SACRAMENTO — This was to be the year of big ambitions in California politics.

In January, Gov. Arnold Schwarzenegger, ever eager to put his stamp on outsized ideas, proposed a $12 billion overhaul of the state's health care system. It would provide universal coverage and give relief to the state's 6.5 million uninsured, a bold plan he hoped would become a national template.

At the same time, he wanted a $5.9 billion makeover of California's complex network of reservoirs, pumps and canals to help the state weather future droughts and accommodate an ever-expanding population.

And to increase competition for legislative seats, the moderate governor also sought to reform the way legislative districts are drawn.

It now appears the year may be more a bust than a breakout.

The prospects for striking deals on Schwarzenegger's priorities and other major policies are dimming, growing fainter each day the state's budget impasse drags on.

The Legislature appears no closer to reaching a budget deal than it was on July 1, the start of the fiscal year. The holdup is with Republicans in the Senate, who say they will not vote for it without more spending cuts and concessions on other issues.

That has led the Democratic leaders of the Assembly and Senate to say that other topics won't be considered until a budget deal is finished — if at all.

"The Senate will take up no legislation — none," Senate President Pro Tem Don Perata, D-Oakland, said this week.


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"They're really not only holding the budget hostage, but a lot of other things that need to get done in California."

The greatest concern is time.

When the Legislature returns Aug. 20 from its summer recess, just four weeks will remain until the end of the session, unless Schwarzenegger calls lawmakers back for a special session.

By this time, the governor and the top Democrats had hoped to have the budget well behind them and be deep into negotiations over a health care reform plan, a water bond for next year's ballot and a redistricting proposal.

Those issues are on hold while the budget deadlock drags on.

The environment throughout the Capitol also has become increasingly toxic as Senate Republicans have refused to budge, with name-calling on both sides. At one point, Democrats referred to Republicans as "terrorists" for what they described as holding the state budget hostage over peripheral issues.

"After this, getting all the sides singing Kumbaya' together is certainly questionable. It doesn't bode well," said Fiona Hutton, spokeswoman for State Water Contractors, an organization representing more than two dozen agencies that buy water from the state.

The group seeks changes to water policy affecting the Sacramento-San Joaquin Delta, an ecologically fragile ecosystem but one that acts as a natural funnel for drinking water serving two-thirds of the state's population.

"These are extremely important issues we're talking about," Hutton said. "It's not like we can put these off for another year when we all like each other."

The Republican holdout has soured the mood of the Legislature's two Democratic leaders, who determine the fate of legislation.

Assembly Speaker Fabian Nunez, D-Los Angeles, said he will not consider more water projects regardless of whether the state has a budget. He objects to more borrowing while the state is cutting programs for the poor, he said.

"The Assembly's not going to engage this year on water policy whether we are holding hands or not," Nunez said in an interview.

Similar concerns apply to health care reform, Schwarzenegger's signature issue this year.

Making changes that will result in greater health coverage resonates with Democrats, who have signaled their willingness to work with the governor this year.

But the two sides remain far apart on a number of key issues, such as whether health insurance for individuals would be mandatory.

Nunez and Perata have a joint proposal moving through the Legislature that requires employers to spend at least 7.5 percent of their payroll costs on health care. That's nearly double what Schwarzenegger proposed in January, but the governor and Democratic leaders had hoped to spend the summer working out their differences.

Instead, those talks have been sidetracked by the impasse over the state's $145 billion spending plan.

Peter Harbage, a health care consultant who worked on the governor's plan, said he fears the budget problems could stall reforms this year. Others believe Schwarzenegger and the Democratic leaders have made health care too large a priority to drop.

"I think the political will will be there regardless of when the budget gets done," said Tom Epstein, a vice president at Blue Shield of California.

Somewhat ironically, health care reform, however difficult to negotiate, may be easier to pass out of the Legislature. A health care bill would require a simple majority vote to pass, whereas the budget requires a two-thirds vote.

"(Health care) doesn't require one single Republican vote to pass," Nunez said. "It's between the Democrats and the governor."

Republican legislators disagree. They say any fee charged to businesses actually would constitute a massive tax increase, which would require a two-thirds vote.

If they press that issue, it could lead to a struggle even more bitter than the one over the budget.

The disagreement over health care reform underscores one reason Republicans are reluctant to move on: They have little to gain in most of the proposed policy negotiations that are being delayed.

"The last time I checked, the agendas coming out of this Legislature were far more Democratic priorities than they were Republican priorities," said state Sen. George Runner of Lancaster, the Senate's Republican Caucus chairman. "I get the picture of a guy holding a gun to his (own) head, saying, 'One more step closer and I'll shoot.' And I'm thinking if you want to give us more incentive, I guess that would be the way to do it."

With his agenda in jeopardy, Schwarzenegger plans to take to the road next week. Starting Monday, he will begin touring the state to urge Republican lawmakers to support the budget and begin focusing on other issues.

"We're 100 percent focused on this budget, because nothing else gets done until the budget's done," Schwarzenegger spokesman Aaron McLear said.