SAN FRANCISCO (Reuters) – California Democratic Governor Jerry Brown’s plan to close the state’s huge budget gap is running into a wall of Republican opposition over a proposed referendum on extending tax increases.

If Republicans hold firm and withhold votes for a tax ballot measure, they could force Brown and his fellow Democrats who control the Legislature to seriously consider a budget plan relying almost exclusively on spending cuts to tackle a deficit that may top $27 billion.

Putting a measure on the ballot requires a two-thirds legislative majority, which Democrats lack. They could try to put tax increases on the ballot on their own through procedural maneuvering, a worst-case option given that they want bipartisan support for a measure.

The political struggle over the budget in America’s most populous state comes as state finances garner attention in the U.S. Congress, where some have called for legislation to allow financially troubled state governments to declare bankruptcy.

State finances also are weighing on investors. They have fled U.S. municipal bonds recently, spurred by some analysts predicting a wave of defaults.

Brown unveiled his budget plan last month after being sworn in to his third term — he was also governor in the 1970s and 1980s — and Republicans are showing no interest in his proposal for a ballot measure on taxes until their demands for spending cuts and regulatory reform are met.

Some analysts had expected Republicans would propose talks with the governor to strike a deal on a tax measure in exchange for reforms aimed at the state’s pension system. But Republicans have yet to draft a plan on pensions and are hewing to their traditional anti-tax stance.

SAN FRANCISCO, Feb 11 (Reuters) – The slump in Nevada’s casino industry shows signs of reaching bottom, giving state leaders some hope the state’s economic engine will warm up.

But first they must contend with the effect of hard times on their state’s coffers — sharply reduced revenue that Governor Brian Sandoval says demands more austerity.

Sandoval, sworn in last month, opposes tax hikes and has proposed slashing spending and shifting revenues to close a $1.2 billion gap to balance the books over the next two-year budget cycle. He proposes a $5.8 billion general fund budget.

His proposed cuts would add to those imposed by his predecessor, Jim Gibbons, a fellow Republican whose single term as Silver State governor was dominated by fiscal crisis.

It was fueled by the implosion of the state’s once-torrid housing market — foreclosures abound in Las Vegas, where home builders once struggled to meet demand to keep up with explosive growth — and a nosedive in revenue from gambling as consumers hoarded cash during the recession.

Now there are signs that gamblers are opening their wallets. Nevada’s Gaming Control Board this week noted the state’s two-year run of tumbling gaming revenue ended with a marginal 0.1 percent uptick last year.

Nevada Gaming Control Board analyst Mike Lawton added that last year Las Vegas visitor volume rose 2.7 percent over 2009 and gamblers boosted spending on table games in casinos along the city’s famous “Strip.” Slot machine gambling was off 0.7 percent last year, compared with falls of 12.6 percent in 2009 and 8.7 percent in 2008.

SAN FRANCISCO (Reuters) – California’s controller said on Wednesday he has received more than four dozen tips about suspect financial practices by local governments and will ask the state legislature for power to open up cities’ books.

A group of California lawmakers has unveiled a package of bills to help State Controller John Chiang uncover financial abuses by local governments, seizing upon a scandal involving a city official pulling in nearly $800,000 a year in pay, and he is calling for its prompt review.

“This will allow me to go in and check to see if the books are as they state,” Chiang told Reuters in a phone interview.

Chiang, who is sponsoring the bills, said the legislation would help pry open the books of local governments suspected of financial abuses or mismanagement, a concern that gained momentum in California after the pay practices of the city of Bell came to light last year.

That led to prosecutors accusing eight current and former officials in Bell, a blue-collar city of 40,000 near Los Angeles, of fleecing its taxpayers of $5.5 million by lavishing excessive compensation on themselves.

“I’m hoping Bell is an outlier but unfortunately there are instances for concern. We’ve received over 50 tips about cities’ finances that may require further review and investigation,” Chiang said.

California’s state government must close a budget gap of more than $25 billion and local officials are also facing deficits — raising the prospect of pay cuts for public employees, furloughs, layoffs and reduced public services.

