budget Committee Chairman John Laird (D-Santa Cruz). "This is reality. If you don't like it, what's your alternative?"

The alternative is raising taxes, because the cuts are flatly unacceptable.

Pitney says: "I don't think taxes are avoidable."

Schwarzenegger still thinks they are. Or so he says. I believe him -- believe that he's living in denial.

The governor should think hard about who he is and how he wants to be remembered. I doubt it's reflected in the budget that bears little resemblance to the statesmanlike policies of Reagan and Wilson -- let alone FDR's New Deal.

We shall see if the insider calculation that Arnold is doing this just to raise support for taxes or not is true. In general, I think Skelton has this right. Arnold rarely thinks three steps ahead, so it is hard to believe that he has planned this out as a major scheme, then again I don't really believe he wants to drown the government in a bathtub. It just doesn't make good photo-ops.

The headline on the AP story reads "Schwarzenegger is facing the kind of crisis that ruined Davis". There is a reason for that. Arnold never actually fulfilled his campaign promises, now we are right back where we started.

Arnold Schwarzenegger stormed into office during California's last budget crisis, promising to "end the crazy deficit spending" so the state would never go over the financial cliff again.

But four years later, California is back in the same spot.

The cooling economy has opened up a projected $14.5 billion deficit over the next 18 months, and the governor proposed this week to cut school spending, release 22,000 prisoners early and shut dozens of state parks.

The irony is rich: He is facing a repeat of the financial crisis that undid Democratic Gov. Gray Davis, the man Schwarzenegger ousted in a turbulent recall election.

The question is: will Arnold actually take this opportunity to make good on his campaign promises? His previous actions have only exacerbated the situation.

Far from solving California's systemic budget problems, Schwarzenegger has taken several actions that have made them worse. Just like Davis, Schwarzenegger cut taxes but not spending, which has risen 30 percent since he took office. That ensured that when tax revenue tapered off, the budget gap would reappear.

The latest crisis came on so fast that California is in danger of running out of cash this year. Schwarzenegger has ordered more borrowing — the sale of $3.3 billion in bonds — to make sure the state can pay its bills.

Arnold opened up the gubernatorial wallet and pulled out the state's credit card. I guess he duct taped it back together.

The boxes were never blown up. Reform was not accomplished. The result is deja vu. It is like 2004/05 all over again. Schwarzenegger is proposing massive budget cuts, power grabs and talking like a partisan Republican again.

His true colors are showing again. They have been hiding for a few years.

Meanwhile, they are starting to tally the real world impact of the budget cuts the governor is proposing. It is staggering. LAT:

Facing the worst fiscal crisis of his tenure, Gov. Arnold Schwarzenegger today proposed a $141-billion spending plan that would reduce health care programs for the poor, close 48 state parks or beaches, release tens of thousands of nonviolent inmates early and make substantial changes in almost every other area of the state's budget.

At the same time, he proposed expanding the state's debt load by more than $40 billion to finance more construction at public schools, colleges and other major institutions.

Schizophrenic no? Let's chop billions from classrooms so they can't buy more books or have enough teachers to teach, but let's borrow billions, driving up our future deficit issues to build new classrooms. Take from one hand and give it to the other. The construction companies get a little too.

Schwarzenegger proposed reducing education spending by $4.4 billion, $400 million of which would be trimmed from money schools had been promised this year. The reductions target special education classes, child nutrition programs, class-size reduction efforts, transportation and charter schools. Schools would receive 9% less next year than they would otherwise be entitled to under the constitutional guarantee for education funding, which the governor proposed suspending.

They are talking about cutting the minimum guaranteed money schools receive under Prop. 98. This will be vigorously opposed by the teachers. Meanwhile those in the Capitol are getting really cynical. Sounds to me like they are actually trusting Arnold to come to reality. I wouldn't take that bet.

Some in the Capitol are already dismissing the proposed deep cuts as a ruse -- an attempt to stir up so much public demand for a tax hike that the governor ultimately will be able to break his pledge not to take that route. The governor disputed any such idea, saying: "I will not go back and ask [voters] for any tax increases. They deserve better than that."

They do deserve better than this short sided plan to slash the budget. What they deserve is comprehensive reform. What they deserve is not the stop-gap measures they have gotten in previous years. What they deserve is a governor who has the political courage to invest his political capitol in getting that done.

If anyone still had any doubts about Arnold's party affiliation, yesterday's State of the State address should have erased them. Arnold is a Republican. His solution to a budget crisis is to slash spending and grab more power for himself. It is that simple.

