From President Barack Obama:

This weekend, our family will join millions of others in celebrating America. We will enjoy the glow of fireworks, the taste of barbeque, and the company of good friends. As we all celebrate this weekend, let’s also remember the remarkable story that led to this day.

Two hundred and thirty-three years ago, our nation was born when a courageous group of patriots pledged their lives, fortunes, and sacred honor to the proposition that all of us were created equal.

Our country began as a unique experiment in liberty — a bold, evolving quest to achieve a more perfect union. And in every generation, another courageous group of patriots has taken us one step closer to fully realizing the dream our founders enshrined on that great day.

Today, all Americans have a hard-fought birthright to a freedom which enables each of us, no matter our views or background, to help set our nation’s course. America’s greatness has always depended on her citizens embracing that freedom — and fulfilling the duty that comes with it.

As free people, we must each take the challenges and opportunities that face this nation as our own. As long as some Americans still must struggle, none of us can be fully content. And as America comes ever closer to achieving the perfect Union our founders dreamed, that triumph — that pride — belongs to all of us.

So today is a day to reflect on our independence, and the sacrifice of our troops standing in harm’s way to preserve and protect it. It is a day to celebrate all that America is. And today is a time to aspire toward all we can still become.

From Gov. Arnold Schwarzenegger:

“America is truly the land of opportunity. When I arrived in America at age 21 with only $20 in my pocket and a duffel bag full of sweaty gym clothes, I hoped to someday become a bodybuilding champion and a leading man in the movies. Not only did I succeed in both, but I now also have the honor of being Governor of the greatest state in the nation, California. Today, America continues to offer an abundance of opportunities to all and remains one of the greatest and most diverse countries in the world. As we celebrate America’s independence, let us not forget those who have worked so hard to protect the freedoms we enjoy today – so a big thank you to our troops. Maria and I would like to wish everyone a Happy Fourth of July and encourage all to practice caution when using fireworks.”

After covering a federal court hearing this morning in San Francisco, I was walking through Civic Center and saw several dozen state workers — most of them wearing the distinctive purple t-shirts of the Service Employees International Union — picketing outside the state building.

“We’re taking care of California, don’t hurt our families,” “Don’t balance the budget on our backs,” their signs read. “5 percent don’t pay the rent” and “The party of ‘no’ has got to go,” they chanted.

They were delivering to Gov. Arnold Schwarzengger’s San Francisco office copies of petitions signed by 35,000 state workers, urging the governor to drop his plans to cut another 5 percent from all state workers’ salaries; they’ve already lost more than a month’s worth of wages through the governor’s mandatory furloughs.

Instead, they want the governor to make a 10 percent cut in California’s $34 billion in private vendor contracts. Just since January 2008, the state has entered into more than 15,000 new private vendor contracts worth almost $6 billion; SEIU Local 1000 boasts it has sued to stop about 120 such contracts in the past two years, winning four out of five cases by proving the contracts were more expensive and less efficient than using state employees to do the same work.

“It’s time for the governor and his corporate supporters to begin giving back to help balance the budget by cutting private contracts and closing corporate tax loopholes,” SEIU Local 1000 President Yvonne Walker said in an e-mailed statement.

SEIU workers were outside Schwarzenegger’s State Capitol office in Sacramento today, too. Senate Republican Leader Dennis Hollingsworth, R-Murrieta, seemed to misunderstand the union’s intent, issuing a statement saying the union wants all of the state’s private vendor contracts eliminated.

“SEIU and AFSCME’s proposals are out of touch with reality, and they do more harm than good. Big labor’s agenda is clear, protect the bloated bureaucracy that got us into this mess,” Hollingsworth said, noting private vendor contracts represent thousands of private-sector jobs and billions of dollars in future tax revenue that would be lost.

In the last decade, he said, public-sector employment has outpaced private sector employment by 9 percent.

