SAN FRANCISCO — California lawmakers are up against a zero-hour constitutional deadline Wednesday to pass a balanced budget or they will begin to lose pay.
But even if a budget is passed on time, the main concern many have is whether it will include structural changes or one-time fixes.
“The plan is to pass a balanced budget by the deadline,” said Mark Hedlund, a spokesman for Senate President pro tempore Darrell Steinberg, D-Sacramento. “Everybody knows that it is crunch time.”
Lawmakers are under pressure due to two propositions approved by voters that require them to pass a balanced budget or have their pay docked every day it is late. State Controller John Chiang has said he will withhold their salaries if lawmakers fail to pass a balanced budget by the midnight deadline.
Gov. Jerry Brown has so far been unable to get enough Republican lawmakers on board to bridge the two-thirds threshold needed to approve an election that would ask voters to approve extending temporary taxes, which is the linchpin of his budget proposal.
Democrats could potentially pass a budget without tax hikes or extensions, which require the two-thirds majority.
Brown said during a news conference Monday that he is still in negotiations with Republicans to try to get four of them — two in the Assembly and two in the Senate — on board to vote for the election in a bid to close the remaining $9.6 billion budget gap. “With the kind of credit rating that our state has, with the kind of debt it is building, we have to bite the bullet,” he said.
In response to Brown’s press conference, a group of Senate Republicans released a detailed list of their budget demands that included a spending cap and pension reform. They blamed the opposing party and their special interests for the failed talks.
Brown’s proposed $88.8 billion general fund budget incorporates a $6.6 billion increase in the Department of Finance’s revenue forecast for combined fiscal 2011 and fiscal 2012.
If the Legislature passes a budget with one-time fixes or gimmicks to close the deficit, the governor would still have 12 days to sign or veto it.
Brown has said he would not sign a budget that includes gimmicks, but he was unclear during his press conference, saying only that “nothing has changed — I just don’t give you all of my strategies before I implement them.”
Rating agencies have said it is important that California pass a budget on time that relies primarily on recurring revenues or spending cuts, rather than one-time fixes.
Analysts have also expressed concern that the state’s cash flow could be strained if a budget is delayed.
Until a budget is in place, the state is unable to sell debt.
Treasurer Bill Lockyer has said California must have a balanced budget in place before it can issue short-term revenue anticipation notes. That puts pressure on lawmakers to reach an agreement that has the confidence of the market.
Ana Matosantos, head of the Finance Department, has said the state still plans its annual sale of around $10 billion of Rans, usually slated for the summer.
But Lockyer has said his office would be unable to issue the notes if the budget is contingent on voter-approved taxes, unless it included cuts that could be quickly put in place if voters reject the tax extensions.
California sells notes to help pay for operations in the front end of the fiscal year because tax revenues are stronger in the second half.
In 2009, after the state was unable to reach a budget agreement in time to go forward with its annual $10 billion Ran sale, Chiang issued IOUs.
California GO bonds carry ratings of A1 from Moody’s Investors Service and A-minus from Standard & Poor’s and Fitch Ratings.