By Jim Christie

SAN FRANCISCO (Reuters ) – Efforts to tackle the costs of public pensions advanced on Tuesday in three Western U.S. states, led by a top Arizona lawmaker unveiling a plan to overhaul his state’s pension system.

At the same, a bipartisan group of Washington state officials presented a plan on funding state pension systems and a California activist said a statewide pension reform initiative would be in print in April or May, the first step to putting it to voters in June 2012.

California lawmakers may also take up pension changes as part of talks with Governor Jerry Brown to balance the state’s $25.4 billion budget deficit.

As in California, state officials across the nation are contending with ongoing weak revenue, and some states face so much pressure to fund pensions systems it may hurt their credit ratings, Moody’s Investors Service said last month.

State finances are also of growing concern in Congress, where some lawmakers are discussing the need for legislation that would allow state governments to declare bankruptcy. That could help them clamp down on labor costs.

Arizona House Speaker Kirk Adams said states must urgently tackle pension costs to prevent more fiscal chaos.

STANFORD, California (Reuters) – The chief investment officer of Calpers, California’s $226 billion pension fund for its government workers, said on Friday that public pension benefits will remain front and center in the state’s politics, fueling efforts to pare them.

“Public pension benefits are a red hot issue,” Joseph Dear of Calpers, the California Public Employees’ Retirement System, said at a forum hosted by the Stanford Institute for Economic Policy Research and Stanford University’s Bill Lane Center for the American West.

On the sidelines of the event, Dear told Reuters he expects public pension benefits in the most populous U.S. state to be targeted in an effort led by Governor Jerry Brown, who took office last month, and through a referendum.

“We’re waiting for one from Governor Brown and it’s expected there will be an initiative,” said Dear, who took the helm of Calpers’ investment office in March 2009.

“The pension debate is alive in California,” he added.

Under Dear, Calpers’ has been steadily recovering from a steep dive in the value of its assets.

Calpers, the biggest U.S. public pension fund, last month said it earned a 12.5 percent return last year, lifting the value of its assets by more than $65 billion from a March 2009 low of $160 billion in the wake of Lehman Brothers’ bankruptcy. Its assets had been valued at a peak of $260 billion in 2007.

SAN FRANCISCO (Reuters) – California Governor Jerry Brown is betting he can win vital support from Republicans for his plan to close a projected $25.4 billion state budget gap by offering to take up public pension reform.

In return, he hopes they will back speedy arrangements for a ballot measure to extend tax increases set to expire this year.

Extreme partisan politics endemic to California have produced a series of delayed, flawed budgets and one of the lowest credit ratings among the 50 U.S. state governments.

Brown’s proposal to close the budget hole with a mix of spending cuts and extensions to tax increases is a compromise that appeals to many, but to win approval for it he needs to shore up support among Republicans.

In particular, Brown, a Democrat, needs a handful of Republican votes to put a tax measure to voters in a special ballot in June. Bipartisan support also would help convince voters to back the measure.

Republicans oppose higher taxes, and many see supporting the ballot measure itself as a vote for taxes, but Brown in his Monday state of the state speech signaled a willingness to negotiate changes to public pensions they have long urged.

“He understands what floats their boat,” said Bill Whalen, a Hoover Institution fellow and former aide to former Republican Governor Pete Wilson.

SAN FRANCISCO (Reuters) – Governor Jerry Brown pressed California lawmakers in his state-of-the-state address on Monday to let voters decide on his budget plan, saying any attempt to block a special election on the issue would be irresponsible.

California, the most populous U.S. state, faces a more than $25 billion deficit caused by the combined effects of recession, high unemployment and turmoil in financial and housing markets.

Brown, a Democrat, wants to fill the gap with a split of $12.5 billion in spending cuts and $12 billion in tax hikes. He urged lawmakers to help him prepare a ballot measure for a special election in June, in order to ask voters to extend tax increases scheduled to expire this year.

“The only way forward is to go back to the people and seek their guidance. It’s time for a legislative check-in,” Brown said in a speech of about 15 minutes. “It would be irresponsible for us to exclude the people from this process.”

