Perata

Today was the day the AB 1x1 was to be brought up in the Senate Health Committee. It didn't. Senator Don Perata asked to delay the vote until Monday since there were not enough votes to pass the bill. To complicate matters the Legislative Analyst came out with her report that had enough consternation about cost containment for the state that it made Senators nervous about moving forward. AP:

Given the Democrats' resistance, it seemed unlikely Perata could obtain the votes without changing the composition of the 11-member panel, although he has said he does not plan to do so. The committee's four Republican members have been opposed to the bill as an expensive and unnecessary expansion of government into the private health care system.

Democrats also sounded queasy about the potential expense, and they sought assurances that the state would not be saddled with new costs.

"It just seems to me that we go into it with a little more certainty of what the price might be," said Sen. Darrell Steinberg, D-Sacramento. "Otherwise we don't go forward."

There are many more reasons for legislators to say no to major health care reform than to say yes. That does not mean that the bill shouldn't pass or that it is impossible to pass reform, but rather that this was always an uphill battle. The state of the economy and the budget made the odds even worse. It is providing an easy out for Democratic legislators who might otherwise be supportive.

Legislative Analyst Elizabeth Hill fed their fears with a report that undermined the administration's insistence that California can extend medical coverage to millions of uninsured people without having to spend additional state money.

More likely, she said, the new health care program would become a drain on the state budget. Hill said she estimated conservatively that within five years, the program would cost the state between $300 million and $1.5 billion a year.

"What you have in front of you is by no means the worst-case analysis," Hill said.

There is no way to guarantee that the cost of insurance will not rise at a higher rate than they anticipated. There are outs for the state. It's not as if it would be on the hock for the plan no matter what. Safety measures were built in. Howevier, if the legislators feel like it is more likely than not that we will encounter a situation where the costs exceed the revenue in the near future then it is not worth it for them to support a plan that they believe is headed for failure.

There are hard choices ahead for Senator Perata. Does he want to pull Yee or Kuehl off of the committee, or let this die a quiet death?

The status quo of our health care system is unacceptable, but that does not automatically translate into passage of this plan, no matter how well constructed.

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.

One could call this a deal, or a breakthrough, but with so little time for people to figure out what is really in this thing, there is a decent amount of confusion. The Assembly has passed a health care reform bill that is supported by Arnold. It is massive and if passed would be one of the most significant changes to our health care system ever. The details are emerging, but what is clear is that the huge coalition of groups working to get reform enacted is split and that is partially due to the speed at which this proposal moved forward.

So while Andy Stern, the president of SEIU international is featured in this picture accompanying the article in the LAT, Art Pulaski and the California Labor Federation has not taken a position.

The state Assembly on Monday approved the first phase of a $14.4-billion plan to extend medical insurance to nearly all residents, giving Gov. Arnold Schwarzenegger and his Democratic allies their first victory in a risky yearlong campaign to overhaul California's healthcare system.

The measure, negotiated by Schwarzenegger and Assembly Speaker Fabian Nuñez (D-Los Angeles), would require almost everyone in California to have insurance starting in 2010. It would provide subsidies and tax credits for those who would have trouble paying their share of the premiums.

The authors estimate that it would bring medical coverage to 3.6 million Californians, including 800,000 children, who currently don't have it. But the plan cannot go into effect unless it passes the state Senate and voters approve a companion initiative that Schwarzenegger and Nuñez are planning to place on the November ballot to finance it.

See Dave more on a few significant issues with the funding. The initiative to fund the program, if they can manage to get it on the ballot faces an uncertain future without a united front behind it.

I know I am sounding really cynical now about the prospects of this plan, but I am a pretty pragmatic observer. The Senate refuses to come back to consider this before the end of the year. We don't know what they will determines once they have a chance to really thoroughly examine the proposal. It is unclear if they have gone far enough on affordability and there is a huge concern that there has not been enough headway on reforming the health care system itself. The labor community is split. The state has serious budget issues. We have no clue what the climate will look like in November 2008, if this makes it on the ballot.

There are a lot of reasons not to be excited about this development. However, there have been significant improvements made as negotiations progressed. This bill would drastically improve health care access for hundreds of thousands of Californians. The question is will it do a lot of harm to thousands more? Who benefits the most, Californians or the insurance industry? And does this have a real shot at passage?

Hopefully we will find out some more answers in the coming weeks. This too big of an issue to ram through without careful examination.

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.

Thanksgiving is over and the legislature is getting back to work. That does not mean that any bills are close to passage, particularly on the two biggest issues dominating the special session: water and health care. There are no votes scheduled and quite a bit of pessimism floating around at this point. AP:

California lawmakers had been scheduled to return after the Thanksgiving break to vote on sweeping health care reform and water proposals, after weeks of promises that compromises were near on both issues.

Instead, there were no signs of any deals on Monday as Gov. Arnold Schwarzenegger and legislative leaders tried to salvage something from the special legislative sessions called in September.

