Flame wars

The Merc's Mike Zapler reports we are currently in the "wait" portion of the state's hurry-up-and-wait budget process.

"Despite plunging tax revenues, Wall Street's unwillingness to loan the state money and billions of dollars worth of IOUs hitting mailboxes, California's leaders are displaying a seeming lack of urgency to close the state's $26.3 billion deficit.

Gov. Arnold Schwarzenegger and legislative leaders blew past a supposedly ironclad June 30 deadline to pass a new budget, and no one can say with any precision when the new moment of truth is, if there is one. Each side seems to be waiting for the other to blink.

The question now hovering over the impasse: How long can this last?

Based on projections of the state's financial outlook by Controller John Chiang, the answer may be several more weeks, if not months. That's when he projects the state will finally run short of cash to make legally mandated payments to schools and bondholders; the crunch would have come even sooner had Chiang's office last week not resorted to IOUs to lower-priority creditors like vendors.

An extended delay would come at a huge cost to California's prestige, possibly sending its credit rating into junk-bond territory and driving an untold number of companies that rely on state money out of business.

"We're in deep trouble in September, if not sooner," Chiang said in an interview Tuesday.

September it is, then...

The Chron's Matthew Yi and Carla Marinucci report the governor has gone into "the steely-eyed, sword-wielding strongman" mode.

"In his latest efforts to close the staggering $26.3 billion deficit, Schwarzenegger is demanding ever-deeper cuts that Democrats say will shred the social safety net. He is even entertaining what some Democrats regard as a "nuclear option" in California politics - the suspension of Prop. 98, the landmark initiative voters passed in 1988 to ensure that 40 percent of the general fund goes to public schools and community colleges.

"With the state's bond rating collapsing and banks refusing to cash state IOUs after Friday, furious critics - including Democrats and labor unions - say the California Republican is engaged in an outrageous attempt to restructure government.

"I feel that all of the things that he was not able to accomplish in 2005 - he's trying to use this budget process to do that. I really think our sole focus should be on (the current) deficit," Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), said after refusing to show up at a budget negotiating session with the governor Monday."

As a side show, Capitol reporters were treated to a flame war between the Schwarzenegger administration and the speaker's office Tuesday. After Assembly Speaker Karen Bass refused to attend a Big 5 meeting earlier in the week, Schwarzenegger spokesman Aaron McLear said Bass's"boycott" was not helpful.

That led the speaker's spokeswoman, Shannon Murphy to send out "A little record straightening after Aaron McLear’s briefing" to those on the Speaker's mailing list.

"Staying off buses in Montgomery to bring down Jim Crow is a boycott.  Missing a photo op to prop up Arnold Schwarzenegger is not.  As the Speaker has said, she will attend any and all Big 5 meetings that focus on solving the deficit immediately," the e-mail stated.

Then things got ugly...

Murphy's e-mail continued: "McLear on July 7: “Its really unclear a lot of what Bass is talking about.” McLear on June 2 “It is our hope that Assemblywoman Evans can keep up.” I guess when your arguments don’t hold water you resort to insulting the intelligence of women lawmakers.

Oh, it is on now...

The LAT's Eric Bailey says Bass's new budget stance may not have many rewards .

 "Assembly Speaker Karen Bass takes pride in being a consensus-builder, a soothing and maternal let's-get-along kind of leader. Now please pardon the interruption -- Madam Speaker is ticked off.

"Finally, she boiled over at Gov. Arnold Schwarzenegger. He rankled Democrats with demands that could undermine their union allies and a declaration to the New York Times that he was "perfectly fine" despite the fiscal meltdown, ready to enjoy an evening cigar in his Jacuzzi.

"The Assembly's den mother became a growling bear, griping after an unsuccessful budget session between legislative leaders and the governor that Schwarzenegger "broke it. He should fix it."

That rare outburst earned an ovation from her Democratic caucus. But Bass has no time to be sanguine. A few Capitol insiders say that barely a year into her tenure, attempts to topple Bass are inevitable.

Her critics say she has a wishy-washy administrative style and is politically tone deaf. They fault her for one of the year's biggest political blunders -- hiking salaries for legislative staff a few weeks before the May 19 special election. The finance measures on that ballot failed, putting the state deeper in the hole.

"I actually like her more in the last week or so," said Assemblyman Charles Calderon (D-Montebello), who has often jousted with Bass over policy and politics. "She clearly has made some mistakes, some very large mistakes. But she is speaking up and standing up for us. I believe she is going into her best moment."

Isn't that normally when Speakers are kicked out in this term-limits era?

The LAT's Shane Goldmacher says if noone else will take your IOUs, you can give them back to the state when you pay your taxes.

"

A California tax authority announced today that it would accept state-issued IOUs as payment from those who owe personal or corporate state taxes.

"Taxpayers must sign the back of their IOUs and write, “Pay to the order of the Franchise Tax Board.”  The promissory note can then be mailed in with the tax bill, the board said.

"The state began issuing the IOUs instead of checks to pay some of its bills July 2. State Controller John Chiang has said he will be forced to issue $3.2 billion in paper promises this month unless state officials reach a budget accord."

Meanwhile, the SF Weekly catches Jerry Brown "carbo loading" for his big gubernatorial run.

 "We interrupt Brown to find out how, exactly, he intends to keep up with younger rich opponents such as Gavin Newsom, Insurance Commissioner Steve Poizner, and ex eBay CEO Meg Whitman.

"That's the big question, isn't it?" Brown says, before contemplating in silence a few moments the fact I've said I work for SF Weekly.

"The way I'm going to do it is, I'm going to bring a message of how we've got to bring spending in line with revenue," he said. "I'm going to talk sense to the people of California. They need someone who's experienced and knows how to get things done."

With that, Brown "turned to flirt  with a group of middle-aged women who are at the cafe for a book club meeting, and then heading back outside."