Those who had rejected ideas in his plan must come up with other solutions, Brown said. “Let the ideas come forward but let them be ideas that measure up to the challenge before us,” he said.

Republicans immediately rejected the idea of tax increases and said voters had already spoken in previous elections.

“We must cut spending. And we must do it now,” State Assembly Republican leader Connie Conway said in video comments released after Brown spoke.

SACRAMENTO, California (Reuters) – California Governor Jerry Brown used his state-of-the-state speech on Monday to argue in favor of a special election to ask voters to extend tax hikes to help narrow the state’s $25.4 billion budget gap.

Weak U.S. state finances are a growing concern in Washington, with some in Congress mulling legislation that would allow states to declare bankruptcy, adding to the turmoil in the U.S. municipal debt market.

State governments face a collective budget gap of $175 billion through 2013, even after closing gaps totaling $230 billion over the past two years, according to the National Governors Association. [nN26151317]

Brown faces the following challenges in balancing California’s budget:

* Keep opposition muted. Brown has proposed a split between cutting taxes and extending tax hikes, and so far the compromise attitude has garnered more support than opposition.

* Keep voters on his side. Brown’s blunt message about the state’s challenges and his personal frugality hit a nerve, and in a recent poll a majority supported his tax extension plan. He needs to keep pinching pennies with measures like cutting back on state vehicles and cell phones to safeguard his reputation. The vote will be largely a referendum on him.

* Find a handful of Republicans. Brown must rally support from fellow Democrats who control the legislature for spending cuts but also hopes to find a handful of Republican votes to put a tax measure to voters. Republicans in both chambers of the legislature oppose tax increases. But they may be willing to provide Brown with the votes he needs to put tax extensions to voters in exchange for his support on their policy plans. These include pension reform, contracting out state services and plans for new water infrastructure.

SAN FRANCISCO (Reuters) – California mayors will press Governor Jerry Brown hard on Wednesday to drop a plan to raise money for the state by scrapping redevelopment agencies.

There are about 400 of the agencies across the most populous U.S. state, originally intended as vehicles to encourage property development in blighted areas.

Currently part of the tax revenues in those areas flows to the redevelopment agencies, but the cash-strapped government would use that money for its own needs under Brown’s plan, a threat to cities who rely on it for their own purposes.

Intense lobbying by mayors from nine of California’s largest cities underscores how the state’s financial straits will make for a short honeymoon period for Brown. He was sworn in this month and must close a $25.4 billion deficit. The state now has a general fund budget of $86.6 billion.

Cities have their own fiscal problems and cannot afford Brown’s plan to dump redevelopment agencies, Mayor Chuck Reed of San Jose, California’s third-largest city, told Reuters.

“I’m going to tell him his proposal to terminate redevelopment agencies is completely unacceptable,” Reed said.

Brown has rolled out a plan to narrow the state budget gap with $12.5 billion in spending cuts, disappointing fellow Democrats. They control the legislature and agreed after long battles with previous Republican Governor Arnold Schwarzenegger to cut the state’s general fund by more than 15 percent over the last three years.

SAN FRANCISCO (Reuters) – Washington state has found a way to save money on prisons — restrict inmates to their cells one day a month and pare back staff.

Desperate to respond to slumping revenue, many states are looking to squeeze savings out of penitentiaries, with solutions ranging from lock-downs to turning inmates over to private companies.

Prisons in Washington state will go on lock-down one day a month through June, confining inmates to cells and adjacent living areas. That cuts the need for resources and lets wardens send some staff home — without pay.

Washington state ran a trial of the lock-downs and furloughs in November and opted last month for the program to go into effect the remainder of the fiscal year

“It’s working as designed,” Dan Pacholke, deputy director of prisons at the Washington State Department of Corrections in Olympia, told Reuters.

Savings from the furloughs in Washington state may reach $1 million and will be applied toward a targeted $48.4 million, or more than 6 percent, cut in corrections spending demanded by Governor Christine Gregoire to help balance the state’s books.

Paul Guppy, research director of the Washington Policy Center in Seattle, isn’t impressed. State officials across the nation contending with ongoing weak revenue should instead more aggressively embrace private prisons, he said.