Senate President Pro Tem Don Perata, D-Oakland, canceled a vote on the water bond he had hoped to put before voters in February. Assembly Speaker Fabian Nunez, D-Los Angeles, postponed a vote on the health care plan he had been negotiating with Schwarzenegger.

No vote means not deals. That does not mean that everything is dead in the water, just that big breaks are not imminent.

Schwarzenegger then summoned Perata, Nunez and their Republican counterparts in the Senate and Assembly to his office for what legislative aides described as a last-ditch effort to find common ground.

"Clearly, there still remain serious negotiations on both," said Adam Mendelsohn, Schwarzenegger's communications director. "The governor just feels like coming out of the delayed vote, he felt it was important to have a discussion."

Discussions are a very good thing. We shall see what comes of it.

Months ago, Arnold introduced his official health care plan. Only it was not an actual usable piece of legislation. He could not find a single legislator willing to flesh it out into a real bill and introduce it in the Assembly or Senate. Now, for some reason he is insisting he has actual legislation, a revised more detailed version of his original plan. And still it is orphan legislation, without a legislative sponsor. And still it is unacceptable to all sides. There is no way that this thing actually gets passed as written. SFChron:

The governor unveiled a revised health care plan that included leasing the state lottery to a private company to help pay for expanding coverage to uninsured residents and give a tax break to low- and middle-class families.

But the proposed changes drew only a passive response from Democratic leaders, while consumer and labor groups said the plan does not do enough to protect the working poor from escalating costs.

The key is affordability. Individual mandates are unacceptable if people are forced to purchase insurance they cannot afford and does little in terms of actually covering health care costs. Of course, he is claiming that he already solved that problem.

Schwarzenegger's new plan would provide a tax credit that would be worth about $2,000 a year for a family of four earning up to $72,000 a year.

"We think we've taken a significant step toward increasing the affordability of health coverage for low- and middle-income Californians," said Amy Palmer, spokeswoman for the state Health and Human Services Agency.

Uh. No. Not good enough. Not even close. While Nunez and Perata put out non-committal statements, labor leaders were more blunt.

"He's leaving the middle class out in the cold," said Art Pulaski, executive secretary-treasurer of the California Labor Federation, AFL-CIO. "He's offering some support for individuals making up to $35,000 a year, but if you make more than that, there's not support but you are still expected to go out and buy a policy in the individual market."

The individual market is inefficient. Group purchasing drives down costs, as it spreads risk across a larger population. AB8 goes much further in terms of creating large pools that individuals can participate in.

And of course, Arnold is relying on gimmics to help pay for it. This time, he has gone back into the privatize the lottery for more revenue.

Another key change in the governor's plan would lease the state lottery to a private company and use the new revenue to help pay for expanded coverage. The governor's office expects the lottery could generate $2 billion a year for health care.

Schwarzenegger also introduced a sliding scale for determining the cost employers would be asked to pay for worker coverage.

Rather than requiring all employers to pay a 4 percent payroll tax, the governor wants contributions based on the size of a company's payroll. For example, a small firm with highly paid employees would pay more than a similar size company of low wage earners.

Employers providing health insurance for their staff are already paying 7-8% of payroll to cover health care costs. It is beyond me how Arnold thinks that halving, or quartering that is going to pay for health care coverage. The numbers just don't work. Keeping it that low will encourage employers to drop their health care coverage, not add it.

Consider this to be the latest bargaining position for Arnold. The Democrats have AB8, which he vetoed today as their base position. Time is of the essence now. It's make or break it for health care reform. Will they get it done? Millions of Californians are counting on them.

See Anthony Wright for way more details on Arnold's plan.

Following up on my post from yesterday, at this point it looks like there will not be a water bond on the ballot through the legislative process. Both Arnold's Republican backers and Sen. Don Perata are now talking about gathering signatures to put their competing proposals on the November 2008 ballot. Perata simply does not have the Republican votes to get his bill passed.

Environmentalists have long supported Perata's plan. He recently won the backing of the Metropolitan District of Southern California, which provides water to 18 million people in Southern California. Meanwhile, many Central Valley officials are pushing the governor's plan.

Under Perata's plan, nothing precludes an agency from spending the money on a dam. But Republicans are skeptical that there's enough money in the pot.

The three dams targeted by Cogdill's bill would cost a combined $10.3 billion, according to estimates. The proposal calls for the state to pay as much as half the costs of the dams with local users paying for the rest. The state's final share would be determined by the "statewide benefit" of each project, including flood protection or new water supplies to aid fisheries.

Historically, the state has contributed far less for dams. But Schwarzenegger administration officials said the new investment was needed to boost the state's water supply "backbone" while dealing with the massive flooding and extended droughts that could result from global warming.

The basic outlines for these bills look like they will be turned into ballot measures. They were hoping to pass a compromise measure legislatively to get it on the ballot. Since that seems like it will not happen, they will have to front the cash for the signature gathering and settle for a later date, instead of the February ballot.

