SAN FRANCISCO (Reuters) – California Governor Jerry Brown wants to move forward with building a statewide high-speed rail system seen costing nearly $100 billion, but lawmakers are nervous about approving bonds needed to lock in federal funds to get the project under way.

They are gagging at the rail system’s projected cost, which towers above its previous estimate of $43 billion, and are anxious about the uncertain outlook for federal and private-sector dollars needed to lay hundreds of miles of train tracks between California’s far-flung metropolitan areas.

Like many in the Legislature, Democratic Assemblyman Jared Huffman supports the concept of high-speed rail. But he has sticker shock: “Anybody who is paying attention has to be very sobered by the numbers.”

Lawmakers are also concerned about the California High-Speed Rail Authority’s oversight of the project. Its chief executive resigned on Thursday and the chairman of its board also stepped down, though he will remain on the board. Dan Richard, a board member appointed by Brown, has been nominated as new chairman.

Additionally, lawmakers are acutely aware of buyer’s remorse among many voters over the project with state finances still under pressure. California faces a $9.2 billion budget gap.

Voters approved nearly $10 billion of general obligation debt in 2008 to help build the rail system. Now nearly two-thirds of them want lawmakers to put the bond package back on the ballot, and if given another vote on it, 59 percent would reject it, according to Field Poll findings released last month.

“The matter is somewhat different now than it was when it was billed to them,” said Field Poll director Mark DiCamillo.

SAN FRANCISCO (Reuters) – California Governor Jerry Brown unveiled a $92.6 billion general fund budget on Thursday for the state’s next fiscal year, aiming to close a projected $9.2 billion deficit with spending cuts and new revenue from a tax measure he expects voters will approve in November.

About half the proposed spending cuts will hit social services, including Medi-Cal, the state’s healthcare program for low-income residents, and home healthcare services. The fiscal year starts July 1.

Brown said he is prepared to cut more spending if voters reject the tax measure, which is expected to raise $6.9 billion annually. Schools and community colleges would face nearly $5 billion in additional funding cuts under Brown’s plan if the tax measure were to fail.

The tax initiative would increase the state’s sales tax, currently at 7.25 percent, by an additional .50 percent, and raise income taxes on those earning at least $250,000 a year.

Brown last year failed to win over a handful of Republicans to gain the two-thirds majority needed for the legislature to approve a tax increase without going to the voters. That resulted in a budget thick with spending cuts to close a deficit of about $10 billion.

Republicans denounced Brown’s budget as a ploy to push state residents into supporting tax hikes.

“This cynical, scare tactic budget strategy once again hinges on the hope that voters will ignore their own financial problems to bail out the Democrats with another ill-advised tax increase,” said California Republican Party Chairman Tom Del Beccaro. “It didn’t work last year and there’s no reason to believe that a new year will bring new results.”

SAN FRANCISCO (Reuters) – California lawmakers return to work on Wednesday facing a series of critical financial decisions – including how to close a $13 billion budget gap for the state’s next fiscal year and whether to move ahead with a $100 billion high speed rail system.

Lawmakers will also be considering when they reconvene whether to proceed with an $11 billion water bond measure, and how to overhaul the public employee pension system to reduce costs, a priority for Governor Jerry Brown.

Political insiders in Sacramento expect the usually fractious legislature to tackle its work, especially on the state budget, without its usual rancor. A Democratic majority in both houses of the legislature, along with new budgeting rules, means the budget can be passed without any Republican votes – as happened last year.

The legislature may also be able to move more quickly than usual because a critical fiscal issue – possible new taxes – will be left to the voter: Brown aims to put an initiative on the November ballot that would raise the state’s sales tax and increase income taxes on those earning at least $250,000 a year.

Lawmakers won’t want budget politics in particular to drag on because so many of them will be seeking reelection in newly drawn districts under a new primary system in which the top two candidates regardless of party face off in November.

“That just creates a tremendous amount of political uncertainty,” said Mark Baldassare, president of the Public Policy Institute of California.

BYPASSING REPUBLICANS

SAN FRANCISCO (Reuters) – San Jose, California’s city council has approved a measure for next June’s ballot that would overhaul pensions for city workers to rein in their rising costs, a growing concern for local and state governments across the nation.

