California budget: Complex deficit plan remains stalled |

California budget: Complex deficit plan remains stalled

SACRAMENTO, Calif. and#8212; The California Senate on Friday approved a plan to close the state’s $26 billion budget deficit, providing a glimmer of hope after weeks of fiscal gloom.

The complex legislative package remained stalled for hours as Assembly leaders struggled to secure enough votes to pass several measures, repeatedly stopping discussion to huddle in groups.

Failure to approve the budget-balancing maneuvers could send California into further fiscal decline.

The country’s most populous state and the the world’s eighth-largest economy has been hammered by the U.S. recession, leading to a steep plunge in income, sales, property and capital gains taxes.

The cash crisis and the lack of a balanced budget have forced the state to issue IOUs, or promissory notes, to thousands of state contractors and vendors. Closing the shortfall is expected to allow the state to obtain short-term loans, eventually ending the need for IOUs.

The rapid decline in tax revenue and Republicans’ insistence on no tax increases left the state with few options.

Senators started their session Thursday evening and worked through the night to get enough votes to pass the more controversial measures, including three that took or borrowed billions of dollars from cities and counties.

Senate leader Darrell Steinberg, a Democrat, said lawmakers could take pride in dealing with difficult budget decisions during an unprecedented economic collapse.

“And California is still standing,” he said moments after the final vote.

The compromise plan before the 80-member Assembly and 40-member state Senate was announced Monday by Gov. Arnold Schwarzenegger and the Democratic and Republican leaders of each house.

It eliminates nearly 60 percent of the deficit with spending cuts to core state services such as education, state parks and prisons.

The rest is reached by one-time raids on local government funding and accounting maneuvers, such as deferring state employee paychecks by one day for a savings on paper of $1.2 billion.

In an interview Friday on MSNBC-TV, Schwarzenegger said he wouldn’t call the still-unapproved package a win.

“When people have to struggle and suffer because of those kind of cuts, you can’t declare victory,” he said. “I think what we have done is steered away from the iceberg and we are coming out of it and we’re going to rebuild California as quickly as possible and get our economy back.”

Both legislative houses quickly passed a key bill with cuts to higher education, college grants, health programs, welfare, in-home supportive services and state prisons. But measures aimed at filling the rest of the deficit proved more difficult.

Some required two-thirds approval, meaning they needed support from a handful of Republicans, the minority party in each house.

That vote threshold was proving to be an obstacle, with Republicans refusing to support a bill that would repay schools for funding cuts in previous years.

After the Senate’s final vote Friday, the Assembly still had a dozen bills left to resolve, several of which were controversial with some members in both parties.

Republicans were balking at a plan to repay California schools billions of dollars once the state’s economy rebounds. Some Democrats opposed permitting oil drilling off the Santa Barbara coast and requiring fingerprinting for recipients and caregivers of state aid programs. Borrowing money from local governments was controversial with both parties.

Legislative leaders of both parties have acknowledged the budget solution is imperfect and cuts deeply into basic programs, including education, prisons, health care and welfare. But they say it is vital to address the state’s cash-flow crisis.

California’s budget shortfall represents nearly 30 percent of its $92 billion general fund. The revision under consideration Friday would bring total spending down to about $88 billion, returning to 2005 levels.

Separately, a union that represents 22,000 California State University faculty members has agreed to take furloughs two days a month to help close a huge budget deficit at the 23-campus system, officials said Friday.

The plan will require all CSU professors, lecturers, coaches and librarians to accept the furloughs, which amount to a 10 percent pay cut, over the coming academic year.

Associated Press Writers Steve Lawrence, Don Thompson, Juliet Williams and Samantha Young contributed to this report.

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