More furloughs for LANG

LANG employees will have to endure yet another round of furloughs. Fred Hamilton, CEO and publisher of the nine-newspaper chain, sent a memo today telling employees that they must take 5 unpaid furlough days between May 16 and July 2. LANGers will also stop accruing vacation between these dates.

For Hamilton to hastily order furloughs to be taken over such a short period of time indicates just how much pressure the company must be under to boost its bottom line before the end of the fiscal year (June 30). Indeed, Hamilton says in the same memo that LANG employees will be able to take an additional 5 paid holidays in the next fiscal year to make up for the short-term pain.

This leads me to wonder if this dramatic, last-minute action is related to a possible deal to buy the Orange County Register. LANG's parent company, MediaNews Group, is in a bidding war with the Tribune Co., owner of the Los Angeles Times, to buy the Register.

It's also likely the chain is simply trying avoid further layoffs, given the revenue demands of some of its investor owners, who agreed to swallow $765 million of debt as MediaNews emerged from bankruptcy last year. The furloughs and vacation freeze come a week after layoffs at the Long Beach Press-Telegram. Hamilton said the latest actions should keep future pink slips to a trickle:

...today's action does not preclude other cost reduction measures including and not limited to reductions-in-force. At this time such actions will likely be limited and will continue to be an expense reduction alternative until the economy and our performance measurably improves.

As expressed in the past, we regret any inconvenience this action may cause you but until our financial challenges are clearly behind us, such actions are necessary.

The full memo is here.

(This post was edited)

California budget squabble continues

The California budget battle isn't over yet.

Senate President Pro Tem Darrell Steinberg said today he will sue Republican Gov. Arnold Schwarzenegger to restore about $489 million in cuts made after a budget agreement was reached. Schwarzenegger used his line-item veto authority to slash funding from health and welfare programs.

Steinberg's office sent out the following statement:

“We elected a governor, not an emperor. In making these line item vetoes the Governor forced punishing cuts on children, the disabled and patients that he couldn’t win fairly at the bargaining table. And in doing so, he overstepped his constitutional authority.”

The Sacramento Bee got this response from the governor's office:

"Because the legislature failed to send him a balanced budget after months of debate the Governor was forced to make these difficult cuts. While Democrats are focused on a protracted legal battle to dig the state back into deficit the Governor will continue to focus on moving our state forward and getting Californians back to work."

Democrats have been working themselves up to file a lawsuit for about a week.

Midnight moves

Republicans in Sacramento have little in the way of power, and so they're lashing out like cornered animals during these tense budget negotiations.

The Los Angeles Times reports that shortly after midnight this morning, Senate Republicans tossed out leader Dave Cogdill of Modesto and chose anti-taxman Dennis Hollingsworth of Murrieta to lead the caucus. It's too early to tell whether this dooms the messy budget proposal to close a $42 billion deficit - or even helps it.

The Senate had essentially locked itself in chambers yesterday to get the budget passes, which led to this little tidbit:

The frenetic day had begun with legislators carting sleeping bags, pillows and suitcases to work. Sen. Ron Calderon (D-Montebello) brought a bottle of cologne.

Budget breakdown and the GOP*

The Sacramento Bee reported earlier today that budget negotiations had broken down between Gov. Arnold Schwarzenegger and Republican leaders, with Republican legislators blaming the Republican governor for compromising the process.

It seems GOP leaders were enraged in anticipation of this Los Angeles Times report that says Assembly Republican Leader Mike Villines had considered a tax increase as a way to close a $14 billion budget gap - California Republicans are duty bound to oppose all thoughts of tax increases.

This leak to the Times could also explain why Villines struck such a cocky posture earlier this week in a visit to the Bee's Capitol Bureau, where he demanded Democrats accede to a host of GOP demands before his caucus would even begin to consider any Democratic proposals for solving the budget crisis.

*UPDATED: Apparently yesterday's leak about Villines wasn't what got Republicans angry at the governor. Instead, it seems to be the big ticking clocks on the governor's website and in the Capitol that are tallying by day and by dollar the Legislature's "Failure to Act." However, the idea that Republicans might have to swallow new taxes remains the reason for the split between the governor and GOP lawmakers. As for Villines and the Bee Capitol Bureau, that appears to be his normal swagger.

Credit crisis hits state budget

California Treasurer Bill Lockyer warns that the credit crunch could lead to a cash shortage.

