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Deal may be just days away; Democrats drop tax plan -- Gov. Arnold Schwarzenegger and Senate President Pro Tem Darrell Steinberg said separately Thursday that they are optimistic a budget deal can be struck within several days. Jim Sanders SacBee Capitol Alert Greg Lucas California's capitol weblog -- 7/2/09

DMV offices to close three Fridays -- State Department of Motor Vehicle offices will be closed each of the next three Fridays, July 10, 17, and 24, to comply with the governor's furlough order, department officials said. Tony Bizjak in the Sacramento Bee -- 7/2/09

State engineers vow legal challenge to block third furlough day -- The Professional Engineers in California Government say they're preparing a legal challenge to stop the Schwarzenegger administration from imposing a third furlough day a month on its members during the budget crisis. Andrew McIntosh in the Sacramento Bee -- 7/2/09

IOUs will pay 3.75 percent -- The tax-free interest will go to those who present the IOUs, formally known as registered warrants, by mail or in person to the state treasurer's office. Banks that agree to cash them early also will receive the interest, which is less than the 5 percent the state paid when it last issued IOUs in 1992. James Sweeney San Diego Union-Trib weblog Mike Zapler in the San Jose Mercury -- 7/2/09

Senate on call over holiday -- Senate President Pro Tem Darrell Steinberg has sent members home for the July Fourth holiday weekend with advice to stay within four hours of the Capitol should budget progress require a floor session. Dan Smith SacBee Capitol Alert BRIAN JOSEPH in the Orange County Register -- 7/2/09

Pete Wilson for Governor Again? -- Would Pete Wilson run for governor against Jerry Brown if term limits did not deny that opportunity? “Hell, yes,” the former California governor said firmly, when asked that question by Fox and Hounds Daily contributor Joe Mathews before an audience earlier in the week. Joel Fox Fox & Hounds weblog -- 7/2/09

Nixon aide, Copley executive Herbert G. Klein, dies at age 91 -- Herbert G. Klein, the former Nixon aide whose 52 years with Copley Newspapers and active role in civic affairs made him a San Diego icon, died Thursday. Mr. Klein, who lived in La Jolla, was 91. Peter Rowe and Tom Mallory in the San Diego Union-Trib -- 7/2/09

Ailing Henry Waxman said to be improving -- Longtime California congressman Henry Waxman is 'in good spirits' after a fainting spell lands him in a Los Angeles hospital. Kristina Sherry and Kate Linthicum in the Los Angeles Times -- 7/2/09

Pham makes congressional bid official, faces Van Tran -- Assemblyman Van Tran, R-Westminster, was recruited by the National Republican Congressional Committee to challenge Rep. Loretta Sanchez, D-Garden Grove, in 2010 - but he won’t have a clear path to the GOP nomination. Martin Wisckol in the Orange County Register -- 7/2/09

Time to hire Arnold's kid, the business whiz: he doesn't take IOUs -- Like father, like son: Gov. Arnold Schwarzenegger's young son, Patrick, looks like he's got that "make-me-a-millionaire" Arnold-style business DNA hard-wired into his teenage frame. Carla Marinucci Chronicle Politics Weblog -- 7/2/09

California first-time jobless claims hit four-month high -- Initial applications for unemployment in California soared by 14,570 in the week ending June 20, the highest level since the first week of February, reports the U.S. Labor Department today. Mary Ann Milbourn in the Orange County Register -- 7/2/09

U.S. unemployment rate hits 9.5%, a 26-year high -- In June, 467,000 jobs were lost; analysts had predicted 350,000. Despite positive signs for the economy in recent weeks, the report is evidence that the jobs market remains troubled. Don Lee in the Los Angeles Times -- 7/2/09

State rolls out $3.36 billion in IOUs today -- Low-income people, the elderly and the disabled will receive their regular checks on schedule. Schools, state workers, Medi-Cal providers, pension funds and In-Home Supportive Services are all protected by law from receiving an IOU in lieu of a real check. Carolyn Said, Nanette Asimov in the San Francisco Chronicle -- 7/2/09

State's budget gap deepens $2 billion overnight -- A missed deadline worsened California's budget crisis Wednesday by $2 billion - and now, the fiscal hole will deepen by millions each day that a solution is not passed. Matthew Yi in the San Francisco Chronicle -- 7/2/09

Federal judge fast-tracks lawsuit seeking to overturn same-sex marriage ban -- A federal judge moved Thursday to fast-track a lawsuit seeking to overturn Proposition 8 and let California's same-sex marriages resume. Josh Richman in the Contra Costa Times -- 7/2/09