San Jose’s city council voted 6-5 on Tuesday to put the measure to voters as Mayor Chuck Reed has urged. The council, however, also told city staff to press on with talks with employee groups with the goal of arriving at a deal on changing pension benefits before the June primary election.

If that fails, Reed wants voters in California’s third-largest city, and the biggest city in high-tech Silicon Valley, to scale back city workers’ pension benefits, which he says risk escalating in cost in coming years.

Unless reined in, pension costs will consume an increasing share of San Jose’s budget, forcing deeper cuts to public services, according to Reed, who says the city already is “at the edge of ‘service-level insolvency.’”

“Service-level insolvency is when you have plenty of money to pay your bills but not provide services,” Reed told Reuters. “We’re trying to avoid it getting worse and restore the services we’ve already lost.”

San Jose’s measure would place new city employees into a “hybrid” retirement plan combining a traditional pension with 401(k)-like accounts or Social Security.

The measure would also give current employees the option of keeping current retirement plans by paying a larger share of their cost or selecting a lower-cost plan.

SAN FRANCISCO (Reuters) – With California Governor Jerry Brown making little progress in his efforts to solve the state’s intractable budget problems, a number of private groups are maneuvering to put new tax measures to the voters next November.

One initiative, backed by billionaire Nicolas Berggruen and a bipartisan group of business and civic leaders, would radically overhaul the state’s tax code by taxing services and cutting income tax rates. Berggruen has pledged $20 million to the effort.

Another proposal, by Molly Munger, the daughter of Warren Buffett’s business partner, would rely on income tax increases to raise some $10 billion in new revenue. Buffett has been a vocal proponent of higher taxes on the rich, though he is not involved in Molly Munger’s effort.

A third proposal by a state teacher’s union and other labor groups would add a 1 percent surcharge on incomes above $1 million. Still other groups are mulling targeted tax hikes on out-of-state companies and oil production in California.

Brown, a Democrat, also is expected to put forward a ballot initiative to raise taxes.

The initiatives would circumvent the legislature, where a two-thirds vote is needed to hike taxes. The legislature’s minority Republicans have blocked efforts to raise taxes, including a bid by Brown earlier this year.

Only a simple majority vote is needed to enact a statewide tax ballot measure.

SAN FRANCISCO (Reuters) – There’s no avoiding a ballot showdown over paring public employee pensions in California’s third-largest city, its mayor said on Wednesday.

San Jose Mayor Chuck Reed told Reuters by telephone he has enough backing from city council members to put his plan for cutting about $100 million a year in pension expenses over two decades to city voters next March.

The council is expected to vote on December 6 on advancing the plan to the ballot. That will involve declaring a fiscal emergency for Silicon Valley’s biggest city, whose unionized employees have been tangling with Reed’s administration over its plans to rein in rising pension costs.

Those costs have become a growing concern for local and state governments across the nation as they contend with lean revenues that opened massive budget gaps, requiring steep spending cuts for public services and putting tens of thousands of government workers in unemployment lines.

Reed said he also expects a landslide victory at the polls for his pension overhaul plan.

“It’ll be in front of voters in March and they will give us enough time to get it place to save money for the next fiscal year,” he said. “Anybody who’s done any polling knows it’s 70 percent ‘yes.’”

PENSION BATTLES SPREAD

WASHINGTON/SAN FRANCISCO, Nov 23 (Reuters) – Revenues for U.S. states may be getting better, but generally they are still not good enough.

The early part of 2011 may have lured some states into a false sense of comfort. Most began their fiscal years on July 1, using revenue projections made earlier, when the outlook for the rest of the year looked solid.

Then came the European debt crisis, the stock market’s declines, and other macro-economic troubles. In big states such as New York and California, estimates made less than a year ago now look overly optimistic.

California, the nation’s most populous state, and others such as Washington are now considering dramatic cuts in areas where they have already hacked away at spending for years now, including education and healthcare.

“Things are better, but clearly, things are still very sluggish,” California Controller John Chiang told Reuters about the national picture.