“Something is wrong with our system when the market no longer drives job creation. California’s bureaucracy should never out pace private sector jobs. SEIU is protecting a broken system and putting more hard-working Californians on the street. Budget priorities should be performance based, not based on which bully can shove the hardest,” Hollingsworth said, claiming that increasing the gas tax, instituting an alcohol tax and accelerating tax collection on small businesses would protect labor’s membership while shifting the cost to the general public. “Increasing taxes and proposing new ones is insane. It’s exactly what the voters said no to. We must cut programs that don’t work, end automatic spending formulas, and pursue long-term reforms that will keep us out of this mess for good.”

And California Republican Party chairman Ron Nehring had this to say about it:

“Today we see the union campaign of threats and intimidation move from the hearing room to the capitol steps. The venue is different, but the tactics remain the same: bully government officials into making decisions that make sense for their narrow interest instead of the public good.

“Today, SEIU will continue to reject a 5 percent cut in pay for state government bureaucrats while continuing to demand billions in new taxes to be paid by California families who are already struggling to make ends meet. The Governor and lawmakers should continue to stand strong in the face of this continued bullying and intimidation by union officials.”

UPDATE @ 3:13 P.M.: Schwarzenegger spokesman Aaron McLear notes the governor issued an executive order earlier this month to eliminate funding “for contracts entered into by state agencies and departments after March 1, 2009 for all goods and services excluding those necessary for public safety and to prohibit entering into any new contracts.” The order also directed all state departments to develop and submit to the Finance Department plans to reduce their future spending on contracts and purchases by at least 15 percent no later than 30 days after the adoption of the revised 2009-10 budget.

From Gov. Arnold Schwarzenegger:

“When the world loses one-third of its wealth in 18 months, it is to be expected that historic levels of job losses will follow. Not surprisingly, we and our fellow states have seen unemployment numbers rise sharply during this difficult time. A full recovery will not happen overnight — it will take time, which only further underscores the need to continue the economic stimulus measures I fought for in the February budget. There is no greater priority right now than to stimulate the economy, create jobs and get California back on the road to prosperity.”

From California Labor Federation Executive Secretary-Treasurer Art Pulaski:

“While the rest the country is beginning to emerge from this deep recession, California remains stuck in the mud under Gov. Schwarzenegger’s failed leadership.

“If ever there was time to sound the alarm, it’s now. The staggering loss of 68,000 jobs in May means more families are teetering on the edge of financial calamity. Instead of throwing families in need a lifeline, the governor threatens to push them over the cliff with his ill-conceived budget proposal.

“The catastrophic cuts the governor has proposed to vital services will shred the safety net that so many families depend upon for survival in these difficult times. Budget cuts will also lead to additional job cuts, exacerbating unemployment.

“Behind every unemployment number is a heartbreaking story of a family in distress. Unless legislators and the governor reach a quick and fair solution to the state budget, we can expect job loss to accelerate and the pain families are feeling to intensify in the months to come.

“We can’t afford more Republican grandstanding. It’s time for a real budget that’s not balanced on the backs of working families.”

UPDATE @ 1:58 P.M.: More views, after the jump…
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Gov. Arnold Schwarzenegger today signed into law a bill aimed at keeping California’s cities from getting soaked for millions of dollars in a kind of sales-tax relocation scheme, as Livermore has.

As I reported last week, the new law — SB 27, which recieved not only bipartisan but unanimous support from both chambers of the Legislature — bars agreements in which consultants and retailers open a “shell” sales office within a given city in order to reap large sales-tax rebates without actually moving their core operations. Bill author state Sen. Loni Hancock, D-Berkeley, said that under this type of agreement most of the local sales taxes paid by residents go into the pocket of the relocating retailer and consultant rather than toward vital public services including police and fire protection.

For example, the cities of Livermore, Industry and San Diego have suffered since Owens & Minor — a Fortune 500 medical-equipment supplier based in Virginia — opened a small sales office in the Ventura County city of Fillmore. Though Owens & Minor still has its distribution centers in the three cities, the local sales taxes are credited to Fillmore, which gives 85 percent of that money to a consulting company that arranged this deal, which in turn kicks at least half back to Owens & Minor.