The water discussion should start dying down shortly, at least for a few months. Having two competing measures next year would pit developers against environmentalists, not to mention Democrats v. Republicans. It is well worth having the public debate over who pays and how we pay for reliable water. Do we keep putting it on the state's credit card, or do users foot the bill? Do we really need more damns, or are they an inefficient method for water storage? Nobody is disputing the need, it's how we accomplish our goals that is at issue.

This water fight sure is ironic. You have the Democrats pushing forward a modest plan for water storage that would put the financial burden mostly on the shoulders of the users. Plus, it allows for local control to determine what projects get the state's money. On the other hand you have the Republicans (including Arnold) promoting a much bigger plan that is heavy on the borrowing and paying for it later. LAT:

Democrats oppose state dam building, although they're willing to provide grants for local construction. The governor proposes that the state pay for 50% of the dam costs. Democrats argue that, historically, the state has paid for only 4%, with water users footing the rest.

"The issue's not dams, it's who pays," says Assemblyman John Laird (D-Santa Cruz), one of the negotiators.

"The governor's proposal is DOA," Machado asserts.

Perata is sponsoring a $6.8-billion bond -- increased by $1 billion on Friday -- that would provide $2 billion for local water supply grants, including for dams. There'd also be $2.4 billion for the delta -- but nothing for a canal -- and $2.4 billion for water cleanup and reclamation.

Assembly Republican Leader Mike Villines of Clovis drew "a line in the sand" last week and declared: No dams, no deal.

Like Skelton says in that column, it is unclear what the huge rush is to get it done in time for the February ballot. They have two other shots next year, with the June primary and November general election.

The Democrats will face a severe backlash from the environmental community, if they agree to dams in any deal. Perata's plan leaves it up to the locals to build the dams, relieving him of the responsibility for their creation.

Nothing much changed outwardly on the politics of passing health care reform. Arnold and Nunez are still being optimistic. Perata is Eeyore and is feeding right into the Republican's talking points, that we should go for little fixes instead of comprehensive reform.

John Meyers and Anthony Wright have been playing off of each other in the blogs today, with an interesting theory by Meyers that the negotiations may be proceeding like AB 32 did. Meyers:

The narrative making its way through the Capitol this week is that the debate over health care reform, now down to the final days on the legislative calendar, has parallels to another last-minute deal struck in Sacramento.

The question is... which one?

Some say just look at last year's global warming law, AB 32, and you'll see how good things can happen as a result of last-minute negotiations. Others, though, say look at 1996's energy deregulation fiasco, and you'll see how bad things can happen in the final hours.

Anthony notes that there is a lot of similarities between the two sides.

In the world of policy, I see two plans that are more similar than different. They both include:
* a major expansion of coverage for more than two-thirds of the state's uninsured
* a minimum employer contribution toward health care
* a requirement on most individuals to take up health coverage from employers
* major eligibility expansion of public insurance programs for children and parents
* significant streamlining of public insurance programs to maximize enrollment
* significant draw-down of federal Medicaid funds
* new use of federal and state tax breaks, though Section 125 plans, for health coverage
* limits on insurers denying people because of pre-existing conditions
* a minimum requirement on insurers to spend 85% of premium dollars on patient care
* various cost containment efforts, such as on information technology and disease management

In some cases, the proposals are very similar, if not the same. There are differences on some key details. And they matter, a lot. But looking at the policy, it's hard to come away with the notion that a deal isn't just possible, it's likely.

He contends that since health care has been a major policy discussion for five years, the issues are well known and thus the politics take a primary role. He is correct. Everyone is very well versed on the issue. This is the crunch time to see if they can find a way to a common path.

Considering the fact that these guys have not met lately, this should be a pretty important meeting to determine the likelihood of coming to an agreement on health care reform legislation. Sen. Don Perata was sounding overly pessimistic, and his comments were pretty unproductive to the overall reform efforts. Nunez and Arnold were much more upbeat. SacBee:

In a prepared statement, Núñez said he remains "an eternal optimist," and added, "I will fight 'til the end for health care reform."

The speaker has said he plans to introduce the governor's health care plan himself and ask lawmakers to consider it this week.

The governor remains committed to achieving health care reform this year, said Sabrina Lockhart, a spokeswoman for Schwarzenegger.

"He looks forward to working with leaders on both sides of the aisle to get it done," Lockhart said.

Weintraub has an interesting column today, suggesting that the fee on hospitals aspect of the governor's proposal may not be dead in the water. He points out that a similar fee was passed on the nursing home industry, after they requested it.

The state's nursing home industry supported a 6 percent charge as a way to draw more federal money to California for Medi-Cal, the health care program for the poor. The federal government matches the state's spending on Medi-Cal. So for every dollar California collected in fees from the homes and then spent on Medi-Cal, the nursing homes, as a group, got an extra dollar back from Washington.

Republicans are opposing many other elements of the governor's plan. However, it looks like the negotiations with the hospitals have moved it towards a more common fee structure that may not require a 2/3rds vote. Arnold is continuing to work on it, despite some resistance from the Democrats.