Applications for home-buying tax credit to be cut off today -- The California Franchise Tax Board announced this morning it will pull the plug on its fax machine at midnight tonight, accepting no more applications for a $10,000 tax credit for buyers of new unoccupied homes in California. Jim Wasserman in the Sacramento Bee -- 7/2/09

Post Publisher Cancels Plans for Off-the-Record 'Salons' -- Washington Post Publisher Katharine Weymouth today canceled plans for a series of policy dinners at her home after learning that marketing fliers offered lobbyists access to Obama administration officials, members of Congress and Post journalists in exchange for payments as high as $250,000. Howard Kurtz in the Washington Post -- 7/2/09

For many state workers, furloughs don't mean breaks -- Furloughs for state workers haven't always turned into relaxing three-day weekends. There's just too much work, said Caltrans employee Terry Chapman. DUANE W. GANG in the Riverside Press -- 7/2/09

'Furlough Fridays' for all? Not so fast -- Most state employees started work Wednesday morning knowing that their pay in coming months will be nearly 5 percent less than June's, since Gov. Arnold Schwarzenegger has added a third monthly furlough day to the two they've endured since February. That's right, "most." Jon Ortiz in the Sacramento Bee -- 7/2/09

Legal action targets gov’s new furlough order -- Governor Arnold Schwarzenegger’s executive order to force state workers to take a third unpaid day off each month has drawn a legal challenge from the Professional Engineers in State Government. Other legal challenges were expected. The item is in Capitol Weekly -- 7/2/09

State IOUs loom as foes' battle lines harden -- Budget hopes fade and officials prepare to issue scrip to creditors. The governor calls lawmakers' inaction on the budget 'inexcusable' and orders a special emergency session of the Legislature. Michael Rothfeld and Shane Goldmacher in the Los Angeles Times Kevin Yamamura in the Sacramento Bee Mike Zapler in the San Jose Mercury E.J. Schultz in the Fresno Bee JIM MILLER in the Riverside Press James P. Sweeney in the San Diego Union-Trib -- 7/2/09

How IOUs work -- Q: What's a registered warrant? A: It's an interest-bearing promise to pay an IOU issued by the state when there's not enough cash in the state's bank accounts to pay all of its General Fund spending obligations. The item is in the Contra Costa Times -- 7/2/09

Long Beach Health Department, students could be affected by state IOUs -- The city's Department of Health and Human Services could lose another $2.5 million in funding, at least temporarily, when the state begins issuing IOUs today, city officials said. Paul Eakins in the Long Beach Press -- 7/2/09

State cannot divert gas tax revenue from transit, court rules -- A California court ruled Wednesday that the state's attempt to divert $1 billion in gas tax revenue from transit agencies to the general fund is illegal — a dose of good news for beleaguered bus and rail lines that have been cutting service, raising fares and laying off workers. Gary Richards in the San Jose Mercury -- 7/2/09

Governor targets public pension cuts -- Governor Arnold Schwarzenegger, calling current benefits “unsustainable,” proposed a sweeping reduction in pension and retiree health benefits for new state workers. Ed Mendel in Capitol Weekly -- 7/2/09

Budget crunch: Feds eye state parks -- Federal authorities are considering taking over some state parks, as the state’s grapples with a $26 billion-plus shortage and is searching for ways to save money. Michael Panush in Capitol Weekly -- 7/2/09

Aficionados of politics await redistricting numbers -- For some, the last week of the year is a time to kick back and relax. For the political junkies who specialize in redistricting, it’s a time of high drama. This year, especially. John Howard in Capitol Weekly -- 7/2/09

Hopefuls in 2010 governor's race raising millions -- Meg Whitman, the Republican candidate for governor, said today that her committee has raised more than $6.5 million since her campaign began earlier this year, while her top Democratic rival, Attorney General Jerry Brown, says he's banked a cool $7.3 million. Andrew McIntosh SacBee Capitol Alert Juliet Williams AP -- 7/2/09

Poizner overhauls political shop to stave off Whitman moves -- Though the Republican gubernatorial primary is almost a year away, Steve Poizner has overhauled his campaign operation, dismissing a number of Sacramento insiders and replacing them with new, full-time staff. Anthony York in Capitol Weekly -- 7/2/09

Race for 32nd district not over yet -- Judy Chu wasn't originally planning on participating in last week's debate among candidates vying to represent the 32nd Congressional district. Rebecca Kimitch in the San Gabriel Tribune -- 7/2/09

Villaraigosa says he will focus on economy, environment in second term -- L.A. mayor says he is 'determined to find a second wind' as he is sworn in on the steps of City Hall in a ceremony that is sunny but lacks the star power of his first inauguration. Phil Willon, David Zahniser and Maeve Reston in the Los Angeles Times -- 7/2/09

