State Leaders Reach Agreement To Close California’s $19B Deficit
On Friday, Gov. Arnold Schwarzenegger (R) and legislative leaders reached an agreement to close California's $19 billion deficit as the state entered the fourth month of its fiscal year without a budget, the Sacramento Bee reports (Yamamura, Sacramento Bee, 10/2).
Both legislative houses could vote on the proposal as soon as this week (Capitol Weekly, 10/2).
For their budget plan, state leaders are depending on about $7.5 billion in spending cuts and a delay of a corporate tax deduction. Sources close to the budget negotiations say lawmakers also are relying on optimistic projections for the amount the state will receive in federal and tax dollars (Sacramento Bee, 10/2).
Although details of the budget compromise have yet to be released, those close to the budget talks say the package includes cuts to health and human services programs (Goldmacher, Los Angeles Times, 10/3).
Schwarzenegger previously has proposed spending cuts to several state programs, including reductions in:
- Reimbursements for Medi-Cal, the state's Medicaid program;
- In Home Supportive Services; and
- CalWORKS, the state's welfare-to-work program (California Healthline, 8/30).
Sources say Republicans have backed down from some of the most severe proposed budget cuts, including the elimination of CalWORKS.
Assembly Speaker John PÃ©rez (D- Los Angeles) said the latest budget proposal avoids new taxes and deep cuts to education and state programs (Buchanan, San Francisco Chronicle, 10/3).
Aaron McLear, a spokesperson for the governor, said more details of the compromise will be revealed this week (Goldmacher, Los Angeles Times, 10/2).
Possible Complications for Budget Vote
A two-thirds majority vote is required to pass a budget both in the Assembly and the Senate. Neither the Republicans nor the Democrats hold enough legislative seats to secure that percentage without some support from the other party (Bloomberg/New York Times, 10/2).
Senate Minority Leader Dennis Hollingsworth (R-Murrieta) said he thinks enough Republicans will support the budget proposal to reach the two-thirds threshold (AP/Riverside-Press Enterprise, 10/2).
However, some lawmakers from both sides of the political aisle have said they have significant concerns about the budget agreement. Such concerns could derail any potential votes on the budget plan this week (Vara, Wall Street Journal, 10/3).
In addition, the impending November elections could add further complications to the passage of a budget package.
Assembly Member Anthony Adams (R-Hesperia) said legislators might be resistant to support the budget compromise because they will have little time to campaign about why their budget vote was necessary (Los Angeles Times, 10/3).
Ripples of Budget Impasse
Meanwhile, Controller John Chiang (D) said he might have to issue IOUs for the third time since the Great Depression if no budget is in place next week (AP/Riverside-Press Enterprise, 10/2).
A spokesperson for State Treasurer Bill Lockyer (D) said that if the budget deadlock continues, Lockyer will seek $10 billion in loans to ease the state's cash flow. The spokesperson also said that California might face limited access to markets for long-term borrowing if the impasse persists (Buchanan, San Francisco Chronicle, 10/2).
During the budget stalemate, California has had to defer billions of dollars in payments to counties, schools and vendors that contract with the state. Four not-for-profit health clinics and two dental care clinics have closed this year, partly because of suspended state reimbursements (California Healthline, 9/16).
Headlines and links to broadcast coverage of Friday's budget compromise are provided below.
- "California Lawmakers Agree on a Budget" (Small, "KPCC News," KPCC, 10/1).
- "After a Three-Month Impasse, California Lawmakers Reach an Agreement on the State Budget" (Lieszkovszky, "KXJZ News," Capital Public Radio, 10/1).