By Kevin Yamamura
kyamamura@sacbee.com
Published: Sunday, Mar. 13, 2011 – 1:00 am | Page 1A

From hosting lawmakers at his downtown loft to testifying in a packed committee room, Gov. Jerry Brown has taken a novel approach to the state budget.

Yet negotiations have returned to a familiar spot: trading additional revenue for long-term changes in state government. Brown is negotiating with a splinter group of five GOP lawmakers, whose wish list contains issues that have divided the Capitol for decades.

Anti-tax conservatives made their voices heard weeks ago. But now core Democratic groups – unions and environmentalists – are trying to ensure that legislators don’t give too much in exchange for a June tax vote.

Democrats say they can only go so far before their coalition begins to fray. They say unions have already cooperated by agreeing to pension cuts last year and supporting Brown’s budget despite its reductions to higher education, social services and health programs.

“Don’t overplay it,” Senate President Pro Tem Darrell Steinberg, D-Sacramento, said to Republicans. “Step back several months. The people elected Jerry Brown, not Meg Whitman. The people returned strong Democratic majorities to the Legislature.”

Some public employee unions opposed a state spending cap on the 2009 ballot and say they would do the same this time around. Unions also would fight a rollback of pension benefits or higher health care contributions for current employees without negotiation.

“It would cause us to rethink whether we could support something in June if this were tied to it,” said Dave Low, head of Californians for Health Care and Retirement Security, a labor coalition that issued an open letter to Democratic leaders last week on pensions.

Democrats are counting on these groups to help finance a special election to extend higher tax rates on sales, vehicles and income for five years. Those additional taxes are estimated to raise more than $50 billion over five years for the state budget.

Unions are reliable financiers of Democratic campaigns. The California Teachers Association spent $9 million on the 2009 special election and contributed to more than 50 current Democratic legislators in the last election cycle. The Service Employees International Union State Council spent $2.6 million last year on independent expenditures – those not coordinated with any campaign – helping Democrats in the most competitive districts.

Brown acknowledged Friday that Democrats face limits in how much they can concede, noting that a pension compromise would contain “as much as we can include that will not set at loggerheads all the opposing parties.”

On pensions, unions want any structural overhaul to be negotiated through collective bargaining. They consider illegal the change suggested by the Little Hoover Commission – freeze existing benefit levels for current employees and reduce them in future years. The five GOP lawmakers, in a letter released Monday, mentioned the Little Hoover Commission idea on their wish list.

Unions say they are willing to address abuses such as pension spiking, in which public employees can bump up their retirement pay by moving to a high-salaried position for a short period of time. They also say state and local governments should be prohibited from halting pension contributions, as many did when investment returns rose in the previous decade.

“I think labor is trying to give as much leeway to the governor as we can, with some level of trust,” Low said. “He understands there are lines.”

The question is whether those changes are enough for Republicans. So far, the “GOP 5” – Tom Berryhill of Oakdale, Sam Blakeslee of San Luis Obispo, Anthony Cannella of Ceres, Bill Emmerson of Hemet and Tom Harman of Huntington Beach – have limited their communications to written statements.

Besides pension changes, Republicans consider a “hard spending cap” a top priority. Democrats agreed last year to put another “rainy day fund” proposal on the 2012 ballot, but Republicans want a more stringent restraint that ties spending increases to inflation and population growth.

Democrats oppose a hard cap, but Steinberg has said that they are willing to consider a temporary spending restraint that lasts as long as the five-year tax extensions.

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