California’s weaker-than-expected revenues will likely trigger spending cuts required in the state budget approved in June by Governor Jerry Brown and fellow Democrats who control the state legislature. The budget had assumed a $4 billion revenue surge that did not materialize.

After the recession began in 2007, states made mid-year emergency budget changes as revenues cratered. Since all states except Vermont must balance their budgets, they hiked taxes and slashed spending. Worse yet, many reduced revenue forecasts only for collections not to meet the lower projections, which in turn forced more spending cuts.

Nov 18 (Reuters) – State and local governments say there is only one sure effect of the current U.S. deficit negotiations on their budgets: cuts.

And with their tax revenues still not back to pre-recession levels after being hit hard during the financial crisis, state and local governments are keeping a careful eye on the events in Washington.

As tax revenues slid, state and local governments responded by slashing spending, hiking taxes, borrowing and turning to the federal government for help over the last three years.

The bipartisan “super-committee” made up of members of both houses of the U.S. Congress has until next week to introduce a plan to reduce the federal deficit by at least $1.2 trillion over the next 10 years, but its negotiations appeared near collapse on Friday.

“Nobody is quite sure what’s going to happen,” said Marty Brown, director of the state of Washington’s office of financial management.

Without a plan, automatic spending cuts totaling $1.2 trillion, split evenly between military and domestic programs, will begin in 2013 as part of the deal President Barack Obama struck with Congress this summer on the country’s $1.3 trillion deficit and $15 trillion debt.

“I keep joking that the watchword is ‘uncertainty,’” said Scott Pattison, executive director of the National Association of State Budget Officers. “The folks I talk to seem to be accepting, although they’d prefer a lot more predictability.”

SAN FRANCISCO (Reuters) – Police arrested dozens of Anti-Wall Street protesters in San Francisco on Wednesday after they occupied a Bank of America branch in the city’s financial district.

Roughly 50 demonstrators flooded into the bank during an organized march that began at the protesters’ downtown encampment and finished at a state office building about a half mile away.

The group set up a tent inside the bank branch as more than 100 bystanders watched from outside and police in riot helmets arrested the occupiers one by one, bringing them to a waiting bus.

One protester waved a sign inside that read “make banks pay.” Another held up a sign to a local television station that said they were protesting the link between California’s public higher education system and the banks.

The protesters chanted “we are the 99 percent,” as they were being arrested.

Earlier during the march, the protesters, who held American flags and signs and beat on drums, could be seen on a Ustream video of the scene chanting “Who do you protect, who do you serve?” at the officers.

One threw a small bunch of flowers at the feet of police.

SAN FRANCISCO, Nov 15 (Reuters) – It took 17 years, but Orange County, California has finally been deposed as title holder for the biggest municipal bankruptcy in U.S. history.

Jefferson County, Alabama, once a top industrial hub in the U.S. deep South, got caught off-guard by rising rates tied to a wildly expensive sewer project — the county has $4.5 billion in outstanding debt, $3.14 billion of it tied to the sewer project — and last week declared bankruptcy, earning an instant stigma in the U.S. municipal debt market.

California’s third most populous county famously filed for bankruptcy in December 1994 after rising interest rates savaged investment bets by its treasurer, leaving the county with a loss of $1.7 billion in an investment pool. That put the county at risk of a $1 billion default the next year.

For years, nothing could touch the size of that debacle. And for John Moorlach, an Orange County supervisor who took over as the county’s treasurer in 1995, the key lesson is this: move as fast as possible to get out from under bankruptcy.

For Orange County’s officials, emerging from bankruptcy was a “top priority,” Moorlach said. “It was a rather consuming, 24-7 kind of operation.”

The county, with its bond rating downgraded to D by Standard & Poor’s in 1995, remained the poster child for years for disastrous financing decisions. Moorlach noted that even the perception that a municipality could declare bankruptcy is hard to shake: “New York city back in ’75 didn’t even file for bankruptcy. They just talked about it — and we’re still talking about it.”

However, Orange County managed to receive solid demand when it offered — at a premium compared to similar California offerings — $295 million in insured recovery bonds in its return to the municipal debt market in 1995.