Calif., Federal fiscal solutions joined at the hip

Gov. Schwarzenegger has a lot in common with President Barack Obama. Both are in the throes of negotiations for multi-billion dollar economic deals. Both are professed champions of the environment and job creation. And both, eventually, are going to need two Republican votes in the Senate to get anything done.

And as Schwarzenegger stays locked in closed-door budget negotiations with legislative leaders, an eye is being cast to that parallel galaxy far, far away in Washington D.C.

What happens in Washington does not stay in Washington. If a federal stimulus package is passed, it will mean billions in new federal funds for California, particularly in the areas of health care and education. And for politicians closer to home, that’s potentially billions in cuts that Democrats won’t have to make, or taxes that Republicans won’t have to increase.

“The key thing here is not to let anyone fool themselves by thinking that the federal government should bail out California,” Schwarzenegger said Monday. While he blamed “half” of the state’s current problem on the macro economic picture, he said, “the other half is self-inflicted wounds. It is because we haven’t had a rainy day fund. It is because we did spend more money than we have taken in consistently. When we have taken care of that, then we can go to the federal government and say, ‘OK, we would like to work together with you.”

And while the governor has called on everyone to stay focused on the state’s own problem, you can feel the collective slouching toward Washington.

Just weeks ago, Speaker Karen Bass, D-Los Angeles, was advocating for federal money to cover any potential cuts Democrats were being asked to make. “To address our budget problem in a way that does not harm the state’s ability to contribute to national economic recovery, California needs to have any new state revenue at least matched by discretionary funds from the federal government,” she wrote in a November editorial.

Some budget stakeholders are also banking on a D.C. bailout. Kevin Gordon, president of School Innovations and Advocacy, said it is entirely reasonable to bank on some savings from the federal government.

“It’s a safer bet than some of the other goofy parts of the budget the governor is proposing, like the lottery bond or some of these other proposals,” Gordon said. “It’s not out of line to assume that we will receive at least as much as what the (House) Appropriations Committee approved. If anything, the number is likely to go up, not down.”

Gordon says the Obama plan could mean as much as 4.8 billion over the next two years directly into K-12 schools, and an additional $1.4 billion for special education programs. That does not include the money set aside for school construction and Head Start, which bring the two-year total closer to $10 billion.

But Gordon cautioned that the state might have to pump more money into schools to receive some of the federal matching money being proposed. That could potentially lessen the appeal of the federal package, and could even lead to the state leaving money on the table if the cost is too high.

In the meantime, Democrats have moved somewhat on the issue of cuts since Bass’s editorial last year. Bass and Senate leader Darrell Steinberg, D-Sacramento, have since agreed to a $6 billion cut package in the budget passed by Democrats last month. But Schwarzenegger vetoed that proposal, saying the plan did not include an economic stimulus package and that the cuts didn’t go deep enough.

Republicans protested that the cuts in the Democratic package were simple reductions in scheduled cost of living increases in a variety of programs, and did not go deep enough. Both Republican Assembly Leader Mike Villines, R-Clovis, and Senate Republican Leader Dave Cogdill, R-Fresno, have called for Democrats to go further and eliminate some of the programs that have been created in recent years, particularly in the areas on health and human services.

Meanwhile, in Washington, Obama has laid out his $900 billion stimulus proposal, which has been coolly received by Republicans on Capitol Hill. Among the president’s plans are to provide a two-year, $150 billion investment in public schools and universities that could net California as much as $10 billion.

The plan would provide additional funds for Head Start, school modernization and construction, special education programs, and financial aid for college students. The New York Times called the proposal “the largest increase in federal aid since Washington began to spend significantly on education after World War II.”

The plan would also allow anyone receiving unemployment to automatically qualify for Medicaid, and help workers hold on to their health care coverage if they are laid off.

Although Obama met with House and Senate Republicans Tuesday, talks have a long way to go. As Rep. Michael Burgess said of the plan after meeting with the President, “It’s raining money,” a dismissive jab that about sums up the Republican opposition to the plan.
And as Republicans in California call for a loosening of environmental regulations, Democrats in Washington are giving the state more authority to regulate tailpipe emissions. This week, Obama reversed a Bush Administration decision that had blocked implementation of the California law that toughened the state’s tailpipe emission standards.

There was no evidence that Republicans in California have called on the governor or Democrats to shackle the law now that Obama has turned the regulatory authority back over to the state. In fact, Schwarzenegger lobbied the president to allow the California waiver from federal EPA policy. But the move this week underscores the fact that Republicans in California are linking environmental regulations to the current budget deal.

“It’s about creating a job environment that’s conducive to putting people to work and keeping them in good-paying jobs in this state, which we think is imperative right now with the economy doing what it’s doing,” said Senate Republican Leader Dave Cogdill, R-Modesto, told the Sacramento Bee.