He refuses to examine the reasons why we have found ourselves staring at a $14 million deficit. Instead, he has gone back to his failed ideas from 2005. LAT:

Returning to policies he advanced without success early in his tenure, Gov. Arnold Schwarzenegger called Tuesday for state government to permanently rein in spending and vowed not to raise taxes next year -- even as he prepared a budget that would increase insurance fees for millions of property owners.

Schwarzenegger, facing a $14-billion deficit, said in his annual State of the State address that he would propose a "difficult" budget Thursday that would hurt many groups, such as AIDS patients, the poor and the elderly. He did not mention that he would also try to raise money for firefighting efforts through a proposal, a copy of which was obtained by The Times, to collect a surcharge from renters, homeowners and business owners who buy property insurance.

Perhaps he has finally learned one lesson: don't attack firefighters in California.

But back to the issue at hand. The state has a huge budget deficit. Our governor has decided to side with the Republicans who want to drown the government in the bathtub. The result of their policies would be catastrophic for hundreds of thousands of Californians. Children would go without health insurance, elderly without assistance and schools without books. For years, California has been tightening up it's budgetary belt. There is just nothing to give anymore.

The Democrats panned the idea.

"The governor is willing to sell us short," Senate President Pro Tem Don Perata (D-Oakland) said immediately after the speech. "He is selling us on the excellence of mediocrity. Advocating automatic cuts, but failing to establish the priorities and how to fund them, is political expediency at its best and political leadership at its worst."

The governor does not appear to be charting any sort of middle of the road path on what is a very stark partisan divide on budgeting. He is simply siding with his fellow Republicans and that is not exactly the way to get things done in the legislature. Arnold already tried this concept directly with the voters and it failed miserably. The political calculation here makes about as much sense as the policy concepts.

Arnold refuses to take a comprehensive look at the problems that have created our budget deficit and now appears to be pushing what essentially amounts to Prop. 76. It is a power grab, short and simple. The voters rejected it overwhelmingly in 2005, with 62.4% voting NO. It was a bad idea to give the governor more power over the budget then and it is still a bad idea now. SacBee:

Heading into a week in which he's expected to deliver grim news about the state's fiscal health, Gov. Arnold Schwarzenegger is also preparing to propose changes to the budgeting process.

The Republican governor will offer a "budget reform" plan when he outlines his goals in his State of the State address Tuesday. Such a proposal, if successful, would likely give the executive office more authority in making cuts even after the Legislature has passed an annual spending plan.

When Arnold talks about budget reforms, he means being able to cut the budget whenever he feels like it. Meanwhile Nunez has some ideas of his own.

A spokesman for Assembly Speaker Fabian Núñez said lawmakers will have to wait to see what the governor proposes. The Democratic leader from Los Angeles has suggested changing the minimum vote for passing a budget, from the current two-thirds to a simple majority. The move would greatly diminish the role of Republicans, who are a minority in the Legislature.

"Reform is in the eye of the beholder," said Núñez's spokesman, Steve Maviglio.

Indeed. California's budgetary process is a mess with the 2/3rds requirements and the Republicans refusal to do anything other than make cuts. Hardly any other states put such limitations on their legislature. The solution is not to give the governor more power, but to untie the hands of the legislature.

See also Dave Dayen on the same subject.

This year was supposed to be the year of health care reform. Next year was supposed to be the year of education, or so pronounced he of the grandiose titles and ambitions: Arnold Schwarzenegger. And you know what, we really need to have our state government make some headway on those issues. Unfortunately, we have a big pressing problem, the huge budget deficit. Health care negotiations have bogged down as the budget gap has risen.

Now Arnold is calling a fiscal emergency. Even prior to that came this LAT article:

Legislative leaders said Thursday that more taxes would be needed to fill a projected $14-billion budget gap next year, and the state Senate president said a healthcare overhaul -- Gov. Arnold Schwarzenegger's priority this year -- will have to wait.

Assembly Speaker Fabian Nuñez (D-Los Angeles) said lawmakers would have to consider raising a host of taxes, including those on Internet purchases and on foreign companies that do business in California.

"We've got to close those tax loopholes," Nuñez told reporters at a news conference. "We can generate billions by doing that."

Senate President Pro Tem Don Perata (D-Oakland) said some sort of tax increase would be necessary, mostly likely in a ballot measure for the public to consider. He said he doubted Republicans would provide the votes necessary for the Legislature to raise taxes.

Raising taxes in California requires a 2/3rds vote and the Republicans are simply calling for more cuts across the board. Those two desires are incompatible, thus there will be a predictable bloody battle to get the budget down.

