SACRAMENTO -- This is usually the time of year when legislators begin sparring in earnest over the adoption of a state budget for the fiscal year that begins July 1.
But this week they're scheduled to begin sparring in earnest -- and doubtless at length -- over plans to fix a $24 billion hole in the budget they approved in February for the coming fiscal year, and the year that ends June 30.
So much for working ahead of schedule.
The budget-balancing plan combines deep cuts, new taxes and some accounting sleight of hand, and almost certainly raises a few questions. Such as:
Who came up with this budget-balancing plan?
It was a group effort. Gov. Schwarzenegger offered his version last month, after state finance officials put together a new forecast of how much revenue the state could expect to collect in the coming fiscal year, and what bills it might incur.
Then a 10-member, two-house legislative committee (three Democrats and two Republicans from each house) took about a month to overhaul the governor's plan.
Since Democrats dominate both houses, they won any disputes, so it's safe to call the plan being voted on this week the Democratic legislative proposal.
But Democratic leaders took pains to point out that the committee accepted about 45 percent of Schwarz-enegger's ideas in total, and about 93 percent in part.
What's proposed to get cut?
Just about every major area of state spending. Elementary and high schools were cut by $4.5 billion (about half of which will be replaced by one-time stimulus money); community colleges by $1 billion; and the University of California and California State University systems by about $2 billion over two years.
The committee rejected plans by the governor to abolish several health and social service programs for poor, elderly and disabled people, but did make cuts in them.
The prison system got whacked by $1.2 billion, and the judicial branch by $168 million, mostly from closing courts one day a month. About $11.4 billion of the deficit is filled by spending cuts.
What about taxes and fees?
About $2.5 billion worth is in there. The biggies would raise the state's cigarette tax from 87 cents a pack to $2.27 ($1.2 billion); impose a new 9.9 percent tax on oil produced in the state ($830 million); a $15-per-vehicle registration fee to fund state parks ($145 million); a $48 fee on home insurance policies to build a pot of money for wildfires ($120 million); and a $6-per-unit hike in commu- nity college fees ($80 million.) Schwarzenegger has vowed to veto all taxes and fees.
What else is in there?
There's $2.1 billion worth of grabbing gas-tax money from local governments and mass transit programs; accelerated collections of personal and corporate income tax payments ($610 million); a 10 percent higher income tax withholding rate, starting in January ($1.7 billion); and about $2.2 billion in changes in business taxes.
Oh, and the state would save $1.2 billion by paying employees on July 1, 2010, instead of June 30, 2010, thereby pushing the payroll expense into the next fiscal year.
Speaking of state workers, why aren't they taking a hit?
They did. The governor exercised his executive authority in December and ordered two-day-a-month furloughs, tantamount to a 9.3 percent pay cut. He eliminated 5,000 state jobs, although many of them will find work elsewhere in state bureaucracy.
Why doesn't the state just do what most businesses do, and lay off workers when revenues slip?
Mostly because the state doesn't -- and couldn't -- operate like a business. Unlike private businesses, most of the state's spending isn't spent on personnel costs.
The part of state spending that is most in trouble, the general operating fund, employs about 100,000 people. If you fired all of them and didn't replace them for two years, you still wouldn't cover the deficit.
In fact, most of the general fund represents pass-through money that the state doles out to schools and local governments. The state has no or very little say in the employment practices of cities, counties and schools.
How did we get into this mess?
First and foremost, the bleak world economy. Also the state's overdependence on income taxes from the wealthiest Californians. Too much spending on programs and tax breaks and not enough saving in years that were replete with tax revenue. Generous pension plans locked in when times were good. Too much growth in state-financed programs, some triggered by automatic spending increases in law, without enough thought about how to pay for them down the road. The rollback of the vehicle license fee just as other state revenues began to slip. Lousy political leadership. Too much budgeting by ballot box.
Can't we quit spending money on illegal immigrants?
The short answer is "nope." For one thing, it's unclear how much the state spends on undocumented workers, versus what they contribute in payroll taxes and to the overall economy.
For another, the federal courts have said (a) states cannot deny emergency medical care to anyone, and (b) that illegal immigrant children are entitled to go to public schools.
What happens next?
Democratic legislative leaders said last week they expect to put the plan up for a vote as early as Tuesday.
Most of the proposals can be approved by simple majority votes, which means Republican legislators are superfluous to the process. But the tax hikes will take two-thirds approval from both houses, and GOP leaders have said emphatically that there will be no Republican votes for any of the proposed tax hikes.
Once the plan gets to the governor, he can veto part or all of it. What's more likely is that legislative leaders and Schwarzenegger will huddle privately to work out a compromise, maybe by the end of this week.
One of the big fights is likely to be over Schwarzenegger's insistence on a $4.5 billion reserve. Democrats think the state can get by with a smaller fund.
What happens if they don't reach a deal?
State Controller John Chiang has warned that the state's piggy bank will be empty by the end of July.
State financial officials usually borrow money from private investors to smooth over cash flow problems at the beginning of fiscal years.
