California governor mends fences after budget veto

Reuters News
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Posted: Jun 22, 2011 6:34 PM
California governor mends fences after budget veto

By Jim Christie

SAN FRANCISCO (Reuters) - California's governor is mending fences with fellow Democrats in the legislature to get them back on board with his budget proposal after vetoing their spending plan, a spokesman said on Wednesday.

At the same time, Governor Jerry Brown will reach out to Republicans who have been blocking his budget for the fiscal year beginning on July 1, which Democrats said was a major reason they approved a spending plan on their own last week.

"The governor is continuing to talk with lawmakers on both sides of the aisle," Brown spokesman's said.

Brown does not intend to draft a new budget plan that could clear the legislature solely with votes from Democrats as some media accounts reported, the spokesman added.

"His approach has not changed," the spokesman said, noting Brown still sees the budget plan he unveiled in May, known in the state capital of Sacramento as the "May revise," as the best option for closing a roughly $10 billion shortfall.

"He's working with the May revise," the spokesman said.

Brown last Thursday stunned Democrats who control the legislature by vetoing the budget they approved a day earlier and bluntly criticizing its "legally questionable maneuvers, costly borrowing and unrealistic savings."

The veto left many Democrats feeling "like they were thrown under the bus," an aide to a high-ranking Democrat said.

BACK TO SQUARE ONE

A spokesman for a top Democrat confirmed Brown's spending plan will guide budget talks, knocking down rumors of an alternate plan that spread through the statehouse on Tuesday.

The rumors followed closed-door meetings between Brown and Democrats to discuss budget matters. The rumored alternate plan was said to be intended to allow Democrats to approve a budget with a simple-majority vote just like they did last week.

They have the votes for that but are a handful of votes short of a required two-thirds majority to approve tax measures, giving Republicans the means to stymie any spending plans calling for new revenue from taxes.

Democratic lawmakers have been pressing for new revenue in addition to deep spending cuts as part of a budget plan.

Republicans want more cuts and have blocked Brown's budget plan because it calls for lawmakers to approve a measure that would ask voters to back tax extensions.

Some Republicans have said they would be open to a budget compromise if it includes a spending cap and changes to the state's pensions and environmental regulations. Brown has not ruled out a budget deal including those issues.

"We're back to the same terms, the same kind of conditions we had before," said Larry Gerston, a political scientist at San Jose State University.

HELPING HANDS

State Controller John Chiang gave Brown a hand on Tuesday by invoking a law approved by voters last year to suspend lawmakers' pay until they send the governor a balanced budget.

Chiang previously threatened to withhold their pay if they did not meet their June 15 deadline for approving a budget, a factor fueling the Democrats' push to pass a spending plan.

Their budget did not "add up," Chiang, a Democrat, said. "My office's careful review of the recently passed budget found components that were miscalculated, miscounted or unfinished."

Also on Tuesday, Standard & Poor's Ratings Services backed Brown's budget plan, although the agency has concerns about its call a statewide vote on extending temporary tax increases.

Enacting a budget with "structural attributes similar to those in the governor's revised budget proposal could lead us to revise the state's rating outlook to stable from negative. Moreover, it could potentially lead us to raise the rating depending upon how much we viewed such a budget as improving the state's fiscal structure," S&P's report said.

S&P rates California 'A-,' the agency's lowest rating for any state. A better credit rating could reduce borrowing costs for California, the U.S. municipal bond market's biggest issuer of debt last year.

(Editing by James Dalgleish)