No sign of progress on Calif’s $26B shortfall

SACRAMENTO, Calif. — Negotiations aimed at closing California’s $26.3 billion deficit remained frozen Tuesday, a day after a top Democratic lawmaker walked away from the talks.

The stalemate had no immediate effect on the state’s solvency, aside from a lower credit rating that adds to its borrowing costs.

IOUs being sent to state vendors and contractors buy lawmakers time to reach a compromise before California risks not being able to pay for its core functions, which could be sometime in September.

The lack of urgency permeated the Capitol on Tuesday, a day after Assembly Speaker Karen Bass boycotted negotiations in a protest against Gov. Arnold Schwarzenegger’s demands to reform welfare, in-home supportive services and state pensions.

It was not immediately clear when the Los Angeles Democrat would return to the closed-door meetings between the governor and legislative leaders from both parties.

Schwarzenegger is demanding the Legislature make eligibility and benefit changes to the state’s welfare-to-work program and other social programs as part of any deal that would close the state deficit. He wants to reduce pension benefits for new state hires and require in-home supportive service clients and workers to get fingerprinted to help avoid fraud.

An earlier budget proposal by the governor would have made deep cuts to the in-home support program. Advocates, many of them in wheelchairs, formed a half-circle around the entrance to the governor’s Capitol office on Tuesday. They demanded that Schwarzenegger and lawmakers agree to higher taxes to protect services they say are critical.

One of the organizers, Ana Acton of Nevada City, said people were willing to stay until they got dragged out.

“People are really at the point where this is our basic right. This is what we need to live,” said Acton, 33, who was with a group called People’s Day of Reckoning Coalition. “We need services and are willing to take it to this level.”

Also Tuesday, officials from several California counties and advocates for the poor said Schwarzenegger’s proposals to reform welfare would dismantle welfare-to-work assistance just as the federal government is getting ready to renew the program.

They also tried to dispel the stereotype that welfare recipients are not trying to find full-time work.

In a recent opinion piece he wrote for the Los Angeles Times, Schwarzenegger said only 22 percent of the 525,000 families receiving temporary financial and employment assistance are meeting the minimum work requirements.

“That means 78 percent aren’t trying to get on their feet at all,” the governor wrote. “They’re not working, not looking for work, not seeking job training, not performing community service and not pursuing an education.”

Advocates said the governor’s measurement was flawed because it does not count part-time work and ignores the reality that low-wage earners don’t have control over their hours. They said the governor was only perpetuating the stereotype that recipients are lazy.

Frank Mecca, executive director of the County Welfare Directors Association of California, also criticized Schwarzenegger’s assertion that there is massive waste, fraud and abuse in CalWORKs, the welfare-to-work program. The state verifies income and identity of all participants, he said.

“It’s difficult to think what more we could do,” he said during Tuesday during a conference call with reporters.

Mecca said the governor’s own figures show that making welfare recipients submit to reviews twice a year will not save as much as he predicted.

Schwarzenegger’s spokesman said the governor’s proposals are relevant to the debate over closing the state’s budget deficit because they will save the state money. The administration is projecting the state could save $1.7 billion through June 2010 if the Legislature adopted all his proposals.

“We’re at a bit of an impasse with the Democrats,” Schwarzenegger spokesman Aaron McLear said.

Friday will mark the last day several major banks have said they will cash the IOUs the state controller began issuing last week. Controller John Chiang has said he expects to issue more than $3 billion worth of IOUs in July alone as a way to preserve cash amid rapidly plunging tax revenue.