Calif. Lawmakers Approve Budget Cuts

Legislators OK Major Spending Cuts but Reject other Controversial Measures; Schwarzenegger Must Close $1.1B Gap

(AP)  Last updated at 9:19 p.m. EDT

Lawmakers on Friday approved a complex package of spending cuts, accounting maneuvers and raids on local government coffers to fill California's gigantic budget deficit, providing hope that the state might begin a slow climb out of a deep financial hole.

The action came after a grueling month for the Legislature as the state dealt with a historic financial crisis that has grown more dire by the day, driven by a dramatic drop in income tax revenue amid the recession.

The cash crisis has become so acute that California has been forced to send IOUs instead of payments to thousands of state contractors and was facing the prospect of being unable to fund pension contributions or pay employees by September.

The cuts imposed by the Legislature are extraordinary. The deal will mean teachers are laid off, college students will pay more, parks will be closed, and office buildings will be sold off. Lawmakers agreed the scope of the cuts was distasteful, but most said they had little choice.

"The only way to do it is to spread the sacrifice. That is why this budget is an acceptable budget to me, it saves our state from financial ruin and from drowning into the fiscal abyss," Gov. Arnold Schwarzenegger said, adding he was pleased that they avoided passing tax increases. "We have endured the darkest of storms and the harshest of winds. ... We have emerged battered and bruised, but we are intact and we are still standing."

The package of about 30 bills first passed the Senate after an all-night session Friday, then was approved by the Assembly in the afternoon. It was similar to the deal announced earlier this week by Schwarzenegger and legislative leaders.

The Assembly rejected two of the most controversial measures, a plan to take about $1 billion in transportation funding from local governments, and allowing oil drilling off the California coast for the first time in 40 years. That was to have brought in $100 million this fiscal year.

The loss of $1.1 billion from the budget package means Schwarzenegger will have to use his authority to make even deeper cuts to close the gap. The governor vowed to make more cuts sometime next week to make up the difference and restore a reserve fund he has long sought.

The passage of the bills brought a measure of relief to a bewildered lawmakers after a marathon session. "I don't even remember if it's afternoon, evening or night," said Assembly Speaker Karen Bass, D-Los Angeles.

She acknowledged that the fixes aren't permanent: "We do not exactly know where the economy is going right now."

Hallye Jordan, a spokeswoman for state Controller John Chiang, said the controller hopes to decide within the next two weeks when California can stop issuing IOUs to cover its bills.

The budget agreement will be felt in nearly every community of the nation's most populous state.

Cuts to public schools are expected to force teacher layoffs, more crowded classrooms and scaled-back offerings in art, music and sports.

College students will pay hundreds of dollars more per year in fees, course offerings will shrink and tens of thousands of prospective students will be turned away.

Welfare, health care programs for low-income families and in-home services for the disabled and elderly will be reduced. Nearly 40,000 will have their in-home support services terminated.

Even state workers, long protected by powerful public employee unions, have been affected. Schwarzenegger has ordered them to take three days off a month without pay, equating to a 14 percent pay cut.

An undetermined number of state parks will close after Labor Day, and the state will be authorized to sell 17 state office buildings to raise cash, renting the space back from the new landlord. The Orange County Fairgrounds also will go on the market.

The oil-drilling measure emerged as one of the most contentious, with Assembly lawmakers debating for more than an hour before Democrats prevailed in killing it. Assemblyman Pedro Nava, a Democrat from Santa Barbara who has long opposed the project, said the governor appeared to be willing to hijack California's future because of a budget crisis.

The spending cuts amount to roughly 60 percent of a budget deficit projected at $26 billion through June 2010. The size of the shortfall is unprecedented, representing nearly 30 percent of the state's $88 billion general fund.

Spending hasn't been at that level in California since 2005, underscoring the severity of the state's economic collapse. Its unemployment rate of 11.6 percent is the highest on record, and personal income tax revenue to the state fell 34 percent during the first half of the year.

When Schwarzenegger signs the budget agreement, state officials hope it will be enough to satisfy the bond markets and allow the state to begin taking out short-term loans.

But other issues loom.