Bono Mack's vote sparks GOP outrage -- Rep. Mary Bono Mack's support of a sweeping climate change bill has unleashed a wave of criticism from her constituents and party activists, with some threatening to withdraw their support of the Republican congresswoman. Erica Felci in the Desert Sun -- 7/2/09

Roberts and Trounstine: Kennedy Whacks Davis, More on Gov Money -- Nasty Ringer from the Horseshoe: So Calbuzz is reading along Wednesday in the Wall Street Journal’s slobber job on Gov. Arnold’s COS Susan Kennedy and suddenly — KABOOM! — she smacks her former patron Gray Davis upside the head with a crowbar: Jerry Roberts and Phil Trounstine CalBuzz -- 7/2/09

Rival states hope California's economic woes will send businesses their way -- California's budget crisis is turning into a worldwide spectacle that could harm the state's business climate – and chase companies away. Dale Kasler in the Sacramento Bee -- 7/2/09

Hiring might not rebound in an economic recovery -- After upheaval in the auto and financial sectors, many workers may find the jobs they lost are gone forever. Don Lee in the Los Angeles Times -- 7/2/09

Obama plan expanded to help more in Valley -- Mortgage counselors in the central San Joaquin Valley say many more at-risk homeowners in the Fresno area could get help through an expansion of President Obama's Home Affordable Refinance Program, which was announced today. Sandy Nax Fresno Bee News Blog -- 7/2/09

Hiltzik: Mercury General using guise of benevolence to assault Prop. 103 -- The auto insurer's alter ego, Californians for Fair Auto Insurance Rates, is sponsoring a bill that it says will surely lower our insurance bills. Michael Hiltzik in the Los Angeles Times -- 7/2/09

U.S. offers financing to small auto dealers -- Dealers of small autos, RVs and other vehicles can apply for federally guaranteed financing under a new loan program introduced Wednesday by the U.S. Small Business Administration. Darrell Smith in the Sacramento Bee -- 7/2/09

Opus West plans to file for bankruptcy protection -- One of the most prominent commercial real estate developers in Sacramento is heading into bankruptcy proceedings. Dale Kasler in the Sacramento Bee -- 7/2/09

Senate stalemate could mean windfall for public schools -- In the wake of the Senate’s failure to pass three bills that would have bridged the state cash crunch, uncertainty now reigns over how much discretion the state has to make cuts to public schools, and what the missed deadline means for the rest of the state budget. Anthony York in Capitol Weekly -- 7/2/09

Suspend Prop. 98? It's back on the table -- With the close of the fiscal year at midnight Tuesday, a proposed $3.3 billion cut to public education was thrown out the door – lawmakers can't cut money from a year that's already ended. SCOTT MARTINDALE and FERMIN LEAL in the Orange County Register -- 7/2/09

Tobar: An unforgettable graduate continues his journey -- We need Luis Peñate, a thinker and a fighter, and others going away to college to come back to L.A. to help solve our many problems. Hector Tobar in the Los Angeles Times -- 7/2/09

School levy failure highlights challenges for big districts -- Rowland Unified gained a majority of votes but couldn't get the required two-thirds support. Experts say larger districts like L.A or Long Beach could have trouble reaching that level as well. Seema Mehta in the Los Angeles Times -- 7/2/09

Solar energy helps to power huge ship at Port of Long Beach -- The solar array, which provides 10% of the energy used by the M/V Auriga Leader while she is docked, is part of a demonstration project to reduce diesel emissions. Ronald D. White in the Los Angeles Times -- 7/2/09

U.S., California programs to reduce ship emissions -- The mandatory use of cleaner fuels will improve the air quality of coastal cities, Gov. Arnold Schwarzenegger says. Amy Littlefield in the Los Angeles Times -- 7/2/09

Rebound expected in California's solar power sector -- The bad economy slowed the growth of California's solar-power sector in the first half of the year, but the industry appears to be rebounding, according to a report released this week by the California Public Utilities Commission. Jim Downing in the Sacramento Bee -- 7/2/09

Economic pinch eases freeway commutes -- Has Sacramento turned back the clock on its highways to a more free-wheeling time? Some drivers and highway officials say yes – knock on wood – congestion doesn't seem as bad as it once was. Tony Bizjak in the Sacramento Bee -- 7/2/09

EPA ready to settle Bay Area pesticide suit -- The U.S. Environmental Protection Agency announced Wednesday a proposed settlement of a lawsuit that could result in scrutiny of how dozens of dangerous pesticides affect threatened and endangered species living around San Francisco Bay. Jane Kay in the San Francisco Chronicle -- 7/2/09

