Assembly Republicans have taken a stand against the Democratic budget package by threatening to block one of the few bills that require two-thirds support, a proposal that would allow state fiscal leaders to delay payments to schools and local governments to help ensure California has enough cash to pay its priority bills.
Assembly Bill X8 5 is one of the more crucial bills in the Democratic budget package, considering that it is designed to shore up California's cash flow in the coming weeks. The legislative delay also forced Treasurer Bill Lockyer to postpone a $2 billion infrastructure bond sale that he had planned for next week.
The bill passed the Senate on a bipartisan 37-2 vote Monday. But Assembly Republicans did not approve the measure and demanded a budget committee hearing before considering it on the floor.
Assemblyman Jim Nielsen, R-Gerber, said at the close of the Assembly Budget Committee's hearing Wednesday that Republicans may withhold their floor votes on ABX8 5 unless Democrats negotiate with Republicans to pass "some real cuts." Nielsen and three other Republicans on the committee ultimately voted to move the bill to the Assembly floor, but with the proviso that the GOP caucus wants further negotiations.
"I do not believe it prudent for us to just move some of these solutions along without cuts concomitant," Nielsen said, adding later, "I'm being predictive of floor action. I'm not saying that there are going to be any floor votes for two-thirds things unless we get some cuts, simply put."
Assemblyman Wesley Chesbro, D-Arcata, responded, "I'd just like to express, Madame Chair, some frustration with our friends from the other party who say they want more cuts. And we put up our votes for cuts from things we care very deeply about, and they're (not voting for them)."
Nielsen later said he could not guarantee that the caucus would block the cash deferral bill without further cuts. But he said Republicans wanted the chance to negotiate both immediate reductions and cuts in the next fiscal year. Assembly Democrats passed about $2.3 billion in solutions on Monday, but no major reductions in education or health and human services that Gov. Arnold Schwarzenegger wanted.
"A good place to start would be the governor's list of cuts," Nielsen said. He offered no more specifics on cuts, saying he didn't want to "negotiate the budget in the newspaper."
Shannon Murphy, spokeswoman for Assembly Speaker Karen Bass, D-Los Angeles, said Republicans were shifting their demands.
"On Monday they said they wanted a hearing, and made no mention of leveraging additional cuts," Murphy said in an e-mail. "Today we gave them their hearing, and now they have moved the ball and want to leverage cuts. We are now past the 45-day period for the Special Session and the Republicans have never put forth a single idea or plan. They simply want to leverage their votes on one bill for unrelated issues."
ABX8 5 would give authority to the treasurer, controller and Department of Finance to delay payments to schools and local governments as needed over the next 16 months. Fiscal leaders already have said they need to delay payments to higher education, trial courts and the State Teachers' Retirement System in March and April to ensure California has enough cash to pay its bills in early April.
Various education advocates, particularly those from community colleges, testified Wednesday that the payment delays could hurt schools' abilities to meet their own financial obligations. Democratic legislators said they would try to address those concerns with subsequent legislation.
California is running a $6.6 billion deficit in 2009-10, contributing to the cash flow problem. But the state also has annual cash timing issues because it receives the bulk of its tax revenues in mid-April when Californians file their 2009 income taxes. After mid-April, the state will have enough cash to pay its bills until mid-summer.
Lockyer said Wednesday that he needs ABX8 5 to pass before he is willing to sell another round of infrastructure bonds. He canceled a $2 billion sale scheduled for next week and another $2 billion sale later in March. That would allow new construction projects to begin and create more jobs.
"For every billion dollars in bond spending that goes out the door, it creates about 16,000 good, middle-class, largely blue-collar construction trade type of work," Lockyer said.
The postponement of the bond sale does not yet threaten to slow or stop current construction projects, which have enough money to continue until mid-summer. But it makes it more difficult for the state to begin new projects this spring.
After the hearing, Nielsen questioned the consequences of not passing AB X8 5.
"Let's just say the consequences are arguable," Nielsen said. "I think there are arguments that indicate we are not on the precipice at this point."
The Assembly is scheduled to hold floor session today at 9:30 a.m.
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