The losing cities are still left with the burden of providing vital police, fire, and other public services to Owens & Minor’s distribution facilities. Livermore’s $2.5 million loss in this fiscal year equals 3.1 percent of the city’s total General Fund and 13.7 percent of the city’s total sales tax revenue, Hancock said; the city’s loss over the past, current and next fiscal year will total about $6.3 million.

“I’m pleased we are putting an end to these ’shell’ sales tax scams that cost local taxpayer millions of dollars and deprive cities of their ability to provide vital public services,” Hancock said in an e-mail moments ago. “I believe it makes sense to prohibit these agreements which simply put money into the pockets of unprincipled profiteers when cities all across California are facing large budget deficits.”

From Assemblyman Sandre Swanson, D-Alameda:

“The Governor’s proposal to balance the $24 billion budget shortfall without the use of additional revenues is neither a fair nor realistic solution to the budget crisis. I find it morally objectionable for the Governor’s proposals to specifically cut Cal-Works, Healthy Families, Cal-Grants, In-home service care for the elderly, and even access to State parks. The Governor’s proposal also fails at its intended goals: it fails to address our deficit and it fails to reflect our priorities.

“In this budget year alone, we have instituted $23 billion of cuts, over 20% of our $105 billion budget. These cuts represent a tremendous amount of pain for California, a serious reduction in services to our constituencies, and a reduction in the prosperity of our state.

“Our budget must reflect our priorities. It must reflect what kind of state we want to be. I believe our state should be one that gives priority to children, seniors, and support for working families, all of which requires us to invest in our state. I hope we will look at revenue solutions that are realistic, that help the state support its safety net programs, and that provide Californians with the services they require and demand as they work to bring our state through this economic crisis.”

From State Sen. Sam Aanestad, R-Grass Valley:

“That was Governor Schwarzenegger’s best speech yet. He understands, as I do, that voters sent an undeniably strong message during the special election last month: cut spending, do your job and live within your means with no new taxes. Senate Republicans have been preaching this message of fiscal conservatism for years.

“The Governor understands, as we do, that our options are few. There is no combination of taxes and fees that will close this yawning $24 billion deficit, nor does the legislative will exist to raise taxes again. Raising taxes is not the answer. We cannot borrow our way out of this mess. Banks do not consider California to be a good loan risk, and with our track record of overspending, I can’t blame them. The only option left on the table is to cut spending, reform inefficient government agencies, live within our means and never make the mistake of spending more than we have again.

“Now, let’s get to work!”

More, after the jump…
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He got polite applause, which is de rigeur: The fact is, nobody in that room likes him, and he bears bad news.

The governor as expected continued to insist the May 19 special election indicated that people want their elected officials to do their jobs, make the hard choices, and not raise taxes. As I’ve written earlier, there’s a lack of consensus on what the extremely low turnout and election results really mean, especially when it comes to taxes versus spending.

“California’s day of reckoning is here,” bringing “a transformation of what services Sacramento can provide and how those services are delivered,” the governor said, citing the bone-deep cuts – no, the amputations (eliminating the CalWorks, Healthy Families and Cal Grant programs, among others) – he has proposed. “I know the consequences of those cuts are not just dollars – I see the faces behind those dollars.”

Those faces are kids without teachers, Alzheimer’s patients without in-home care, police and firefighters pink-slipped, he said. “I hear the deomonstrations outside of our capitol. It’s an awful feeling, but we have no choice. Our wallet is empty, our bank is closed and our credit has dried up.”

We must “live within our means,” he said. “We can only spend the money that we have.”

Though he referred to our “outdated and volatile tax system,” he made no mention of possible new revenue streams – perhaps it returning the top bracket of income taxes to where it was under governors Pete Wilson and Ronald Reagan, or inserting a new income tax bracket so that someone making $1 million a year isn’t taxed at the same rate as someone making $50,000 a year, or allowing commercial property to be reassessed at fair market values.

