Friday, September 24, 2010

86-days-and-counting/hold your nose, not your breath!: CALIFORNIA STATE BUDGET BREAKTHOUGH ANNOUNCED

Wyatt Buchanan,Marisa Lagos, Chronicle Sacramento Bureau | This article appeared on page A - 1 of the San Francisco Chronicle |

Friday, September 24, 2010 -  04:00 PDT Sacramento - -- State leaders have made a breakthrough in the record-breaking budget stalemate, announcing Thursday they have agreed on a framework for solving California's $19 billion budget deficit.

The bare-bones announcement came after the second day of meetings in Los Angeles, where negotiations were moved because Gov. Arnold Schwarzenegger has been sick and unable to fly to the capital.

The state has been without a budget for 86 days. Sources close to the talks said leaders had agreed to make $7.5 billion in spending cuts and that they are assuming the state will receive a significant amount of federal money, which has not been promised. The $7.5 billion in cuts is much less than the governor and Republicans have been backing - about $12 billion - and even less than the $8 billion in reductions Democrats had proposed.

Additionally, the framework relies on a $1.4 billion revenue estimate by the Legislative Analyst's Office, which is rosier than a Department of Finance estimate, along with $1.2 billion from the sale of state buildings that would then be leased back, sources said.

More details are expected in the coming days, including plans for pension budget reforms - the latter would be placed on the 2012 ballot.

More negotiations

Schwarzenegger spokesman Aaron McLear described the framework as "a conceptual agreement on where the numbers fall." He said the negotiations will return to Sacramento and more specific details will be worked out over the weekend. The goal is to come to a final agreement Monday, he said.

Assembly Speaker John Pérez called the progress "significant" and said, "Given the enormity of the deficit and the stark choices available to us in closing it, it's vital that we take the time to get it right in producing a budget plan that protects Californians from devastating job losses and economically hurtful decisions."

In recent weeks, the impacts of the lack of a spending plan in a state of nearly 37 million people have become more clear. And just hours before the announcement of the framework, one impact was made glaringly obvious: Caltrans announced it had to freeze another $1 billion in transportation funding because of the lack of a budget, bringing the total of delayed transportation money to nearly $4 billion.

Stalled Caltrans projects include $32.6 million in construction on Highway 101 between University Avenue in East Palo Alto and Marsh Road in Milpitas. Caltrans Director Cindy McKim also warned Thursday that another $2.3 billion in bond funds for projects is at risk of being delayed.

News of the breakthrough was cheered by Gloria Marshall, who runs a preschool in East Palo Alto and has not been able to pay her 22 teachers since July 31. Creative Montessori Learning Center gets about 80 percent of its funding from the state, because so many of its students are from low-income families.

"Oh my goodness. Praise the Lord," Marshall said when told of the possible budget deal. "I'm sitting here right now (with some of our) parents trying to figure out how we can do a paycheck next month. This is such excellent news."

To conserve the school's dwindling cash, Marshall didn't cash her July paycheck, and her employees are among the scores of Californians affected by the budget impasse.

Checks on hold

While the state has been able to continue paying most bills, state law prevents some checks from being sent out without a spending plan in place. Among those unpaid since July 1: health clinics that serve the poor, college students who qualify for financial aid, state-funded child-development programs - which serve more than 270,000 children - and hundreds of vendors that provide food for prisons, fuel for the California Highway Patrol and other goods and services to the state.

Assemblyman Sandré Swanson, D-Oakland, said he was pleased about the progress, adding it is "really unacceptable" that the state is 86 days into the fiscal year without a budget.

"This has been bad for schools, bad for business and bad for California, so I am hopeful they have a deal," Swanson said, though he added that he would be most interested in details for school funding.

Democratic leaders in both houses plan to brief their caucuses this morning on the framework of the deal.

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