Democrats say they are fed up with the two-thirds vote requirement to pass budgets and taxes. They are trying to figure out a way to get around the Republicans but their efforts may be too little, too late.
A state investment panel put hundreds of publicly-funded construction projects on hold Wednesday because the budget is not balanced.
But, democrats have come up with an $18-billion package of cuts and taxes, a plan they insist does not need republican support.
A vote is expected Wednesday night.
None of the three State Investment Board members wanted to vote yes, but given California's cash crunch, they had to.
They killed about 2000 publicly-financed roads, schools and housing construction projects statewide, possibly eliminating 200,000 jobs over 18 months.
"You usually look to construction as bringing a state out of a recession. Housing starts first, commercial follows next. Those are high-paying jobs that bring taxes and revenue into the state," said Dick Ackerman with the California Association of General Contractors.
The money now will be diverted to help the state pay for schools and social programs.
Had there been a plan in place to solve the state's $42-billion deficit, the state could have gone to Wall Street to borrow the money. Instead, it is Day 42 of the gridlock with Republicans still refusing to go along with tax hikes to solve the budget crisis.
"I hope the legislators come to their senses and work on this, and solve this problem before Christmas. I think the people of California deserve a great Christmas gift, and to have a budget in place," said Gov. Arnold Schwarzenegger.
This loss of public works funding is the most dramatic consequence yet of California's financial crisis. The extreme move pushed Democrats to propose a new plan to break the budget log jam, that can pass on a simple-majority vote without Republicans.
The plan contains $9.3 billion in new fees and taxes, while cutting $7 billion.
Democrats say they can bypass GOP votes because it does not increase the amount of taxes overall. It just shifts them.
The creative maneuvering includes dropping all state taxes on gasoline and replacing it with a 39 cent-a-gallon fee. It also adds a 2.5% surcharge on state income tax.
"It is a significant dent and will hopefully give bondholders and the people of California the confidence that we are on our way to solving the problem," said Senator Darrell Steinberg. "These are taxes. There should be a two-thirds vote. Californians want to be protected from it. And, they're now calling it fees. This is what happens when you have a liberal democrat majority that's addicted to taxes," said Assemblyman Mike Villines.
Democrats are hoping that Wall Street will see California can solve its budget problems and deem it credit-worthy enough to give a loan to. California has the lowest credit rating of all states in the country.
More than 350 projects have been halted in the Bay Area.
They include a $7-million renovation at Cal-Fire's Alma Helitack Helicopter Base in Santa Clara County.
Other projects include the $35-million fourth bore to the Caldecott Tunnel and improvements to the $15-million Interstate 580/Highway 101 connector in Marin.
Affordable-housing projects such as the San Leandro Crossings will have to wait to receive $12 million in state funding. So will school upgrades like an $11-million improvement at West Contra Costa Unified.
One project not affected is construction of the New Bay Bridge, which is being paid for with bridge tolls and not bonds.