So, we’re at the “still-no-budget” stage in California yet again and the best the governor can do is cut state workers’ pay to the federal minimum wage of $7.25 per hour. The fiscal year began July 1. Plus, he decided that his $11 billion pork-laden water bond package, set as a proposition to be voted on in November, should be put on a shelf for awhile.

The state controller, John Chiang, threatened to sue because of this wage move and the governor threatened to sue him right back. Boys, boys… Meanwhile, Chiang, who went through this last year, is dusting off those IOUs.

Meanwhile, the legislature (actually the Democrats in the legislature since the Republicans are not invited to participate) is still debating the governor’s proposed cuts to social services, community colleges, school programs and local governments totaling around $20 billion, the budget’s shortfall.

The governor, of course, was hoping for a hefty slice of relief ($1.8 billion) from the feds to help pay for the state’s Medicaid program, called MediCal. But all relief amendments for states was cut from the original unemployment insurance extension bill in Washington (and that will keep morphing until July 15, when Senator Robert Byrd’s replacement is named, though we are currently on a time-out for the week-long July 4 break).

Anyway, no magical fix is coming to California any time soon. State Treasurer Bill Lockyer says “it’s absolutely critical that the governor and legislature quickly adopt a budget that’s free of hope-and-a-prayer math and legal clouds. Every day without a credible plan brings us closer to deterioration of the state’s credit rating and the humiliation of IOUs. Our taxpayers shouldn’t have to pay the higher borrowing costs that come with a ratings downgrade. If we let that happen, we will saddle Californians with a multi-billion dollar debt surtax.”

Oh, boy, on top of everything else (did anyone hear about the city of San Carlos shutting down its police department?) we may get a debt surtax. Wonderful…

Since he’s a bit more organized this time around, Controller Chiang has created a website to record what bills the state can pay and what bills it can’t. Frothy summer reading...

And I guess it’s not the right time, economywise, to be asking the voters to approve an $11 billion bond (that we might not get anyway if our credit rating tanks any further) that was approved by the legislature last year.

After several behind-closed-door sessions, Governor Arnold announced he would ask the legislature to pull the water bond off the November ballot and instead ask that it be put before the voters in 2012.

William E. Davis, executive vice president of the Southern California Contractors Association, sent out a note to members: “The governor said he and the legislature ‘must focus on the budget’ (well, duh), but the backstairs whispers in Sacramento say that pulling the plug on the water bonds was part of the negotiations with the public employee unions. The unions have been lobbying against the bonds because they want the state to spend money on employees, not infrastructure and interest and principle payments on the bonds.”

says that while the construction industry, including the heavy construction trade unions, supported the bonds and the 100,000+ jobs that would come with the projects, others were lining up the opposition, including an announcement yesterday, just minutes before the governor made his move, from the California Teachers Association.

“We can't afford an $11.14 billion water bond,” says David Sanchez, president of CTA. “With an already outrageous budget deficit, California can't afford an additional $1 billion every year, taking more money away from our students, our schools and other essential services.”

“So here's what we've got,” Davis concludes. “The public employee unions win, again. The losers are the construction industry, Central Valley farmers and Arnold Schwarzenegger who has traded another piece of his legacy in an improbable quest for a budget solution.”