Capitol Alert: Democratic leaders say they have two-house budget plan

On the eve of the new fiscal year, Senate President Pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez said Wednesday that they have a unified Democratic budget framework.

Lawmakers and Gov. Arnold Schwarzenegger still remain far from enacting a bipartisan budget to bridge an estimated $19.1 billion deficit, however. As a consequence, the state will stop paying vendors, local governments and community colleges on Thursday. The state also will withhold pay for lawmakers and their aides.

Steinberg and Pérez met last night with the Republican governor and committed to regular negotiations that also include GOP lawmakers. That in itself was significant because Pérez had said he wanted to avoid private "Big Five" talks. The speaker also suggested Democrats do not plan to put up a budget bill for a vote that only has Democratic votes.

"It signals the next step of negotiations, so obviously that's going to require us to engage in 'Big Five' discussions with the governor and Republican leaders," Pérez told reporters outside the Governor's Office, with Steinberg standing next to him. "And then we hope we can quickly get to a package that we think represents the best consensus. We'd like to take that back to our conference committees and take that back to our floor and vote for it. But the only way to get there is to have consistent conversations right now."

Democrats presented Schwarzenegger a "framework" of their proposal on Wednesday, sources close to budget talks said. They have outlined budget principles on which they agree in a two-page document.

Democrats will pursue a new $1 billion tax on oil production, as well as seek to delay about $2 billion in corporate tax changes scheduled to take effect in January. They will also seek to maintain funding levels for Medi-Cal, In-Home Supportive Services and the welfare-to-work program.

They have not ruled out extending 2009 tax hikes on vehicles and income that are due to expire within the next year. Senate Democrats had eyed an extension of the higher car tax as one way to pay for a shift of public safety and welfare functions to counties, a restructuring package that remains in the joint Democratic budget.

Democrats also will seek the roughly $54 billion for K-14 schools that Assembly Democrats wanted in their plan, according to a source close to budget talks. Senate Democrats initially proposed less funding for schools, which would have required some program cuts. Democrats also want the state to commit to paying the additional $9.8 billion to schools over several years that was negotiated in last year's budget.

Democrats will still pursue the speaker's "Jobs Fund" plan of borrowing against future oil tax revenues to provide money for jobs in select industries and local governments. But they have not determined how much they will seek to borrow, since Senate Democrats want to use future oil tax revenues to pay for public safety and welfare functions they move to counties.

The document also insists that Democrats do not want to pursue "cynical" borrowing to balance the budget, a nod to past practices of relying on risky maneuvers that never come to pass due to legal problems.