It's been just about two weeks since the Senate collapsed. Sad to say, that we might even be further away from a solution. Let's look at this mess in a bit of a random order. Lot's of things going on, even if there has been absolutely no progress.

14 Senators are holding up the budget until a majority of their far right cohort agrees to the deal, even though we only need one more vote. Essentially they are requiring that 74% of the legislature approves of the final budget. The two-thirds budget requirement is arcane as it is, but to require near unanimous consent is just absurd.

It is now clear that the Republican calls to change CEQA (see yesterday's post) are central to their demands. That is absolutely a non-starter for the Democrats and the Governor. In the wake of the dustup over the CARB, Arnold is not exactly in a position to start weakening environmental laws without a huge backlash. I am not sure where the Republicans think they are going to get a lot of support for their pro-business, anti-green argument in both the Capitol and the public. California has a lot of Republicans, but a large percentage of them are environmentally friendly. The same cannot be said for the Republican Senators who are holding out. They are very much out of the mainstream, arguably even within their own party.

Senator Perata has declared that he will not take up any more legislation until the budget is passed, something Nunez quite rightly disagrees with. The Republicans would love it if the progressive legislation that the Democrats have on tap, like AB8 (health care reform) get scuttled. It would allow the Republicans to further undermine our system of government.

Arnold really looks impotent here. Nothing he has done has worked. His strategy of disengagement on the budget until the last minute has proven to be a bad one. He seriously miscalculated the intentions of his fellow Republicans. This stalemate has the ability to seriously undermine a lot of the work he has done in the last year to try and prove that he can unite both parties and pass landmark legislation. If this keeps up, it will damage his chances at the 2010 Senate race, if he was even thinking of running in the first place.

Nunez and Perata are now looking for any possible leverage points they can find on the hold-out Republicans. Nunez is declaring Republican legislative priorities DOA. Perata is stripping folks from committee assignments. Unfortunately, there is not much power they hold over them. Each day that passes is a victory for the ultra right-wing conservative Senators.

This week momentum has emerged to repeal the 2/3rds vote requirement for the budget's passage. Speaker Nunez has declared that it will be a major priority for him. Doing that in conjunction with a re-examination of our tax system would make sense, however that tact did not work in 2004. Logically, it does make sense to address our revenue problems, as part of a larger budget discussion. Today Mark Leno has an op-ed in the Chronicle worth reading about reforming the budget process and historical look at the 2/3rds requirement.

The idea that a single legislator of the minority party can cause such suffering to millions of Californians is appalling. Maybe if the deadlock continues for another month or two, recognizing the risk that would present thousands of social-service providers, voters will more quickly understand that it is time to change the way we do business and enter the 21st century.

Obviously, the attempt in 2004 to address this very rule did not go well. The Republicans managed to scare the public about the potential for increased taxes. Nunez and Leno seem to be arguing for a ballot initiative to change it to a simple majority vote for the budget. That would fix the short term problems of the mechanisms for passing the budget, but looking at the tax vote requirement and Prop. 13 would address the supply problem. These are very thorny issues to say the least.

Right now there is not a clear or heck even a murky path to a resolution on the budget. Who knows when that will change or what will cause it to happen.

"This budget is late 31 days and I think it is time we start moving forward," said Sen. Abel Maldonado (R-Santa Maria), who was under pressure from his caucus to continue holding out but voted for the measure. "We are getting more than we asked for with this budget."

Maybe it isn't the greatest frame to lead this post with a quote from a Republican, but you know what, Maldonado deserves some props for his vote last night to approve the budget. He broke ranks from the gang of 15 Republican Senators who had vowed to stick together in a suicidal pact to hold out for gaping cuts to essential state services, tax cuts and limiting the power of Attorney General Brown to go after polluters.

Robert has a great five point post up at Calitics and I am going to paraphrase right now, because he is just so completely right on.

1. It is the Republican Senators and the Republicans alone that are holding up the budget. The "Republicans are being irresponsible and reckless" in holding this up."
2. The budget that passed the Assembly and is now in front of the Senate is balanced.
3. What the Republicans are demanding are "unnecessary and spiteful cuts to public services. Cal-WORKS was was a bipartisan reform program that has been a proven success. Child health care - who in their right mind would oppose this? Aid to the elderly - why do Republicans want to cut that?"
4. One of the main motivations for this obstruction is an attempt to gut the landmark global warming legislation that the legislature passed last year. "hey're using hostage tactics to gut AB 32. They want the state to be totally unable to act to save our environment and mitigate our carbon output."
5. "Their delaying tactics are financially irresponsible, leaving workers unpaid, schools without money on the eve of the new year, and families without health care as a result of the Republicans' unwillingness to do their job and pass a budget."

One vote away and there is no end in sight.

"It seems like every time we take a step forward, they ask us to take two steps back," Perata said. "The state budget is being held up by Republicans."

The stalemate threatens to drag on for several weeks. The Senate adjourned Wednesday night with no plans to return.

Already, some $1.1 billion in payments have not been made to schools, hospitals, community colleges and social service programs.

