California budget 'emergency': bid to recoup $6 billion in pensions

Gov. Arnold Schwarzenegger declared a state of emergency over California’s finances Wednesday and ordered three days off without pay per month for tens of thousands of state employees.

The tactic is being seen less as a move to preserve cash than to pressure state legislators to negotiate a state budget that is more than a month overdue and needs to close a $19 billion gap.

"Without a budget in place that addresses our $19 billion budget deficit, every day of delay brings California closer to a fiscal meltdown," Governor Schwarzenegger said in a statement. "Our cash situation leaves me no choice but to once again furlough state workers until the legislature produces a budget I can sign," he wrote.

Schwarzenegger's declaration noted the state's government is projected to run out of cash no later than October should its budget stalemate persist as expected.

But analysts call the emergency declaration a political pressure tactic.

“The furlough idea is a tactic to try to get the unions to negotiate more favorable contracts,” says Tony Quinn, a former GOP legislative aide and co-editor of California Target Book. He says the very generous pensions handed out under previous Gov. Gray Davis are costing the state $6 billion annually.

“These contracts were decided back when no one ever thought the housing prices or stock market would drop and are now costing the state enormous sums of money," he says. "Schwarzenegger is trying to get these people to go along with whatever leverage he has.”

The move puts pressure on both parties, says Barbara O'Connor, director emeritus of the Institute for Study of Politics and Media at California State University, Sacramento.

“It creates enormous pressure for the Democrats to finally come to the table with a consensus proposal,” she says. Right now, she says, they are floating one idea in the state Assembly and a different one in the Senate. “This move creates havoc, and out of havoc usually comes forced consensus,” says Ms. O’Connor.

Meanwhile, the governor is at an economic summit in San Diego with business leaders who are getting close to wanting to be out campaigning for fall elections. A Field Poll released Thursday shows Attorney General Jerry Brown and Sen. Barbara Boxer with narrow leads for governor and US Senate respectively, but also shows a large number of undecided voters.

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