Arnold Schwarzenegger

Would you buy $4 billion in bonds from this man? That's the question facing Gov. Schwarzenegger. He's made himself the voice of a radio effort to sell bonds to cover the state's short-term operating expenses. It's a tough time to sell bonds, in the middle of a credit crisis. Standard & Poor's Ratings Services has publicly questioned whether the state will be able to sell the bonds. S&P put California's bonds on negative credit watch as well. (California's credit rating also has suffered from persistent deficits).

If Schwarzenegger can convince people to buy the bonds, it would prevent the state from encountering a cash crisis in the next few weeks, as some, including S&P, appear to be anticipating. But if he can't, it's a body blow to the state -- and to Schwarzenegger's credibility. The S&P report says: "Without a successful infusion of cash over the next six to eight weeks, however, we believe, the state may be required to defer spending by executive order, schedule a special session of the legislature and/or possibly slow payments to local units, including school districts." (The S&P does end with an oddly hopeful note; California is so accustomed to managing bad budgets that it will probably muddle through this as well.)

The governor considers himself a top-notch salesman. This may be the most important test of salesmanship that he's ever faced.

Here's a link to the S&P report. A free registration is required.

Attached is the full text of the letter rejecting the first recall petition submitted by the prison guards' union:

Talk about timing. Today is the fifth anniversary of the vote to recall Gray Davis and elect Arnold Schwarzenegger governor. And today, the Secretary of State's office rejected the first petition submitted to recall Gov. Arnold Schwarzenegger. The petition, submitted by the prison guards' union, failed to include Schwarzenegger's official statement in response, as is required. The mistake is a simple one, but somewhat understandable. By keeping the recall petition to one page ,the union may be able to circulate it more easily and inexpensively.

This is not the end of the story. The union now has the right to alter and re-submit its petition.

This post has nothing to do with Gov. Schwarzenegger, but the elements might sound familiar to Californians.

More Democracy, a Germany-based organization that operates in several countries, has sent representatives to this conference I'm attending in Aarau, Switzerland. The Vienna representative of the group just outlined for me their plan to introduce the California-style ballot initiative to Austria. The country requires a two-thirds vote of Parliament for a constitutional amendment. Now that new elections have reduced the governing coalition's share of the Parliament below two-thirds, there's an opportunity for minority parties to band together and block significant changes. That's what they plan to do -- unless the ruling coalition agrees to add the initiative to the constitution.

At the Sacramento Bee, Dan Weintraub examined the changes in the rainy day fund that were part of the budget agreement. He was skeptical but also suggested they could, in time, prove to be a victory for Gov. Schwarzenegger. I'd bet against that, for reasons both political and budgetary.

First, the political. The rainy day fund changes are not official yet--they need to be approved by voters. And there is so much anger about the budget agreement among the state's powerful labor unions, particularly those representing public employees, that it seems likely the rainy day fund may face an aggressive "no" campaign in a special election next year. Such a campaign will be difficult for Schwarzenegger to win.

Second, the budgetary. The rainy day fund's supporters see it as having only modest effects. It wouldn't end the state's budget dysfunction. It might make the budget spikes -- and thus the budget down years -- less severe. Such a half-measure is unlikely to inspire much passion among voters, while an angry labor campaign against a budget agreement that all sides acknowledge is problematic would be an easy sell.

Former Gov. Gray Davis, recalled in 2003, explains why to Rick Orlov of the Daily News.

I visited yesterday afternoon with Jim Wunderman and othe rstaff and consultants of the Bay Area Council, the San Francisco-based organization that is pushing a state constitutional convention. I'll write at more length later, but the two main things I learned is 1. The process is still early, and even Wunderman, the strongest advocate for this idea, doesn't have a clear idea of how such a convention would be called and how it might work. 2. The convention idea has real momentum. Wunderman has been deluged with expressions of interest from across the political spectrum. And if he and his lawyers (Hanson Bridgett is providing legal advice) can figur eout the mechanics of this quickly and file a measure, he wantsan initiative to call a constitutional convention to appear on next year's special election ballot.

As evidence of that interest, Schwarzenegger gave a shout-out to the convention idea, without specifically endorsing it, in his budget press conference yesterday. Here's the paragraph in question, from the official transcript released by the governor's office:

The governor says there will be a special election in 2009. He wants one because two pieces of the budget agreement -- the rainy day fund changes and the borrowing against future lottery revenues -- requires voter approval. Interestingly, he's looking in the first half of the year--June was the month, he mentioned. Why is that interesting? If the prison guards' union goes forward with a recall against the governor and qualifies the measure, that could trigger a special election. But my reckoning, it's unlikely that such a recall vote could come together before August. (The union does not even have a recall petition certified for circulation yet). Could we end up with two special elections next year? Perhaps.

Gov. Schwarzenegger himself, as the target of the recall, would not set the date of the recall election. In 2003, Lt. Gov Cruz Bustamante, who ran in the replacement election, stepped in and set the date because Gov. Gray Davis, as the recall target, was conflicted.

Lots of afternoon news in California.

NEW BUDGET COMPROMISE, VETO AVERTED: Legislative leaders have reached an agreement with Gov. Schwarzenegger on modifications to the budget compromise. The governor won't veto as a result. Apparently, there are stronger protections to prevent untimely raids on the rainy day fund and some differences in the gimmicks used to pretend the budget is balanced. More details to come.

RECALL GOING FORWARD, IT APPEARS: Mike JImenez, the president of the prison guards' union, won re-election during a vote at the group's convention in Las Vegas today. The union also voted, by acclimation, to go forward with the recall of Schwarzenegger, albeit with a few caveats.

WHEN DO WE VOTE ON NEW MEASURES? The budget compromise looks like it will include changes that have to go before voters (among them borrowing against lottery revenues and provisions of the state rainy day fund). But it's too late to add measures to this November's ballot. Can such measures really wait until the next scheduled statewide election in the spring of 2010. This budget deal would seem to clinch a special election in 2009.

The target of a recall in California is entitled to a 200-word official response. Gov. Schwarzenegger filed his today, in response to a notice of recall advanced by the state's prison guards' union. It reads:

"This recall petition is special interests politics at its worst. It's not about the people of California; it's an intimidation tactic by the prison guards' union to force Governor Schwarzenegger into giving them a bigger contract. The bosses want the same sweetheart deal Governor Davis gave them after $3 million in campaign contributions. When Governor Schwarzenegger ran for office he said if special interests try to push him around, he would push back.

"The Los Angeles Times said this union is 'fooling no one.' The Sacramento Bee called it a 'self-serving grab for power and money.' The San Diego Union-Tribune says it's a 'bullying tactic.' The San Jose Mercury News calls this an attempt to 'pressure' the Governor to 'give away the store like his predecessor.'

"Even Democrat lawmaker Jackie Speier said this union has 'a lock on the Legislature... They telegraph loud and clear: 'If you cross us, we'll take you out.''

"It's offensive that one special interest is using a recall to get more money. California faces a financial crisis and this union's leadership wants $1.3 billion more from taxpayers. Governor Schwarzenegger refuses to be intimidated and will do what's best for California, not a special interest."