A prolonged impasse could trigger a financial crisis at any number of smaller healthcare and social service institutions that do not have reserve funds and are unable to access bridge loans. Vendors are not getting paid. Some have already refused to supply services until a budget is in place. The state also could see its credit rating downgraded.

"I was prepared to eliminate the operating deficit as requested, therefore the Senate should have approved the budget," the governor said. "My job now is to make sure this does not shut down state government."

Arnold had offered to "blue-line" about $700 million extra out of the budget. His recent efforts to persuade two Republicans to play ball have not been successful. They are now severely damaging the state, with long term implications. Californians are suffering as a direct result of the inability of Controller Chiang to be able to pay the state's bills. I feel like I write it every day, but it's true. This thing just gets worse for hardworking Californians each day that this stretches on.

There is no real change in the political situation on the budget in the past day. The Republicans are still pledging to stick together on their $842 million in deep cuts to the budget and the Democrats are united against it. Perata is now calling the Republican's actions "fiscal terrorism". Meanwhile, more details on what exactly the Republicans have proposed to slash emerged.

One of the biggest is their end around attempt to try and stop Attorney General Jerry Brown from going after polluters. It is something they can't accomplish in the normal legislative process, so they are trying to do it through the budget. They want to restrict his ability to enforce the landmark greenhouse gas bill AB 32. All of the major environmental groups issued a joint statement titled "Senate Republicans Declare Open Season on the Environment". LAT:

The coalition warned that a demand by the lawmakers to restrict enforcement of a landmark law passed last year to curb greenhouse gases "is a radical departure from established state policy." Business interests "want a moratorium now while they delay and obstruct regulation in the future."

The Republicans also want to slash another $15 million from our state park's maintenance fund. State Parks is already woefully behind on maintenance and this will only further degrade our parks.

Some of the other cuts the Republicans have proposed would take away federal matching funds, doubling the loss and others could run afoul of legal rulings. The CPB has been speaking out against the welfare cuts.

To say things are a mess in Sacramento right now is an understatement. The budget is being attacked by all sides. Usually that is an indication of a good compromise, but sometimes it leads to HillaryCare and everything goes down in flames. Here is a status update.

The Assembly passed the budget in a late night session then said it was going on recess for a month. The trouble started in the Senate before the Assembly even started. Senator Perata was not happy with a package of tax cuts that the Republicans wanted. Then the Senate Republicans started moving the goal posts. They went back to demanding even more cuts, without spelling out what they meant.

Meanwhile, advocates for the poor, elderly, education and transportation expressed their disappointment at the budget that passed the Assembly. George Skelton today went after the cuts to the poor.

Anyway, it was about the time of the wine-tasting that the legislative leaders hatched their plan to roll California's most vulnerable.OK, maybe I'm guilty of a cheap shot. But it's no more a cheap shot than picking the pockets of the poor in order to bring spending and taxes closer into balance.

The victims list includes 1.2 million impoverished aged, blind and disabled, plus 500,000 welfare families, mostly single moms with two kids.

Skelton then reminds us of the comments made by Nunez and Perata earlier on these type of cuts.

Check this Perata comment to reporters after a July 12 negotiating session with GOP leaders:

"They want us to cut in places that Democrats just didn't get elected to come up here and cut. So for any program that involves the elderly, people who are disabled, people who are mentally ill, our mantra is kind of, we're here to protect those who can't protect themselves."

Nuñez was even more adamant: "We're not going to take the canes away from the blind. We're not going to kick people out of their wheelchairs … kick poor kids into the street. We just refuse to do that under any circumstances."

Guess he was speaking literally. Could have fooled me. I and virtually everyone around the Capitol thought he was promising not to buy Republican votes with poor people's pocketbooks.

Look, they managed to restore most of the cuts that Arnold had proposed, but not all. But then they went and cut taxes, which opened them up to new criticism. This has opened them up for criticism for both their previous comments. It's hard to justify the tax cuts when they had said they were not going to cut aid to the most vulnerable and then they did just that. Then Nunez made it even worse.

At 4 am this morning the Assembly passed the budget. The Senate is hearing it right now, and is expected to pass it, though not without some rancor. The budget was passed mostly on the backs of cuts to transit funding, the poor and teachers. The Democrats appear to have caved on most issues, but not to the extent that the Republicans and Arnold wanted.

Let's run down a few details as to the actual program cuts.

• The Republicans wanted $2 billion in cuts. They got $1.4 billion
• The government will pay $2.5 billion in bond obligations. That is $1 billion more than required. Arnold had proposed $1.6 billion in early payments originally.
• $1.257 billion in gas taxes, which were intended to go to public transportation have been rerouted to the general fund. This is a one time shift. It has led many people to say that the budget has been passed at the expense of transit, which will lead to increased pollution and traffic. This may cause LA to put off plans for expanding the Expo light rail line. BART may have to delay expanding the line to the Oakland Airport.
• The Democrats had declared that eliminating the cost of living increases for the Supplemental Security Income/State Supplemental Payment (SSI/SSP) was unacceptable. They have agreed to suspend the increase for four or five months. This along with CalWORKS cuts saves $247 million.
• They have cut $25 million intended to treat drug offenders from Prop 36 funding.

