Friday, July 24, 2009

CALIFORNIA BUDGET DEAL (almost!) CLOSES $26 BILLION GAP – No drilling, No stealing from local gas taxes – but plenty of begging, borrowing and stealing


Published: July 24, 2009

LOS ANGELES — After several days of nearly endless debate, California lawmakers on Friday signed off on a budget deal that closes a $26 billion gap and shores up state finances, for now.

Related Times Topics: California Budget Crisis (2008-09)

The budget, an agreement made earlier in the week in near secrecy among party leaders and Gov. Arnold Schwarzenegger, contains more than $15 billion in cuts to services, but spares local governments from serving as unwilling cash machines for the state’s general fund, and discards a plan to drill for oil off the coast of Santa Barbara.

Legislation mirroring the deal cobbled together by the leaders was approved by the State Senate early Friday morning after an original failure to get the two-thirds vote needed to pass.

State Assembly members settled midafternoon on a final deal that no longer contained a nearly $1 billion reserve from earlier versions, but also discarded plans to take gasoline tax revenues away from local governments, a plan that had enraged mayors and county leaders and invited lawsuits.

Mr. Schwarznegger, a Republican, will sign the document next week.

“It’s not an easy budget; it’s a tough budget; but it’s a necessary budget,” he said in a news conference immediately after the deal was sealed.

The budget contains a vast array of spending cuts that will soon be felt throughout the state. The K-12 education budget, which also includes community colleges, lost $6.1 billion from its roughly $58 billion base, and higher education took a $2 billion hit.

The state will save $1.3 billion by furloughing state workers three days out of the month. Medicaid took a $1.3 billion cut, not including a $129 million trim to the state’s program that insures children whose families make too much for them to receive Medicaid.

There were accounting tricks, like $1.2 billion that will be saved in a one-time deferment of state worker paychecks for one day, moving them into the next fiscal year.

The Senate had signed off on measures to move about $4.7 billion of local government monies into the state’s fund.

But now the state will borrow about $2 billion from local governments, which has to be repaid within three years, and which those governments can borrow against in the short term.

There will also be a $1.7 billion shift from local redevelopment agencies into state funds, which is likely to anger local governments, who were placated by the return of other money. The money previously planned to come from localities will now be made up by dipping into a nearly $1 billion planned reserve.

“In no way should this be misconstrued as kicking the can down the road,” said the Assembly speaker, Karen Bass, in prepared remarks. “Where local government, and the communities we serve are concerned, it’s more like we’re throwing a hand grenade out of the foxhole.”

The Assembly rejected a revenue-raising measure to drill for oil off Santa Barbara, blowing another $100 million hole in the plan that is likely to be compensated for in line-item vetoes made by the governor.

The state’s nebulous way of managing its budget negotiations, as well as other oddities of its fiscal situation, are almost certain to be taken on by outside groups this year who wish to change the state’s tax system and perhaps its entire Constitution.


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