He spoke instead about “great opportunities here for structural reform,” finding innovative ways to stretch the taxpayer dollar and provide services at lower costs – like moving from paper to digital textbooks. “In so many areas of government, there are opportunities here for reform.”

He spoke of consolidating more than a dozen state departments, boards, commissions, and swore he’d not cut a dollar from schools, health care, public safety or parks without first eliminating the California Integrated Waste Management Board (the state agency designated to oversee, manage, and track California’s 92 million tons of waste generated each year, with a current annual budget of $235.3 million – none of it from the general fund, all of it from fees) and other entities like it. He also spoke of selling off state property to pay down the state’s debt, which will ease debt-service burdens on the general fund.

Schwarzenegger gave an unsubtle I-told-you-so, noting his 2004 speech about “blowing up the boxes” in Sacramento and consolidating agencies. “Now we are in a crisis and we are running out of excuses and we have run out of time and the people have run out of patience.”

“Let’s all work together on all of those issues and make it happen,” he said, urging lawmakers to enact most of these structural reforms before leaving for the summer recess in mid July.

“There’s no doubt that the challenges before us are enormous, they will test our will, they will test our resolve, they will test our leadership,” he said, citing recent media reports including New York Times columnist Paul Krugman’s recent, dire review of California government.

“Let’s prove all of the pundits wrong,” he said. “Let’s think big, let’s think outside the box, let’s think long term and lay a new foundation for California’s future.”

Full transcript of the speech as prepared, after the jump…
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What they’re saying about Gov. Arnold Schwarzenegger’s bad-and-worse May budget revision proposals…

State Senate President Pro Tem Darrell Steinberg, D-Sacramento:

“The message from the Governor’s May Revise is clear. California’s budget deficit continues to grow because of a National and International economic crisis that can be felt in every classroom, boardroom and unemployment office in the state. While Californians will have a chance to affect our budget deficit in next week’s election, it doesn’t change the fact that there are difficult choices ahead for this Legislature and the Governor. Regardless of what happens on May 19, on May 20 we will begin to respond to this fiscal challenge swiftly and responsibly, doing the best we can with the money we have.”

From Assembly Speaker Karen Bass, D-Los Angeles:

“The deep cuts included in both of Governor Schwarzenegger’s budget proposals reflect the impact the extended national recession continues to have on California. We have consistently said that all issues must be on the table, so we will closely examine each and every one of the Governor’s proposals announced today. We understand the people of California don’t care about politics-as-usual when it comes to solving the budget, and we will reject any stunts or gimmicks that get in the way of serious solutions. Californians are frustrated and families who depend on services from the state –whether schools or firefighting or health care for children – are worried. We will work to solve the budget deficit in a way that protects a safety net for the most vulnerable among us, acknowledges the fact we need an educated workforce to keep our economy going, and respects the strains all Californians are facing in this economy.”

From you:

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What’s that? You have nothing to say about it? But the governor himself today challenged every Californian, “If you don’t like the cuts, sit down with a pen and pencil and figure out where the money is going to come from.”

Hey, it’s even easier than that: Go use Next 10’s nonpartisan “California Budget Challenge,” a free online educational tool that lets users try to balance California’s budget and see how their choices will affect the state five years into the future. Everyone should take a stab at it, in order to understand what’s really at stake here.

More feedback on the governor’s proposals, after the jump…
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The Public Policy Institute of California’s latest poll shows that as interest has grown in the May 19 special election, opposition has grown to the ballot measures with five of the six headed for defeat:

“The voters who are really tuned in are really turned off,” PPIC president, CEO and survey director Mark Baldassare. “They see the state’s budget situation as a big problem, but so far, they don’t like the solution.”

PPIC found voters most likely to be following news of the special election very closely are older than age 55, men and those who disapprove of the governor and legislature.

That latter category would be most of you, apparently: The poll found the governor (34 percent) and legislature (12 percent) at almost-record-low approval ratings. Californians feel less trust in state government now than PPIC has ever seen: Just 16 percent of likely voters say they can trust the government in Sacramento to do what is right just about always (2 percent) or most (14 percent) of the time. Among Californians overall, 23 percent hold this view (4 percent always, 19 percent most of the time).