For more see this run-down on CPR.

Education has been fully funded to the Prop 98 requirements and the budget also includes a cost of living adjustment. That is the good news. The bad news is that the legislature agreed to go along with the governor and eliminate a tax credit for teachers. It was intended to help off-set the money teachers spend on out-of-pocket classroom supplies. Teachers routinely spend hundreds of dollars a years on supplies for their classroom that their districts can't afford to provide. This would have allowed them to deduct the expenses from their taxes. It's a little thing that makes all the difference for our hard working teachers.

The elimination of this tax credit is all the more disheartening with the news that the Assembly has agreed to go along with $600 million in tax breaks for corporations and movie studios. Senator Perata was steamed this morning and sent a letter to Speaker Nunez.

Dear Mr. Speaker:

I am alarmed and dismayed by rumors that you are considering a half a billion dollars in tax breaks for special interests.

As you and I well know, Democrats have sacrificed funding for education, have postponed a meager cost-of-living increase for the state’s most vulnerable disabled residents – the aged, blind and disabled, and have barely thwarted deeper cuts to education and higher education. Even the increases we proposed to the state’s Prop 36 program – aimed at keeping non-violent drug offenders out of prison and putting them into treatment programs – has fallen victim to concerns about the state’s long-term deficit.

But most ironic, we have surrendered $185m in teacher tax credits to balance the budget!!! How could you now throw them over for Hollywood movie moguls and multi-national corporations???

Our out-year budget problem is already $5.5 billion dollars. We cannot continue to fund education, higher education and crucial human services issues, such as the in-home supportive services program, childcare, or funding for the aged, blind and disabled by providing tax giveaways.

I am deeply disappointed and saddened by your actions – and hope you will reconsider.

The Senate is taking up the budget right now. SpeakOut and Calitics are calling on people to contact their legislators and encourage the Senate to take a stand against these tax credits and budget cuts. The tax credits were passed in stand-alone bills, not part of the main budget. They could be rejected by the Senate, without dooming the entire budget.

Let me take this opportunity to rant a bit about this AP story:

The state Assembly on Friday ended a stalemate over California's overdue budget with a surprise deal to give tax credits to movie studios, tech firms and other companies.

The tax-relief package — the state's first since 2001 — emerged as the key piece of legislation that prompted Assembly Republicans to end a standoff over a spending plan worth $145 billion. It now goes to the Senate, which was scheduled to meet later Friday.

The budget deal, approved 56-23 shortly after 4 a.m., was made possible by the compromise on tax credits, a separate move that was assailed by the Senate leader.

Excuse me...tax-relief?! How about tax credits, tax cuts, tax reductions. Anything but the politically loaded term tax-relief. That implies that taxes are a burden from which we deserve to be relieved. It is a complete right-wing frame that does not deserve to be in an AP story. I would expect the conservatives to get upset if tax giveaway was used instead. There is no cause for this language to be used in a straight news story.

Expect to hear more on the budget as the day progresses and the Senate takes up the budget. Given the tone of Perata's letter, it will not go smoothly.

UPDATE 12:15 Who knows if my post had anything to do with it, but the AP story has now been edited. "The tax-relief package" is now "The tax package". Wow. Notice that the WaPo still has "tax-relief" in its story. That means that the Chron deliberately edited it.

No, there is no deal to pass the budget, but the Democrats are scheduling a vote anyways. It will put the Republicans on record opposing and put some more public pressure on them to play ball in the negotiations. SacBee:

"Hopefully, the Republicans will have enough sense to vote for it because it's going to be a very strong budget," Assembly Speaker Fabian Núñez, D-Los Angeles, said after participating in budget talks on Thursday. "They're going to have to defend their opposition if they decide not to vote for it."

With a monthlong legislative recess scheduled to begin July 20, Núñez said he canceled his vacation plans and warned lawmakers to brace for a long summer that will require them to stay within two hours of the Capitol.

The Democratic leadership continues to find multiple pressure points on the Republicans.

Democrats, who refuse to cut social welfare programs, say the GOP governor should resolve problems with the Republican lawmakers.

"This is a fight between Republicans and Republicans," said Senate President Pro Tem Don Perata, D-Oakland.

Arnold's response was to fire right back and blame the legislators.

But Schwarzenegger's communications director, Adam Mendelsohn, said the legislative leaders need to resolve this on their own. In May, the governor submitted a $103.8 billion plan that proposed, in part, cutting social services to help narrow the state's operational deficit.

The public finger pointing goes round and round while negotiations take place in secret. Just like those mysterious Republican program cuts.

The Democratic health care bill, AB 8, passed a Senate panel yesterday, moving its way towards the Senate floor. Described as a "work in progress" by its author Fabian Nunez, the legislation is conditionally supported by a group of labor unions and consumers groups.