But Chiang and state Treasurer Bill Lockyer have said that without a no-gimmicks balanced budget in place by June 30, it will be exceedingly difficult and expensive to borrow enough money.
The other options are to delay payments to some of the state's creditors until more tax revenue comes in, or issue IOUs, formally called registered warrants.
Why doesn't the state just declare bankruptcy?
No can do. Federal laws restrict access to bankruptcy to individuals, businesses and in some cases to local governments.
Two plans have emerged to close the budget deficit, one from Gov. Schwarzenegger and another from the Democrat-controlled conference committee. Here's how some provisions match up.
GOVERNOR'S PLAN: Cuts $4.5 billion from schools from the February budget, and about $700 million from community colleges.
Lets districts cut the year by up to seven days.
Includes a $315 million diversion from school bus programs to the state's general fund.
DEMOCRATS' PLAN: Cuts $3.8 billion from schools, $700 million from community colleges.
Lets districts cut the year by up to five days and suspend the high school exit examination.
Guarantees schools will be repaid at least
$9.3 billion in past budget cuts beginning in 2011 -- a move that was rejected by voters in May.
Increases fees for community college by $6 per unit, to $26 per unit.
GOVERNOR'S PLAN: Reduces state aid to UC and CSU by about $2 billion. (About $1.7 billion is offset by stimulus money.) Phases out CalGrants, the state's college fee assistance program, for a savings of $87.5 million.
DEMOCRATS' PLAN: Accepts the governor's cuts, but divides them equally between UC and CSU.
Rejects governor's plan to phase out CalGrants.
HEALTH AND HUMAN SERVICES
GOVERNOR'S PLAN: Eliminates the California Work Opportunity and Responsibility to Kids Program -- CalWORKS. Cutting off the welfare-to-work program would save the state $1.3 billion (and mean the loss of about $4.5 billion in federal matching funds).
Saves $1 billion by securing a waiver from the federal government so California can reduce rates and tighten eligibility requirements for Medi-Cal.
Eliminates Healthy Families, a health insurance program for 930,000 low-income children. It would save $375 million (and cost $500 million in federal matching funds).
Eliminates the Adult Day Health Care program, for a savings of $170 million.
Restricts In-Home Supportive Services to only the most severely ill and disabled, and lowers the state's share of IHSS worker pay to $8 an hour, for a savings of about $730 million.
Reduces maximum Supplemental Security Income/State Supplementary Payment grants for low-income elderly, blind or disabled to $830 a month for individuals and $1,407 a month for couples. Saves $248 million.
DEMOCRATS' PLAN: Retains CalWORKS, but cuts $270 million by reducing payments to counties, exempting families with very young children from work requirements and reducing caseload estimates.
Agrees with the governor's plan for a federal waiver and $1 billion in savings in Medi-Cal, but rejects the governor's plans to eliminate some programs for legal immigrants.
Retains Healthy Families program, but cuts $70 million by freezing enrollment unless private donations become available.
Retains the Adult Day Health Care program, but limits it to three days a week, for a savings of $26.8 million.
Rejects most of the governor's reductions for IHSS, but saves $118 million by increasing the share of payments for some clients and reducing or eliminating services for clients with the least amount of need.
Adopts the governor's cut to the SSI/SSP monthly grant for couples -- taking them from $1,489 to $1,407 -- but limits cuts to individuals to $5 a month, reducing payments from $850 a month to $845. Saves $116 million.
GOVERNOR'S PLAN: Borrows $2 billion from property tax revenues ordinarily allocated to cities, counties and special districts. The money is supposed to be repaid in three years.
Shifts $336 million in local transit funds and $1.7 billion (over two years) in local government transportation money to the general fund to make state transportation bond debt payments.
DEMOCRATS' PLAN: Rejects the local government borrowing plan.
Accepts governor's transportation fund shifts.
Shifts $350 million in local redevelopment funds to schools.
GOVERNOR'S PLAN: Sells a portion of the State Compensation Insurance Fund for $1 billion.
Allows some oil drilling off Santa Barbara for $1.8 billion in royalties over the next 14 years.
Imposes a 4.8 percent surcharge on property insurance premiums to raise $76 million for wildfire response.
Accelerates tax payments by requiring corporate and individual filers to pay 40 percent of their liability in June. Saves $610 million.
DEMOCRATS' PLAN: Accepts governor's revenue proposals, but is silent on oil drilling plan.
Defers the June 30, 2010, paycheck for state employees until July 1, 2010, saving $1.2 billion on the books in the fiscal year.
Increases the cigarette tax by $1.50 per pack effective Oct. 1 , taking the tax to $2.37 per pack and raising $1.2 billion in 2009-10.
Imposes a 9.9 percent tax on oil extraction to raise $830 million.
Requires business and government to withhold 3 percent of payments to independent contractors, as a credit against taxes owed by contractors. Does not change tax liability, but is estimated to raise $2 billion by increasing taxpayer compliance and accelerating revenue to the state.
-- Compiled by Dan Smith,
Bee capitol bureau chief