Nunez thinks they are close enough on health care to call a vote next week. Perata is signaling that he won't go along and is pushing a water bond. Arnold wants cuts, health care and the moon. Republicans don't want anything but a smaller government.

Yes, I am pessimistic this Friday, but I think it is understandable when looking at the situation. The system is dysfunctional right now and I am not confident that they will be able to do the hard work to fix the fundamental problems.

$14 billion is the new projected budget deficit for the state of California. The forecast last month was a mere $9.8 billion. It is an enormous number and a jaw dropping jump. SacBee:

The growing estimate increases pressure on Schwarzenegger and lawmakers to cut state spending and consider tax increases to close the budget hole. Schwarzenegger last month ordered all departments to prepare spending plans 10 percent below than what they had anticipated, and GOP lawmakers are calling for immediate midyear cuts in spending.

Naturally the Republicans want more cuts. That is always their solution, unfortunately the state has run out of fat and places to cuts. Any more will go right to needed programs. The place to address this problem is on the supply side.

The state needs to take a hard look at the fundamental ways we construct our state budget and where our revenue is coming from. This should have happened years ago, but we relied on gimmicks and a roaring economy to ignore the problem. We cannot do that this time.

See also Dave Dayen at Calitics.

Right now the revenue projections for the state are not very good. They are showing about a $10 billion deficit. That does not mean that it is time for the governor to declare a "fiscal crisis" under Prop. 58, as the Republicans are calling for. SacBee:

Top Republican lawmakers on Tuesday called on Gov. Arnold Schwarzenegger to declare a "fiscal crisis" to deal with California's looming budget problem, but administration officials said such a move would be premature.

Sen. Bob Dutton, a Republican from Rancho Cucamonga who refused to vote for the current budget because it spent too much, said the governor should use a special authority voters assigned him during the last budget crisis to tackle a budget deficit forecast to be nearly $10 billion.

Under Proposition 58 passed in 2004, the governor could declare a fiscal emergency if he determines revenue is "substantially below" what was anticipated in the budget and summon the Legislature into special session.

This smacks of the Republicans wanting to push through a bunch of cuts, rather than deal with the deficit in a strategic and long-term way. This is time for a thoughtful substantive discussion, not rash decisions. Arnold is right to resist this call. There is time and the state needs more data before it moves forward.

The administration's Department of Finance cautioned that it was too soon to make such a call.

"When we have all our data and we have our decisions in front of us, that will be when we advise the governor," Finance Chief Deputy Director Vince Brown said during Tuesday's hearing.

The state Finance Department is waiting on additional economic and revenue indicators to help draft the 2008-09 budget. Those reports are expected Dec. 10. A month later the governor will release his proposed budget for the fiscal year beginning July 1, 2008.

The state of the state in January should be the next target date, where the governor will throw a marker down on how to deal with the deficit. He cannot borrow his way out of this one. The state is struggling to pay off the huge bonds from 2004 right now.

Man this reads as if I could have written it. LAT:

Gov. Arnold Schwarzenegger swept into office in 2003 promising to end the state's pattern of "crazy deficit spending," cut up the government credit cards for good and force the state to finally live within its means.

So much for that.

He has never had the willpower to actually sit down and make tough decisions.

Experts say the state's spending habits are no more restrained than they were when Schwarzenegger arrived in Sacramento four years ago. The budget has grown by a staggering 40%. Costly programs have been launched.

And spending has continued to outpace tax receipts year after year -- even years when housing and tech booms led to cash windfalls.

Now the governor finds himself in a predicament similar to that of his predecessor, Democrat Gray Davis: staring at a crippling budget shortfall that threatens to overshadow all other business in the Capitol and tarnish his political legacy.

It is all too predictable. We never solved the fundamental problems that make our revenue is very cyclical. Thus when we hit hard times we run into big problems. Yesterday's LAT had this quote.

"We never fixed the problem," said Chris Thornberg, a principal with Beacon Economics. "It's been Scotch tape and glue and staples and just praying we will never have to face the reality that state government is on a path that is not sustainable."

Today's:

"There has been lots of talk and lots of gimmicks, but none of the state's underlying budget problems have been dealt with," said Ryan Ratcliff, an economist at the UCLA Anderson Forecast. "Even in the middle of a revenue boom, we kept spending more than we take in."

Arnold has been talking about making next year the year of education. Speaker Nunez seems to have nixed that idea. How about we make it the year of the budget. It sure isn't sexy, but it is damn important.

California has not solved its structural budget problems and the crash of the housing market has exacerbated the situation. We are not the money into our coffers that we expected. It is a serious problem, one that will not be solved with patches. LAT:

Gov. Arnold Schwarzenegger on Monday ordered all state departments to draft plans for deep spending cuts after receiving word that California's budget is plunging further into the red -- largely because of the troubled housing market.