“While this is not a perfect plan, we believe it is a thoughtful plan that will help pave the way for comprehensive reform,’’ he said. “…Clearly there is no greater issue of state interest or urgency that we can be working on today than improving on our fragile health care system. This is a rare opportunity we have….we need to act now. We need to take advantage of the opportunity we have before us.’’

Senate President Don Perata said it was important to move AB8 this year, but indicated that his preference was a national solution. “There’s no doubt that we ought to have a national health care program… It’s scandalous that a country like ours is woeful in the way it treats and responds to people who are in ill health,’’ he said. “Until that day comes, California must provide leadership, not unlike what we did with AB32,” last year’s global warming bill.

It is unlikely that this bill will be put in front of the governor in its current form. Amendments will continue to be heard and soon the negotiations with the governor will begin. Anthony Wright has a good run down of the amendments that were heard yesterday.

SFChron:

The bill, AB8, was approved by the state Senate's Health Committee after a two-hour debate that attracted about 50 witnesses. The bill needs approval from one additional committee before it can be considered by the full Senate -- action that is expected to take place in the coming weeks.

It would also need approval from the state Assembly.

Over five hundred people attended yesterdays long hearing, where those 50 witnesses spoke. The outcome was already well known but the hoopla is indicative of the importance of this piece of legislation. All of the groups were able to lay out their positions on the bill, which will be sure to be factored into the negotiations.

Meanwhile, Arnold was still talking about his plan, which was never turned into actual legislation.

The governor, speaking at an event in Los Angeles Wednesday, said he was looking forward to the talks.

"My favorite proposal is our proposal, because it spreads it out," he said. "I think it is important that we spread out the responsibility."

AB8 does spread out responsibility. Employers without health care plans would be required to pay a 7.5% fee based on payroll to purchase insurance for their workers. Employees would be required to pay 4.5% of their salary toward coverage. Arnold on the other hand, would only require 4% from businesses, well below what most employers currently pay. It is a recipe for employers to drop their health care contributions.

Meanwhile, there are two competing studies about the impact of AB8 on job creation. Plus, the Republicans are running around trying to scare people about the bill, in the hopes of killing any reform. Today, Arnold has a webcast on health care, so we should see another round of stories on the issue in the morning. Things are chugging along, on schedule.

There are two central themes to Dan Walter's column today, both worth examining: Arnold's team is in damage control mode and that their new Air Resources Board appointee is a politico. Walters points out that while Arnold's reasoning for dumping Robert Sawyer are all over the map, his advisors are "maintaining strict message discipline" over their validity.

Schwarzenegger said such characterizations are "not fair" and refused to allow top aides to testify at a legislative hearing into the firing that his spokesman dismissed as a "political drill." To them, it's water under the bridge and everyone should focus on, as press secretary Aaron McLear said Tuesday, "looking forward."

They're concentrating, instead on promoting Sawyer's successor, veteran environmental bureaucrat Mary Nichols, contending that she's the perfect choice to provide leadership on air quality and bridge the gap between environmental and business interests.

This reads like Walters tried fishing around for a cogent argument for Sawyer's ouster, but ran up against tight-lipped spokesmen, who only wanted to talk about Nichols, the new appointee. They want to move past last week's story and on to the confirmation hearings. Unfortunately for them, the Senate conformation hearing will rehash what transpired, in an attempt to assess Nichols ability to resist political pressure from the Schwarzenegger administration.

While Nichols was widely praised by the environmental community, it appears that she is much more of a political animal than her predecessor and has a history of bending to her boss's will.

The biggest difference between Sawyer and Nichols, however, isn't so much one of philosophy but of political orientation. He is a veteran energy scientist with scant political experience while Nichols, an attorney by trade, has operated in a political environment for 30 years and accepts that when one serves a governor -- this is her third -- or a president, there is just one ultimate boss.

That was driven home eight years ago, during the first months of Gray Davis' governorship, when Nichols was serving as Resources Agency secretary and unilaterally altered the state's position on a high-profile lawsuit pitting farmers against environmentalists on a major water issue. She dropped the state's support for farmers, which generated howls from agribusiness and earned her a very sharp, semi-public rebuke from Davis, who dressed her down at a Cabinet meeting, reminding her that he and only he would set policy.

Her situation was uncannily similar to the pressure that Sawyer says he was getting from the Governor's Office. He refused to buckle to Schwarzenegger, but Nichols bowed to Davis and kept her job.

Nichols has already indicated her willingness to find common ground with the governor on a cap-and-trade system. That does not mesh with the legislature, or with the wording of AB 32. It will be a topic of discussion at the hearing, and has the potential to derail her appointment. However that seems to be fairly unlikely, considering the support she has received from the environmental community.

One of the biggest sticking points in the negotiations that led up to the passage of the landmark Global Warming Solutions Act (AB 32) was whether the goals to reducing greenhouse gas emissions were going to be accomplished through a cap and trade system. Governor Schwarzenegger favored that "market based approach", while the Democrats resisted codifying that into law. The compromise reached allowed that cap and trade was to be one potential solution, only after careful study by the California Air Resources Board (CARB).