The state's largest employee union, representing 95,000 workers, is asking its members whether they want to authorize a strike or walkout to protest the monthly furloughs.

Cities and counties, meanwhile, have said they might to stop the state from taking some $4 billion in local tax money. Local governments throughout the state, hit by declining property and sales taxes, already are laying off law enforcement officers, firefighters and other employees, while trimming park maintenance, library, trash and other services.

"This budget deal doesn't just kick the can down the road; it kicks it off the road into our front yard, and we've got a toxic mess spilling out that cities and counties are going to have to clean up," said San Jose Mayor Chuck Reid.

The Assembly's decision not to take $1 billion in transportation money from local governments succeeded in heading off a threatened lawsuit from cities and counties. The vote came after an intensive lobbying campaign by mayors and local officials from around the state, who bombarded lawmakers with letters and calls.

The rapid decline in tax revenue and Republicans' insistence on no tax increases left lawmakers with few options but to cut spending, borrow money from elsewhere and resort to various accounting tricks to balance its books.

One of those gimmicks was to defer state employee paychecks by one day, from June 30 to July 1, 2010, for a savings on paper of $1.2 billion. The state also will accelerate collection of 2010 personal income and corporate taxes to bring in revenue earlier than anticipated.

Schwarzenegger said the budget resolution is a sign to the financial community and the public that California is back in business - even if its image has been tarnished.

"I think the people that sometimes suggest that the American dream or the California dream is evaporating I think is absolutely wrong," he said. "I think the California dream is as strong as ever."

[HGOODGUY]

THIS IS NOT A BUDGET CUT, IT IS A "SLASHER MOVIE"!!!

YOU CAN EITHER JUMP UP AND DOWN-RANT & RAVE, GRIPE & MOAN INDEFINATELY OR "BITE THE BULLET", RAISE SOME TAXES AND BE DONE WITH IT!!

THERE IS NO OTHER WAY UNLESS YOU WANT TO KEEP PLAYING MORE "SMOKE & MIRRORS"!!!

[sjc_1]

Prop 13 is mostly to blame for the state's problems, it appealed the greed and selfishness in people and now the devil is getting his payback.

[Sloughfoot]

Californians just don't get it. If you dance to the music you gotta pay the fiddler. Their bull headed refusal to sincerely address their finacial shortfalls will increase the impact of the repairs when it is applied. Let the Communities rebel, let the State Workers go on strike, shut down all the State give away programs for lack of funding and staff, these would be great steps for severing infected and ailing programss that have little if any merit to the real needs of a society.

[pepperwood2]

"I think the people that sometimes suggest that the American dream or the California dream is evaporating I think is absolutely wrong," he said. "I think the California dream is as strong as ever."

Replace the California Dream with The New Caliphonia Scheme. You increase income taxes, raise the cap & trade costs, institute waste fees on all products sold in Caliphony. The potential of raising State Revenues is endless.

The Working Stiffs, as Arnold call you, will gladly pay for it. It is no longer necessary to fool all the people all the time. Just fool some of them when necessary. Caliphonia needs more waste & fraud in your economy on life support. Caliphonia Scheming is alive and well.

[Void_Master]

California's budget crisis is just god's punishment for their passing prop-8 ;=)

[Void_Master]

What happened to the plan to legalize then tax cannabis?

[Dgunner]

The fat lady is too weak to sing and the audience is stuck in the soup line.What a mess. I was out in ca. in 95 . I couldn't believe they had paid pregnancy leave from the DHS. Programs like that and the lets doctor and feed all the illegals came back and bit them on the hiny.

The California dream - a divorce in Orange County....

[longtree-2009]

apparently this new budget only covers some 60% of the budget deficit. it is only a bandaid for the current financial crisis. karen bass, steinberg both leaders in the state legislature should resign. none of the sitting legislators should be re-elected, nor promoted, in the next election. arnold should just go away from public office at the end of this term. arnold can lead during good times but is inept during crisis or other bad times such as the current recession.

[edgy44]

I'd charge $20 at the borders for every car coming into the state. They'd be rolling in dough. Maybe also require a visa that you have to pay $300 for. Post the National Guard, they are mostly sitting around anyway. The Governor needs to think more like a good Austrian.