State officials have warned the governor that the likely deficit for next year has jumped from a few billion dollars to as much as $10 billion, threatening to wipe out the progress Schwarzenegger has claimed in getting the state's accounts in order.

Claimed is an accurate word to use, given that he never actually solved the real underlying financial imbalances. Instead of doing the hard work, he has gone for cheap fixes.

The state is also being forced to confront the consequences of not saving money when times were better.

When the economy improved nationwide several years ago, most states erased chronic deficits and began building rainy day funds. California did not. It continued to spend more money than it brought in.

"We never fixed the problem," said Chris Thornberg, a principal with Beacon Economics. "It's been Scotch tape and glue and staples and just praying we will never have to face the reality that state government is on a path that is not sustainable."

It is likely that the state's credit rating will be downgraded due to our declining fiscal projections. That makes it tougher and more costly for the state to borrow money. Not a good scene all the way around.

Will Arnold have the courage and willpower to actually face the state's fiscal problems, or will he try and stave off disaster and pass the buck?

Gov. Schwarzenegger has a lot more in common with Bush and the Republicans in Congress than most realize. They both have the same approach to finances: cut taxes, keep spending. Or as Dan Walters describes it today: "all gain, no pain."

His first act as governor was to reinstate a popular, multibillion-dollar reduction in taxes on cars, even though the state was already running huge budget deficits. A few months later, he backtracked even more by unilaterally rescinding billions of dollars in spending cuts that he had initially proposed, while refinancing the state's short-term debt with long-term bonds.

Schwarzenegger evidently has no real intention of bringing the state's income and outgo into balance with either spending reductions or new taxes and is content to let the immense deficits mount for the rest of his governorship -- while continuing to talk a good game about fiscal responsibility.

Rather, he's allowed spending to soar and floated new schemes for spending money -- borrowed money -- on highways, reservoirs, prisons and other infrastructure, pushing the eventual costs onto a budget that already has a huge structural deficit and on future governors, voters and taxpayers, while continuing to boast about not raising taxes. He rejected new gas taxes or other revenues from motorists for transportation and sidestepped water charges to pay for the reservoirs he wants to build.

I would not exactly say that spending has soared, more that he has reduced revenue streams and refused to find a way to make that up. Plus, he has relied very heavily on borrowing. That leaves us with a basic math question: what happens when you spend more than you take in? And how do you exactly find ways to pay for new programs when you are unwilling to raise taxes? Arnold's answers are usually borrow and find gimmicks like selling off the lottery.

So, while the Democrats in Congress have insisted on a pay-as-you-go plan for the national budget, California continues to teeter on the edge of financial ruin. We continue to be on an unsustainable path with a structural deficit and grand plans for new programs. Arnold had promised to come in and do the hard work, but he is much more interested in headlines than securing California's finances. It just is not sexy enough for him and requires too much detail.

He is leaving the mess for others to clean up.

Color me confused, but what of consequence did the Republicans in the Senate get out of their month long hold out on the budget, other than the $700 million in blue line cuts? That was offered right at the beginning of the impasse. What they accomplished at the end might actually backfire on them. The Republicans wanted to try and restrict the ability of Jerry Brown to go after polluters. What they won in the end was a two year gap where the transportation bond projects cannot be slowed due to greenhouse gas emission concerns, and a few other minor things. The fact that it was not threatened in the first place seems to be of little consequence to the Republicans. Steve Mavigilio has all of the wonky goodness.

I was holding off on writing a budget post because it seemed likely that this morning's headlines were going to be quickly outdated. They came close to passing a budget last night, but Sen. Ackerman appeared to be jerking the Democrats around. Now it looks like a budget has been agreed to and is about to pass the Senate. Frank Russo has the breaking news.

The California State Senate is in the process of passing the state's budget with Senate Republican leader Dick Ackerman joining his fellow Republican lawmaker Abel Maldonado in voting for it and trailer bills associated with it. Some of the trailer bills, attached to and necessary for the budget to go into effect have been passed by the Senate and have received other Republican votes.

The budget bill is "on call," meaning the record is being kept open for additional votes to pass it. It has 26 votes, one shy of the number needed. The Senate is waiting for the arrival of Democratic State Senator Edward Vincent who is bill but will provide the final vote for passage.

The process of passing the budget and the trailer bills should be accomplished by this afternoon, and then it will land on Arnold's desk for his signature. It is about friggin' time. This delay has caused a lot of damage to this state. More details should emerge throughout the day about the actual details of this deal and the make-up of the $700 million in blue-line cuts Arnold is going to make.

