Legislators fail to act on budget crisis

SACRAMENTO —  An emergency session called by Gov. Arnold Schwarzenegger to address the state’s budget crisis ended Tuesday night in bickering and party division. Legislators adjourned without taking any action that improves the state’s finances.

The state’s estimated budget shortfall has swelled to $28 billion through the middle of 2010.

Democrats in the Senate and Assembly had proposed a package that would have wiped out most of the deficit by tripling car license fees and by cutting billions of dollars from schools, healthcare, welfare and other government services.

The plan failed to gain the two-thirds majority needed for passage, however.

The proposal would also have temporarily increased income taxes on Californians earning more than $40,000 by $79 to $200 per year.

In the end, GOP lawmakers balked at raising taxes.

Democrats had presented the bill after efforts by legislative leaders and the governor to reach a bipartisan compromise collapsed Monday night.

“It’s like a kindergarten up there,” said Schwarzenegger, speaking to a group of reporters outside his Capitol office, a floor below the Assembly and Senate chambers.

“I am very disappointed that the legislators failed the people of California,” he said.

Schwarzenegger, who had proposed a separate budget plan that included billions of dollars in new and increased taxes on sales, alcoholic beverages and oil companies, said he would have vetoed the package crafted by the Democrats.

The proposal did not include measures Schwarzenegger said are needed to stimulate the economy, including easing of state labor laws and a tax break for film companies.

But the inability of lawmakers to pass any legislation in the emergency session Schwarzenegger called highlighted his limited influence in the Capitol.

Not a single Republican indicated they would support the level of tax hikes called for by the governor and Democrats under any circumstances.

“It is irresponsible to ask taxpayers for another dime of their hard-earned money, especially when we haven’t put the microscope on state spending,” said Senate Republican Leader Dave Cogdill of Modesto.

Tuesday’s gathering of the full Assembly and Senate was the last opportunity for the lame-duck Legislature to address the state’s massive budget problem.

A new class of lawmakers takes office Dec. 1, and state officials say no legislative business can take place in the intervening days, while they are updating computer systems.

Schwarzenegger declared that he will call another emergency session when the new group of lawmakers start work Monday.

The failure of lawmakers to make any progress on the deficit puts a serious financial strain on the state.

California is projected to come up short on the cash it needs to pay routine bills by February or March if action is not taken to stem the flow of red ink before then.

State budget analysts are warning that California’s credit rating is at risk of a downgrade.

State Treasurer Bill Lockyer said a cash shortage could cause the state to suspend core healthcare and public safety programs, as well as public works projects.

In the event of a shortage, he said, state law requires finance officials spend whatever money comes into the state on schools and repaying bond debt first.

Suspending the other programs, he said, “will profoundly threaten Californians already hit hard by the economic slump.”

Democrats accused GOP lawmakers of blocking the plan for ideological reasons.

Every Republican member of the Legislature except Assemblyman Roger Niello (R-Fair Oaks) has signed a pledge vowing never to increase taxes.

“All of us come to the table with our ideology and I certainly have mine,” said Assembly Speaker Karen Bass (D-Los Angeles).

“But when you are in a crisis, you have to put your ideology aside.”

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evan.halper@latimes.com

jordan.rau@latimes.com

Times staff writer Patrick McGreevy contributed to this report.