IOU's, Banks Put Pressure on Gov., Legislature

Lawmakers working through holiday weekend to break budget deadlock

As tens of millions of dollars in state IOU's make their way into circulation, key California lawmakers are working over the holiday weekend to reach a budget compromise acceptable to Gov. Arnold Schwarzenegger.

The state officials are under subtle pressure from several major banks that have agreed to honor the IOU's -- known as registered warrants -- but only through July 10. Members of San Diego County's legislative delegation to Sacramento said in interviews Friday that their respective party leaders are also feeling heat from constituents over the lack of a balanced budget.

"As great as our state is, to have to issue IOUs is an embarrassment," said Assemblyman Nathan Fletcher, R-75th District. "And people have every right to be frustrated with the legislature and the job they're doing. I understand where they're coming from."

State Sen. Christine Kehoe, D-39th District, said indications are that substantial progress is being made toward closing a $26.3 billion deficit that's growing at the rate of $25 million a day.

"We're $2 billion to $3 billion apart," she noted. "It's the very last step that needs to be taken."

Missing the June 30 deadline for a budget deal, Kehoe said, "has kind of given us all a 'thanks, I needed that' slap in the face. And [Senate and Assembly leaders] are really bearing down."

Fletcher echoed the governor's insistence that balancing the budget be done in coordination with "structural reforms in the way the state does business," but that view runs counter to the perspective of Assemblywoman Lori Saldana, D-76th District.

"What I say is, you don't remodel your home while it's burning down," Saldana said. "We know we need structural reforms, but one of the toughest is our supermajority [two-thirds] passage requirement for any budget -- whether we raise taxes, lower them or keep them the same."

State Sen. Denise Moreno Ducheny, D-40th District, said the governor, on the eve of the new fiscal year, "changed the whole dynamic of the budget we've been working off of since May."

Ducheny said picking up and refitting the pieces of the legislative wreckage into a new budget puzzle won't be easy.

"And they still won't have solved the long-term problem," she added. "I mean, it'll be a patchwork again. What [the governor] keeps saying is, 'I want a permanent solution'.  What he's going to get out of this madness is not."

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