[billpl-2009]

when the economy turns around in a year or so

California will once again be rolling in dough

...and they'll be right back burning all up

[HORSUN4TJS]

Most all lawmakers are lawyers and that is californias problem and when you get over 100 overfed and overpayed foxes in the tax payers chicken coop nothing gets solved but they eat well, remember this budget is really late so the next one will be here soon, save your money and hope the california foxes get hungry enough to drill for black gold, and work on our fences.

[daviddferaro]

Can anyone tell me how many jobs were lost today?

Can anyone tell me how many business will fail because they have no customers?

Can anyone tell me how many more homes will be lost?

[trapbreaking]

Liberals are all for keeping the oil drilling off their coast, until the state is going broke, then they suddenly lost their high flown principals and realize the oil drilling ain't all that bad. Better than chapter 11 and IOU's.

[HORSUN4TJS]

YOU MUST ADD TREE HUGGERS AND LIBERALS HAVE CAUSED THE STATES PROBLEMS, FIRST DRILL FOR OIL IS A NO BRAINER, THAN STOP FUNDING ILLEGALS. PROBLEMS SOLVED, BETTER THAN CHAPTER 11 AND MORE IOU'S, READ MY LIPS DRILL NOW.

[caliguy55]

If you want to talk about the federal deficit and how much it rose under the Bush Administration, then the fact is it almost doubled from $5,727,776,738,304.64 to $10,626,877,048,913.08. That is an increase of approximately 5 Trillion Dollars over an 8 year period.

Source: http://www.treasurydirect.gov/NP/NPGateway

As for the state of California, the problem is the people and government by referendum. The people have so hamstrung the legislature that we experience perpetual governmental gridlock. The solution is really fairly simple, but would be extremely hard to accomplish, i.e., discard the present Constitution and ratify a new Constitution in a Constitutional Convention. The new Constitution would have to return California to a Republican form of government, which is supposedly guaranteed to every state by the U.S. Constitution. To the uneducated, a Republican form of government and the Republican party are two entirely different and distinct things.

[caliguy55]

If you want to talk about the federal deficit and how much it rose under the Bush Administration, then the fact is it almost doubled from $5,727,776,738,304.64 to $10,626,877,048,913.08. That is an increase of approximately 5 Trillion Dollars over an 8 year period.

Source: http://www.treasurydirect.gov/NP/NPGateway

As for the state of California, the problem is the people and government by referendum. The people have so hamstrung the legislature that we experience perpetual governmental gridlock. The solution is really fairly simple, but would be extremely hard to accomplish, i.e., discard the present Constitution and ratify a new Constitution in a Constitutional Convention. The new Constitution would have to return California to a Republican form of government, which is supposedly guaranteed to every state by the U.S. Constitution. To the uneducated, a Republican form of government and the Republican party are two entirely different and distinct things.

[lovegetpeace]

Voter Initiatives, Term Limits and 'Recall Gray Davis' was suppose take California to Heaven.

What happened?

[lovegetpeace]

Dear Californians,
What happened to Voter Initiatives and Democracy?

Governor Arnold, the leader of the Republicans and the leader of the Democrats generated this budget plan in record time.

Maybe we should eliminate all California Legistatures except for 1 from each party. We would save Billions of Big Salaries for Novice Legislatures since since they are under Term Limits.

[lovegetpeace]

Dear Californians,
Whatever happened to the 'Recall Davis'? I thought Republican Arnold was going to take California to Heaven?

Do we need a 'Recall Arnold'?

[lovegetpeace]

Hey Berkeley_Skirt_Lifter,

Why not all the Voter Initiatives that read "Spend this, spend that, spend this, spend that, spend this, spend that, etc..." passed by Californians over the last 40 years?

There are many other 'cook the book' tricks or measures that legislatures can act on but their Hands are iced by previous passed Voter Initiatives.

[lovegetpeace]

Folks,
I guess passing Term Limit back in the late 1990s fixed all of the political problems in California.

I guess Voter Initiatives in the California's Constitution work wonders.