Meet-up

I hear Gov. Schwarzenegger and top legislative leaders, known collectively as the Big Five, are meeting in an apparent attempt to head off a veto showdown over the budget bill.

Budget deal illegal?*

Mark Paul of the New America Foundation says the budget deal passed by California legislators violates the law and calls on state controller John Chiang to block it:

In 2004, near the beginning of California’s long budget nightmare, newly elected Gov. Arnold Schwarzenegger, and most of California’s leaders, offered voters a two-part deal. Approve $15 billion in deficit borrowing to get the state through the budget crisis, the state’s grandees told voters, and then we “tear up the credit card.” Voters took them at their word. They approved both Proposition 57, authorizing the unprecedented borrowing, and Proposition 58, called “The California Balanced Budget Act,” forbidding the state from further deficit borrowing and making it illegal for the Legislature to pass, or the governor to sign, a budget in which spending exceeds revenue.

-snip-

The budget just passed by the Legislature is plainly illegal and unconstitutional under those provisions.

*Update: Gov. Schwarzenegger vows to veto the budget bill; legislators in both parties vow to override the veto.

Robbing Paul to pay Paul

It may surprise you to learn that the secret budget deal worked out by California lawmakers will put off tough decisions and leave "gaping holes in future budgets." From the Sacramento Bee:

But much of the $15.2 billion budget shortfall would be bridged by advancing revenues to be collected in future years, shifting or borrowing money from other state funds and employing accounting maneuvers. The plan would generate immediate revenue but leave gaping holes in future budgets.

A budget deal in the works

The California Legislature this afternoon agreed on a budget deal. It will include no tax increases to close a $15.2 billion deficit, but is likely to be chock full of fuzzy math. A vote could come as early as tomorrow. From the LA Times:

Details of the final budget package have not been released. Without a tax increase, it is likely to include accounting maneuvers and other financial gimmicks that would push much of the budget gap into next year. Democrats had vowed they would never balance the budget through cuts alone, and even Republicans who held the line against taxes were unable to show how the gap could be wiped out entirely with spending reductions. Their own budget plan relied heavily on borrowing.

Shrinking in Sacramento

Reporters are becoming as hard to come by in Sacramento as budget deals.

On this day 74 of the Great Budget Impasse, we learn veteran political reporter Bill Ainsworth, of the San Diego Union-Tribune, has agreed to take a company buyout and will be leaving at the end of the month. His colleague in Sacramento, Bill Mendel, has applied for the buyout as well.

Their rush to early retirement is surely hastened by reports that the U-T is on the chopping block.

Ainsworth's departure is part of a depressing trend in Sacramento, as bureaus that had beefed up when Gov. Schwarzenegger first swept into office now cut back or close down altogether. The Sacramento Bee reports that both the San Francisco Chronicle and Orange County Register are down to a single reporter.

The governor's proposed budget and you

How will Gov. Arnold Schwarzenegger's budget proposal affect the county you live in? The California Budget Project has the answer. Check it out here.

Budget action star

The Sacramento Bee reports that Gov. Arnold Schwarzenegger will declare a "fiscal emergency" next week, which will allow him to fast-track mid-year budget cuts to close an anticipated budget deficit of between $10 billion and $14 billion.

This is the first time Schwarzenegger has made such a declaration since voters passed Proposition 58 in 2004.

In debt we trust*

Good news for Republicans: Gov. Arnold Schwarzenegger will be asking for a 10 percent across-the-board spending cut to close a yawning budget gap predicted by his financial advisers.

The Democrats, having put off tough choices year after year, will now have to decide whether they want to push for higher spending in an election year (which will fail because of the Republican minority), shift more expenses to bonds (which will make them look as bad as Schwarzenegger did in 2005), or negotiate for a smaller but still substantial cut in services (which will make all of their proposals for new programs, including health care, look financially risky).

Whatever they do, redistricting will keep them safely in their seats.

However, they will have a harder time attracting votes for the Democratic term-limit initiative if they get into a protracted budget battle.

Schwarzenegger predicts a $14 billion shortfall in the next fiscal year, while the Legislative Analyst's Office predicts $9.8 billion. The Dems will latch on to the smaller of the two numbers, but it's still a chunk of money.

I hear cities and counties are bracing for another raid.

*The Sacramento Bee says Senate Pro Tem Don Perata has put health care reform on the back-burner. That seems an odd negotiating tactic to me.