[UPDATE] 1:55 The traditional media sources are starting to weigh in. It appears that the Republicans didn't get too much from their holdout and it is very similar to the budget that passed the Assembly. Here is the LAT:

Among the final changes Republicans won is a prohibition against using global warming concerns in lawsuits to block transportation and levee improvement projects authorized by voters last year. Environmentalists and Democrats have said such lawsuits are not a threat to any projects.

The deal also will allow railroads to apply for state money intended to help mitigate pollution, another priority of the GOP holdouts.

Republicans gave up on several other demands, including one to funnel more school money to their suburban and rural districts and another that Schwarzenegger outline all $700 million in cuts. The GOP also abandoned efforts to cut the state's welfare program.

There have not been any lawsuits filed or even threatened over transportation bond construction. The Republicans were simply afraid that it would happen and held up the budget over it. I am very glad that they failed to get the other items listed above. So far the news is about as good as could be expected thus far, not that the original budget was that great.

There appears to be some progress over at the Capitol, with signs that a deal may be imminent. The Republicans sound pleased, but Nunez does not seem particularly thrilled. SacBee:

Senate Republican leader Dick Ackerman said Monday that the Senate has reached a tentative deal to resolve the state's protracted budget fight.

He cautioned, however, that the Assembly and Gov. Arnold Schwarzenegger still need to approve the agreement. (snip)

Speaker Fabian Núñez said he would take the Senate deal to Assembly Democrats, but made no commitment to endorse it.

That is the politics of it, which to me seems like there is a reasonable possibility that the Democrats in the Assembly at the very least may balk at it. Here is more on the meat of this particular proposal.

Sen. Bob Dutton, R-Rancho Cucamonga, has been voicing concern over Attorney General Jerry Brown's aggressive moves to force local planners to include climate change in their development projects. Using the California Environmental Quality Act, Brown has sued San Bernardino County for failing to consider greenhouse gas emissions in its general plan.

Dutton has said he is worried that Brown and environmentalists would use the same tactic on billions of dollars the state is getting ready to spend on much-needed public works projects. He said he feared such a move would caused lengthy delays and prevent roads and bridges from being built or repaired.

To soothe GOP concerns, staff has drafted a compromise proposal that would place a moratorium on greenhouse gas-related actions against transportation bonds, approved by voters under Proposition 1B last fall. It would sunset after the state Air Resources Board adopts new regulations to comply with a state initiative to reduce greenhouse gas emissions by 25 percent by 2020.

Basically, they want to be able to pollute while spending the transportation bonds on construction. That would sunset when the new regulations from AB32, the landmark greenhouse gas reductions bill, are enacted.

We should know more in the coming hours and days.

It has been interesting tracking Arnold's time management lately. He is attempting to balance his legislative priorities with helping speed the passage of the budget. Arnold knows that he can't get anything done until the budget is signed, yet he has found little leverage over the right-wing Republican holdouts.

Last week he spent several days visiting nursing homes and other sites that are directly feeling the impact of not receiving the money they are owed by the state. He strategically selected the locations for maximum impact on the Senate Republicans. They are still attempting to shake it off, and close their ears from the thousands of small business owners shouldering the burdens of the missing budget. It's folks like Janet Rios, featured in today's LAT who are feeling the most pain, especially fiscally:

By the time a state budget is passed, Janet Rios will be at least $4,000 poorer. That's the 19% in interest Rios says she must pay on loans to keep her two nursing homes afloat until lawmakers can agree on a spending plan.

Rios would seem to be a welcome client for any bank. The state pays her to take care of the elderly, and once the budget impasse is broken she'll get a bundle of money that has been delayed. She just needed emergency funds in the meantime to pay the Stockton homes' bills.

The state offered to guarantee the money in a letter she could take to her bank, Wells Fargo. But "they said that is not an acceptable thing to base a loan on," she said, and classified her as a high risk, with an interest rate to match on two $100,000 lines of credit.

The state won't reimburse her for the interest. Still, she said, she had no choice but to take the bank's terms. "We have to take care of 15 residents in wheelchairs. We have people getting fed through tubes in their stomachs. Some have seizures. Some need oxygen. There are a bunch of things we have to do. Nobody cuts us any slack."

The big companies and institutions who have pre-arranged credit, just in case of this type of situation. Most small contractors, nursing homes, clinics and day-care centers do not have that ability, so they fall between the cracks and rack up thousands of dollars in interest in order to keep their doors open. That is money that will come directly out of their programs, a needless waste of money.

Meanwhile, Arnold has attempted a new approach for local leverage. LADN: