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California lawmakers pass plan to balance state budget

California Gov. Arnold Schwarzenegger describes how he and legislative leaders resolved the state’s $26 billion state budget deficit Friday. (Associated Press / The Spokesman-Review)
Judy Lin Associated Press
California Gov. Arnold Schwarzenegger describes how he and legislative leaders resolved the state’s $26 billion state budget deficit Friday. (Associated Press / The Spokesman-Review)

SACRAMENTO, Calif. – Lawmakers on Friday approved a complex package of spending cuts, accounting maneuvers and raids on local government coffers to fill California’s gigantic budget deficit, providing hope that the state might begin a slow climb out of a deep financial hole.

The action came after a grueling month for the Legislature as the state dealt with a historic financial crisis that has grown more dire by the day, driven by a dramatic drop in income tax revenue amid the recession.

The cash crisis has become so acute that California has been forced to send IOUs instead of payments to thousands of state contractors and was facing the prospect of being unable to fund pension contributions or pay employees by September.

The cuts imposed by the Legislature are extraordinary. The deal will mean teachers are laid off, college students will pay more, parks will be closed, and office buildings will be sold off. Lawmakers agreed the scope of the cuts was distasteful, but most said they had little choice.

“The only way to do it is to spread the sacrifice. That is why this budget is an acceptable budget to me: It saves our state from financial ruin and from drowning into the fiscal abyss,” Gov. Arnold Schwarzenegger said, adding he was pleased that they avoided passing tax increases.

The package of about 30 bills first passed the Senate after an all-night session Friday, then was approved by the Assembly in the afternoon. It was similar to the deal announced earlier this week by Schwarzenegger and legislative leaders.

The Assembly rejected two of the most controversial measures: a plan to take about $1 billion in transportation funding from local governments, and allowing oil drilling off the California coast for the first time in 40 years. That was to have brought in $100 million this fiscal year.

The loss of $1.1 billion from the budget package means Schwarzenegger will have to use his authority to make even deeper cuts to close the gap. The governor vowed to make more cuts sometime next week to make up the difference and restore a reserve fund he has long sought.

The passage of the bills brought a measure of relief to bewildered lawmakers after a marathon session. “I don’t even remember if it’s afternoon, evening or night,” said Assembly Speaker Karen Bass, D-Los Angeles.