California's fiscal emergency draws tepid response on Capitol Hill

WASHINGTON — Congress left town on Friday for its annual weeklong Memorial Day break, in no rush to respond to California's simmering financial crisis.

Indeed, while the state has more clout than any other on Capitol Hill, there are no signs that it will translate into any financial help anytime soon.

As Republican Gov. Arnold Schwarzenegger and legislative leaders prepare to make drastic budget cuts to erase a $21 billion budget deficit, the response from Democrats who control Congress has been tepid.

Consider the statements coming out of congressional offices:

House Speaker Nancy Pelosi of San Francisco: "The speaker has been in discussions with the delegation, the governor, the treasurer, the House Financial Services Committee chairman and the treasury secretary to determine available options," said her spokesman, Drew Hammill. "The speaker plans to continue this dialogue, and hopes that the governor and the Legislature will come together to address this problem."

Sen. Barbara Boxer: "Senator Boxer is working with the administration to find a pragmatic solution for California," said her spokesman, Zachary Coile.

Sen. Dianne Feinstein: "Senator Feinstein is deeply concerned about the budget crisis in California, but the borrowing proposal that has been discussed does not appear workable. ... State leaders must put forward a clear, detailed plan. The state is going to have to make some very painful cuts, but the failure of the budget-related proposals in this week's special election makes this unavoidable," said her spokesman, Gil Duran.

And Rep. Doris Matsui of Sacramento: "I am working with (House Financial Services Committee) Chairman (Barney) Frank, who held a hearing this week on the municipal bond market, and others in Congress on the appropriate federal government response to California's budget crisis, and I hope the governor and legislature will work together to address the budget issues as well."

Republican Rep. Dan Lungren of Gold River said he's not surprised by the relative quiet.

"You know something? There's an old saying about someone on death row: The sight of the gallows tends to concentrate the mind terribly," he said.

Lungren said the reality of California's fiscal mess is finally hitting home.

"Would it make people nervous who have been ignoring this? I guess so," he said. "We've been ignoring the elephant in the room for too long."

Lungren said the idea of guaranteeing loans for the state is "a bad idea" and that it has little support in Congress.

So far, most Republicans have been united in their skepticism of providing any type of bailout.

Republican Rep. Kevin McCarthy of Bakersfield is among those who question why Congress should step in to help at all.

"California gets to make the decisions, but we pay the bills," he said. "It's like when you're growing up and you make your parents take the loan out for your car and you get to drive it. ... Why should we take the burden for their mistakes?"

But McCarthy said he expects Democrats to introduce legislation to guarantee loans for states and cities, broadening it beyond California as a way to try to build political support. He said such a measure should be rejected.

"Billions of dollars in taxpayer stimulus money has already been sent to Sacramento, so how do you convince taxpayers of other states to once again send or guarantee more federal tax dollars to bail out Sacramento, without then bailing out every other state and municipality all over this country?" McCarthy asked. "This would truly send a bad precedent and is ultimately misguided because in the end, bailouts are not paid for by state governments or the federal government -- they are paid for by taxpayers."

Boxer and Matsui want the federal government to guarantee emergency loans for the state, while Pelosi has yet to endorse the idea, at least publicly.

Those prospects dimmed greatly on Thursday when Treasury Secretary Timothy Geithner said it would take an act of Congress to guarantee the loans. Supporters had hoped they could secure a quick and tidy deal by having the Treasury Department sign off on the guarantees, which would put federal taxpayers on the hook if the state defaulted on its loans.

The unease extends to 1600 Pennsylvania Ave. California may be a big Democratic and politically important state for the Obama administration, but White House officials are fearful of not treating states uniformly.

Lungren said there would be a backlash from states that already have made painful cuts and that the most practical path for California may be to ask Congress to waive federal rules as the state begins serious budget-cutting. He predicted that any aid that would help only California would face an uphill fight.

"California suffers from the fact that we're the biggest state in the union," he said. "People immediately assume because you're the biggest you've got the greatest sway and therefore there's a reflexive attitude of coalitions against who's the biggest."

In an opinion piece for the Washington Times, Republican Rep. Tom McClintock, who also opposes guaranteeing the state's loans, said that "the decline and fall of the California Republic is a morality play in the form of Greek tragedy." He suggested that the state start saving money by reducing its costs.

"California pays $43,000 each year to house a prisoner, while many states get by with half that amount," McClintock said. "An average classroom accounts for more than $300,000 of public resources but only a fraction actually reaches the students."

What happens next is anybody's guess, but no congressional action is expected this month.

At her weekly press briefing on Friday, Pelosi made no mention of California's plight. Pelosi, who controls the House agenda, told reporters that she's planning a trip to China next week.

Congress will report back to work in the first week of June.