Let the recriminations begin.  Governor Arnold Schwarzenegger says that he will lay off 10,000 workers starting today and end the few remaining public-works projects still in progress as the California legislature failed to reach an agreement to hike taxes by over $14 billion in order to close a massive hole in state finances.  Republicans refused to go along:

With lawmakers still unable to deliver a budget after three days of intense negotiations, Gov. Arnold Schwarzenegger prepared to lay off 10,000 government workers and his administration said it would halt the last 275 state-funded public works projects still in operation.

The projects, which cost $3.8 billion and include upgrades to 18 bridges and roads in Los Angeles County to protect them from collapsing in earthquakes, had been allowed to continue as others were suspended because the state was running out of cash. …

Schwarzenegger had delayed sending out pink slips since Friday, hoping that lawmakers would soon approve a budget. But they failed Monday to find a third GOP vote in the state Senate to achieve the two-thirds majority needed to pass a budget — a requirement that essentially gives the minority Republicans veto power. A spokesman for Schwarzenegger said layoff notices would go out today. …

State Sen. Abel Maldonado (R-Santa Maria) was viewed as the most likely candidate to provide the final vote, but by Monday evening legislative leaders had not agreed to his demands. The dominant Democrats need three Republican votes in each house to pass the budget; leaders in the Assembly said the votes were available in the lower house.

In the tax revolt of the 1970s, conservatives managed to amend the state constitution to require supermajorities in each chamber for tax increases.  They intended to use that as a tool to force better fiscal discipline on state government — a great idea, but unfortunately ultimately ineffective.  California just found other ways to raise money, usually through fee hikes.  It also did nothing to control spending, as the state’s enormous $105 billion annual budget proves.

Republicans have almost no power in the state legislature apart from this supermajority requirement, so it’s not surprising that they’re reluctant to pass up a chance to use it to get spending cuts.  Democrats heavily invested in nanny-state policies over the past few decades, though, and refuse to consider large-scale rollbacks of state government programs.  Doing so would jeopardize their standing among key constituencies, especially public-sector unions like AFSCME and SEIU.  Instead, they want to bulldoze Republicans into jacking up taxes even higher, making the state that much less competitive and forcing business relocation to increase.

However, Republicans did manage some interesting concessions in this package.  They claim over $15 billion in cuts to the budget, as well as greater private contracting on public-works projects, a real sore spot for Californians who wait years for state agencies to complete projects that should take months.  They also got approval for a referendum to limit the legislature’s ability to raid the treasury during boom times, which might have prevented the crisis they face now had it been in place three or four years ago.

Is that enough?  If the Republicans refuse to budge, Democrats will likely play chicken and blame the layoffs of public employees on the GOP, especially given the concessions already made.  Newt Gingrich lost that game in 1995 when he played it with Bill Clinton.  Republicans had more strength in 1995, too, than they have had in California over the last decade.