Budget negotiations break down


Budget talks between the Governor and Democratic leaders have collapsed again. It is Day 62 of the stalemate, and California has about a month's worth of cash left on hand. Democratic leaders announced they thought they were close to a deal with the Governor, but they say he has suddenly backed off.

"He appears to be shutting down. Put simply, the Governor appears to be getting cold feet," said State Senate President Darrell Steinberg (D).

Democrats suspect a lawsuit filed on Tuesday by the Howard Jarvis Taxpayers Association made the Governor think twice.

The group believes parts of the Democratic package of solutions are illegal, since it takes advantage of a loophole that bypasses the minimum number of votes normally required to pass tax hikes.

"The people in the state of California made it very clear that they like the 2/3rds vote as a reasonable protection against excessive taxation," said Jon Coupal, from the Howard Jarvis Taxpayers Association.

The Governor's office denies the lawsuit had any influence on his decision to back down. Aides say the Democratic package still does not contain everything the Governor wants.

"We need cuts that are real, we need economic stimulus to get people back to work, and we need to streamline government. We need government efficiencies in the package," said Aaron McLear, the Governor's press secretary.

The latest breakdown in talks makes it very real that IOUs will be issued to pay the state's bills. That includes IOUs for people who are supposed to get state tax refunds.

Democrats went ahead and sent their $18 billion package of cuts and taxes passed last month without Republicans to the Governor in the hopes of averting the IOU option. Now the ball is in his court.

"The Governor signing this package wards off the fiscal Armageddon that he's warned of," said Assembly Speaker Karen Bass (D) of Los Angeles.

On Monday evening, Governor Schwarzenegger wasted no time vetoing a budget plan that reached his desk late in the day.

Democratic leaders sent the governor the $18 billion package lawmakers approved in December. He vowed to veto it then, but now Democrats called it "the only game in town" and pushed ahead with it -- optimistic he might approve it.

After two months of negotiations, California is back to square one. Only this time, the state's coffers are nearly empty.

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