But it’s not all gloom and doom. For the first time since PPIC started asking in 2003, most Californians – 57 percent – and most likely voters here – 52 percent – think the nation is generally headed in the right direction. That’s a marked increase even from when January, when it was 32 percent of Californians and 31 percent of likely voters. (Apparently, yes he can!)

The findings are based on a telephone survey of 2,005 adult Californians interviewed from April 27 through May 4 in English or Spanish; the margin of error all adults is ±2 percent, and for the 1,080 likely voters, it’s ±3 percent.

More PPIC tidbits, after the jump…
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Gov. Arnold Schwarzenegger was up on the northern edge of Rep. Ellen Tauscher’s 10th Congressional District this morning to announce California’s first construction groundbreaking of an infrastructure project funded by the America Recovery and Reinvestment Act.

It’s improvement of the pavement on a 50-year-old section of Interstate 80, between State Route 12 and Air Base Parkway in Fairfield, a roadway used by nearly 200,000 motorists each day; the governor’s office estimates it’ll create more than 200 jobs.

“When President Obama made infrastructure projects a priority, we immediately took action because we know firsthand this investment provides a shot to the arm for our economy and puts Californians back to work,” Schwarzenegger said in a news release. “The groundbreaking of this project illustrates how quickly and effectively we are pumping Recovery Act funding into our economy to create jobs for Californians and invest in the future of our state’s infrastructure.”

Expected to be completed by the end of 2009, the $13.5 million project will resurface and repair the freeway thereby extending pavement life, saving taxpayers money, and improving road conditions for motorists and truckers moving goods. The winning bid from contractor Top Grade Construction of Livermore was the lowest bid submitted at nearly 40 percent below the California Department of Transportation’s cost estimate. Savings from this project have been directed to advance other highway projects.

Estimates show California will receive nearly $2.6 billion from the Recovery Act for highways and local streets and $1 billion for transit projects. Discretionary programs could add another $300 million, and the governor’s office says California “expects to be very competitive in securing a portion of $8 billion set aside nationally for high-speed rail and intercity rail.”

Though building support for the special-election budget reform agenda was his main goal, Gov. Arnold Schwarzenegger touched on other topics in a Q&A session with the Bay Area Council on Thursday in San Francisco – and one of those topics is how hard it is when people disagree with him.

The governor went on a bit of a tirade against dissent, first talking smack about U.S. District Judge Oliver Wanger’s 2007 order reducing the operation of pumps in the Delta to protect the endangered Delta Smelt, then about a three-federal-judge panel’s moves toward ordering the release of certain inmates to reduce California’s chronic and unconstitutional prison overcrowding, and then about Clark Kelso, the receiver empowered by a federal judge to demand $8 billion from the state to correct unconstitutional, decades-long underfunding of prison health care.

“It’s not productive for the state to have so many chefs in the kitchen,” the governor grumped. “Those are the kinds of things that make it very difficult.”

But his ire wasn’t just directed at the federal courts. Lt. Gov. John Garamendi, he said, opposes him on fiscal policy at every turn, he said: “He’s running for Congress now, so that’s good.”

And he cited state Controller John Chiang’s and state Treasurer Bill Lockyer’s opposition to his plans to cut state salaries last year. “How does a coach win a basketball game when all of the players are running off in different directions?” Schwarzenegger asked.

Maybe that’s why he’s so hot for Proposition 1A, which would give the governor new authority to unilaterally reduce some spending for state operations and capital outlay and eliminate some cost-of-living increases, all without legislative approval – shoo, you pesky compromises; begone, consensus! Also, maybe he’s forgetting that these federal judges’ job is to hold California to its obligations under federal law and the U.S. Constitution, and that the Democratic statewide elected officials he’s knocking are with this state’s majority party while he’s in the minority.

More, after the jump…
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