Assembly passes stopgap money-raising bills; governor vows veto
swiegand@sacbee.com
Published Thursday, Jun. 25, 2009

Unusually unified legislators were moving today to prevent the state from issuing IOUs next week by delaying some payments to schools and local governments - but Gov. Arnold Schwarzenegger warned he would veto the maneuver.

On votes of 69-0 and 54-0, Assembly members passed two of three bills designed to free up cash and buy the state time while legislators and Schwarzenegger wrestle with the bigger task of healing a gaping wound in the state budget. The third bill was also expected to be approved by the Assembly, and the state Senate was also expected to pass them.

But in a written statement, Schwarzenegger repeated his earlier demand that the entire deficit be addressed at one time.

"Since the first day we began working to solve this $24 billion deficit, I have been clear: the legislature must solve the entire deficit, must make the hard decisions now, and must not ask California taxpayers to foot the bill," the governor said. "The current proposal in the Legislature amounts to nothing more than a piecemeal proposal and a second day of drills and if passed, I will veto it because it doesn't solve the problem."

Senate President Darrell Steinberg, D-Sacramento, countered the governor was making a mistake.

"If the governor wants his legacy to be 'I refused to sign a bill that would have prevented IOUs,' that's his choice," Steinberg said. "I think it's a bad choice."

Two of the bills would defer payments that would have been due to all levels of the public education system and cities and counties for road repair until later in the fiscal year that starts July 1, or the 2010-2011 fiscal year, as well as cut deeper into state spending for schools in the fiscal year that ends next Tuesday.

The third bill redrafts a measure legislators passed earlier this year that would transfer money from regional redevelopment agencies to the state. In April, Sacramento Superior Court Judge Lloyd Connelly ruled the cash grab was unconstitutional because the redevelopment money wouldn't necessarily be used by the state within the redevelopment agencies' areas. The bill passed by the Assembly today would require that the funds be used in school districts that at least partially overlap the redevelopment areas.

Assembly budget chairwoman Noreen Evans, D-Santa Rosa, said the trio of bills would raise a total of about $5 billion. Legislative staff said that could be enough to delay the issuance of IOUs through July and August.

Wednesday, while a divided Legislature was rejecting a bill that would have made $11 billion in spending cuts, state Controller John Chiang warned that absent some solution to the state's budget deficit, he would be force to issue IOUs - formally called registered warrants - to pay most of the state's bills starting next Thursday.

The warrants are needed, Chiang said, because he must set enough money aside to make constitutionally required cash payments to schools and holders of California bonds and other financial paper. State employees would also receive their regular paychecks.

Today, Chiang spokeswoman Hallye Jordan said the controller's office was studying the measures to determine how far the money might carry the state.

"Anything that can allow the state to meet its obligations and avoid the issuance of registered warrants is welcome," she said.

But Schwarzenegger has repeatedly warned he wants a comprehensive solution to the deficit and will not support a piecemeal, stopgap approach.

That approach might be the best legislators can do, given the deep partisan divide between the two parties. Minority Republican lawmakers want deeper cuts, and control enough votes to stymie the two-thirds legislative approval the budget-balancing bills need to take effect immediately. Democrats want the cuts to be leavened with some accounting tricks as well as higher taxes on cigarettes, a tax on the production of oil in the state and some fees.

Today's actions in the Assembly, which were expected to be mirrored in the state Senate later today, were marked by a partisan comity that is almost as rare as the speed at which the three bills were passed. There was no debate on any of them.