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Calif., other states face tough budget choices

The Associated Press

Democratic senators tried Tuesday for the second time in two days to pass three stopgap measures that would have preserved cash, primarily by cutting education funding remaining in this year’s budget. The measures would have avoided the immediate need for IOUs but were put on hold because not enough Republicans support them to reach the required two-thirds majority.

Senate President Pro Tem Darrell Steinberg recessed his chamber so he and other leaders could discuss potential solutions. He later said the two sides are not even close on the potential framework of any deal to close the deficit.

The Assembly had no immediate plans to even meet Tuesday night. The Senate had scheduled an evening session, but it appeared lawmakers would address only the stopgap measures to avoid IOUs, putting off any decision about the overall deficit.

Democrats said the stopgap measures would save more than $4 billion.

Schwarzenegger’s office said the governor did not want the partial fix the Democrats were proposing to delay the IOUs. Aides said he believes it would let lawmakers off the hook and make it more difficult to close the entire deficit in the weeks ahead.

California’s deficit is roughly a quarter of the state’s general fund and has been widening this year as tax revenue has plunged. That has left the state with too little money to pay all its bills.

California will not run out of cash immediately. While spending obligations will begin outpacing revenue without a balanced budget in place, the IOUs will delay a cash crisis until lawmakers reach a compromise, which would be expected sometime this year.

The state already has a budget in place for the 2009-10 fiscal year, thanks to a two-year budget package approved in February, but the spending plan is badly out-of-balance. The main culprit is the recession, which caused a 34 percent plunge in personal income tax revenue during the first five months of the year.

Democrats, the majority party in both houses, want to solve the deficit by cutting $11 billion in spending, raising the vehicle license fee by $15 to keep state parks open and increasing taxes on tobacco products and companies that drill for oil.

Schwarzenegger has proposed more aggressive cuts of $16 billion, including dropping health care for 930,000 low-income children and eliminating the state’s main welfare program. He also would borrow $2 billion from local governments, take $6 billion from other government accounts, accelerate personal and corporate income tax collections, and cut state employee pay by another 5 percent.



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