Garbage gas will light up thousands of homes -- Methane gas seeping from a landfill in Half Moon Bay will supply power for thousands of homes in Alameda and Palo Alto, using a new system that began operation on Wednesday. David R. Baker in the San Francisco Chronicle -- 7/2/09

Making Plants That Sip, Not Gulp, Water -- For the family farm, the margin between profit and loss is razor thin in the best of times. These are certainly not the best of times for farmers in San Diego County. JONATHAN PARKINSON Voiceofsandiego.org -- 7/2/09

Sacramento County sues Aerojet and Boeing over water contamination -- The county alleges that years of pollution by Aerojet and McDonnell-Douglas -- which has since merged with Boeing -- led to groundwater contamination in a large portion of eastern Sacramento County. Robert Lewis in the Sacramento Bee -- 7/2/09

Rally for water rights hits downtown Fresno -- Ron Schafer and Alice Powlick aren't farmers or farmworkers. They are middle-school teachers who came to Wednesday's water rally in downtown Fresno on behalf of their students. Robert Rodriguez in the Fresno Bee -- 7/2/09

GOP ads link Dems to Valley water crisis -- Republican strategists are now roughing up San Joaquin Valley congressional Democrats with radio ads linking them to the region's water woes. Michael Doyle in the Fresno Bee -- 7/2/09

In San Francisco, thou shalt compost: It's the law -- San Francisco, renowned for its civic will to save the planet, is now ordering residents and businesses to compost food scraps and biodegradables, or risk fines for not properly sorting their garbage. Peter Hecht in the Sacramento Bee -- 7/2/09

For Some WH Aides, Public Service Has Its (Six-Figure) Rewards -- The magic number in the Obama White House appears to be 172,000. Dollars, that is. Per year. Michael D. Shear in the Washington Post -- 7/2/09

L.A. employers face immigration audits -- Federal officials Wednesday notified more than 650 businesses around the country, including nearly 50 in Los Angeles, that their records will be audited as part of a widening effort to find companies that hire illegal immigrants. Anna Gorman in the Los Angeles Times -- 7/2/09

Immigration Crackdown Shifts Focus to Employers -- The Obama administration announced a crackdown Wednesday on hundreds of companies suspected of employing illegal immigrants, signaling a shift in strategy: going after employers instead of workers. MIRIAM JORDAN and SABRINA SHANKMAN in the Wall Street Journal -- 7/2/09

Calorie counts don't dissuade most diners -- Despite her very Berkeley name, and a new state law that requires chain restaurants to fess up about the caloric and fat load in their food, Rabbit wasn't nibbling on carrots and lettuce Wednesday. Michael Cabanatuan in the San Francisco Chronicle -- 7/2/09

Medical marijuana backers wary as ID cards readied -- Even as San Bernardino County prepares to comply with state law and issue identification cards to medical marijuana patients in August, advocates say access to cannabis may remain difficult. IMRAN GHORI and MICHAEL PERRAULT in the Riverside Press -- 7/2/09

Medical pot users, growers can sue over raids -- Medical marijuana patients and growers can sue police for illegally raiding their property and destroying their plants, a state appeals court ruled Wednesday. Bob Egelko in the San Francisco Chronicle -- 7/2/09

Program aims to put Ph.D.’s in legislative offices -- If a bill by Assemblyman Anthony Portantino, D-Pasadena, keeps moving forward, 10 legislative offices will be hosting science Ph.D.’s by this fall. Malcolm Maclachlan in Capitol Weekly -- 7/2/09

More woes for the Gabrielino-Tongva Tribe -- One of California’s longest-suffering Indian bands is undergoing yet another leadership dispute. The Gabrielino-Tongva Tribe of the Los Angeles Basin — which has already lived through a loss of federal recognition and a casino effort that has been stalled for years, as well as competing bands and multiple lawsuits — has now seen a split among its tribal council. Malcolm Maclachlan in Capitol Weekly -- 7/2/09

Caltrans Has Legacy of 'Phantom Closures' -- For every road closure that Caltrans approves and contractors use, the agency notifies the public and emergency responders about two more closures that never happen. ROB DAVIS Voiceofsandiego.org -- 7/2/09

With boost from Obama, Web 2.0 government takes off -- Want to give the Obama White House an earful on how to open up government? Want to sort through the latest NASA images of Mars, use a text message to donate to Pakistani refugees or help transportation officials design new bus stops? Frank Davies in the San Jose Mercury -- 7/2/09