SACRAMENTO, Calif. (AP) — An emerging Democratic plan to address part of California's $24.3 billion deficit appears unlikely to win support from the governor and GOP lawmakers, raising the prospect of another prolonged deadlock that could jeopardize the state's finances.
Controller John Chiang has warned the state could run out of cash by the end of July unless lawmakers pass a balanced budget quickly. The increasing likelihood of another stalemate prompted Standard & Poor's to place California on credit watch Tuesday.
Gov. Arnold Schwarzenegger is proposing steep cuts in social services while vowing not to accept any plan that includes higher taxes or does not close the entire $24.3 billion shortfall.
"If they come back to us with anything that's not the full problem, if they come back to us with whatever they solve, they solve through tax increases, it's not something we can support," said Aaron McLear, spokesman for Gov. Arnold Schwarzenegger.
Assembly Speaker Karen Bass has said Democrats are considering a severance tax on oil production and closing some corporate tax loopholes. They also are discussing another increase in the vehicle license fee after raising it during a February budget vote — this time by $15 — to keep state parks open.
The cuts they have proposed so far are billions of dollars less than the governor's plan. A joint conference committee voted Tuesday to cut $5.5 billion from education, nearly $1 billion less than Schwarzenegger proposed, and eliminate California's high school exit exam.
On a straight party-line vote, the Democratic-controlled committee also voted 6-4 to reject the governor's proposal for a 5 percent salary reduction for some 235,000 state employees. The pay cut would have come on top of two-day-a-month furloughs the governor imposed in February, which have reduced state employees' pay by nearly 10 percent.
The administration projected the latest move would save $470 million a year.
"It's outrageous that the Legislature would ask Californians to pay higher taxes but refuse to cut the pay of state workers by 5 percent," Schwarzenegger said in a statement. "This is exactly why so many Californians have lost faith in Sacramento's ability to solve problems."
Democratic leaders said they will provide a formal summary of their budget plan Wednesday. The full Legislature could take up the package as early as next week.
As described so far, the Democratic budget plan would face a steep climb to generate enough Republican support to reach the two-thirds vote threshold needed to pass.
Schwarzenegger has proposed deep cuts to fill the $24.3 billion deficit that has emerged since he and lawmakers passed a budget for the 2009-10 fiscal year in February. That package increased sales, income and vehicle taxes that were expected to bring in another $12.8 billion.
On Tuesday, the governor's finance department said the taxes now are expected to generate far less — about $11.1 billion through June 2010.
The recession has has sharply reduced tax revenue, widening the deficit since the February budget deal.
For the fiscal year that begins in July, Schwarzenegger is proposing a mix of $16 billion in spending cuts, borrowing from local governments and fees on property owners to close the deficit for the fiscal year that begins July 1.
His cuts would eliminate health care coverage for nearly 1 million children from low-income families and California's welfare-to-work program. He also would close 220 state parks.
by the associated press
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