Part of the recent dust up over the CARB was how it planned on addressing a potential cap and trade system. Arnold was twisting arms to insure that the CARB would take that approach and vowed that his next pick to head the board would support a cap and trade program.

Before I get ahead of myself here, I want to be clear about we are talking about. Cap and trade systems are basically emission trading programs. They encourage controlling pollution by providing economic incentives for reducing pollution emissions. Participating entities may trade carbon credits. Wikipedia is our friend:

In such a plan, a central authority (usually a government agency) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups that emit the pollutant are given credits or allowances which represent the right to emit a specific amount. The total amount of credits cannot exceed the cap, limiting total emissions to that level. Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances or face heavy penalties. This transfer is referred to as a trade. In effect, the buyer is being fined for polluting, while the seller is being rewarded for having reduced emissions. Thus companies that can easily reduce emissions will do so and those for which it is harder will buy credits which reduces greenhouse gasses at the lowest possible cost to society.

The environmental community is a bit split on the issue. Nunez has stated that he prefers the ARB meets the "emission-reduction goals with regulations and energy efficiency before a market system such as cap-and-trade is put into place." He is holding a hearing tomorrow on the governor's attempts to influence the ARB.

The Senate will take its turn investigating this issue when Arnold's pick for the new chairmanship of the ARB, Mary Nichols, comes up for her confirmation hearing. Perata writes letters, like this one to Arnold earlier this week:

As you know, you and I have not always agreed on the implementation of the state’s greenhouse gas law.

Specifically, I have taken issue with your preference for market-mechanisms – a.k.a., “cap and trade” – over strong regulation. Last October, I sent you the attached letter, opposing your broadly-drafted executive order directing the ARB to adopt market mechanisms concurrent with the adoption of regulations. I believed your executive order conflicted with AB 32. The law requires that the ARB adopt “early action” emission reduction regulations prior to the use of any market-based compliance mechanisms [Health and Safety Code Section 38560.5]. What’s more, AB 32 specifies that regulations are mandatory, while market-based mechanisms are elective – and, in fact, permitted only after extensive evaluation and a public process.

It's a little more wonky than the above, but you get the picture. There are some pretty high hurdles before a cap and trade system can be put into place under AB 32. Arnold has been working since day one to try and game the system. Trouble is that the language of AB 32 is pretty clear on the subject and it is what Arnold personally signed into law, following intense legilative negotiations.

As for Mary Nichols, she is getting widespread praise as an excellent choice for the chair of the ARB. However, note that she does have experience with running a cap and trade system, thus pleasing Arnold. AP:

Nichols said she supported market-based mechanisms as part of a broader effort that includes regulation. She said she already ran a cap-and-trade program on acid rain when she was at the U.S. Environmental Protection Agency.

"I think I can speak with some authority," she said. "It takes a strong regulatory backdrop. It takes good measurement and monitoring. It also takes a recognition that trading is just one tool. The key is the cap."

Expect Nichols to face some pointed questions by Perata about cap and trade during next week's hearing. He promised as much in the letter.

The Senate will determine the extent to which she is both knowledgeable about the law – and the law’s emphasis on strong regulation over market mechanisms – as well as independent, even if given a directive to take an action in conflict with AB 32.

We will establish a bona fide understanding of the law and its enforcement priorities.

The law is the law, not whatever Arnold says it is.

Sing it in the melody of the theme song from "Where in the World is Carmen Sandiego?".

The answer is not at the budget negotiating table. It also can be England, France and Austria. Arnold has been on an Europe tour, while the budget is being hammered out. I guess meeting with Blair, just before he stepped down and visiting friends in Austria was more important. When he first took off the legislative leaders seemed to not mind, but now that the negotiations have ground to a halt, his absences is slowing things down. SacBee:

Both Perata, D-Oakland, and Ackerman, R-Irvine, said they prefer to negotiate without Schwarzenegger until late in the process, and have not asked for his help. Before the governor left for Europe late Saturday, Perata told Schwarzenegger that his presence at budget meetings was unnecessary, though the Senate leader now believes lawmakers are at an impasse and need the governor.

"It's worked in the past," Perata said of the governor's strategy. "I think this year he's going to have to come in and lift a little more because we are quite a bit apart. The only way we're going to close that gap is by having the governor force that gap to be closed."

With Arnold's absence, it is increasingly likely that we will not make the July 1st deadline. Assemblyman De La Torre, a budget subcommittee chairman is correct:

"I think going off on a little road trip to Europe doesn't send the best message in regard to engagement on the budget," said De La Torre. "Even if you were to believe the 'Big Four' could bring things to a close in short order, he'd need to be there to close the deal."

Until Arnold get's back (I won't say home, since he doesn't actually live in Sacto), it is unlikely that the gaps will be closed. He is getting plenty of headlines, but our state government is languishing in his absence.