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July 21st, 2009, 03:58 AM
With much trepidation, California patches budget hole
Tue, 21 Jul 2009 07:22:20 GMT
http://www.presstv.com/detail.aspx?id=101232§ionid=3510203
Gov. Arnold Schwarzenegger speaks about the deal while flanked by top Democrats and Republicans from both the state Senate and Assembly.
Following months of deliberation and conflict between authorities in the financially hit US state of California, lawmakers have managed to seal a deal that is expected to fill a current $26 billion budget gap.
California, whose economy is the eighth largest in the world, has been suffering from the lowest credit rating in the United States, an unemployment rate of around 11.5 percent and an empty state kitty since early 2009.
The situation in California -- heavily dependant on taxes as its source of income -- has been further compounded by the double-digit unemployment, which itself burdens state coffers by lowering income taxes and indirectly influencing sales taxes.
The recent state bid to introduce IOUs into the system to alleviate the concerns of creditors dealt yet another blow to the system as people involved hinted at the possibility that the IOUs of a state forced to borrow even the money required for printing the notes would not bear value.
Lawmakers last February assessed a measure to temporarily counter the fiscal crisis by affixing the state to $14.8 billion in spending cuts, $12.5 billion in tax increases and $5.4 billion in new loans, along with the creation of a $1 billion reserve fund.
But the measures, considered contentious, received a nay vote and were never put into play.
On Monday night, however, Governor Arnold Schwarzenegger joined legislative leaders in telling reporters that over five hours of new closed-door talks had resulted in a budget compromise that would provide temporary relief if it survives the confines of the two houses of the California State Legislature.
"We are very happy to have a basic agreement," Schwarzenegger said outside his office.
"All around I think it is a really great, great accomplishment," added the Hollywood star turned politician, while likening the long-drawn-out budget talks to a suspense movie.
The California governor's optimism toward the newly-reached compromise comes in spite of the agreement envisioning measures he had earlier vowed not to brook.
Under the currently proposed deal, the state will enforce $15.5 billion in cuts in the education sector and in health and welfare services. Around $4 billion will be taken from local governments, and $2 billion will come from new borrowing.
The state will also employ accounting maneuvers to plug nearly $3 billion of the budget hole, around $1 billion of which will come from assigning end-of-year pay to state workers to the next fiscal year.
Controversial plans to release prisoners early, however, will not take effect even though prisons will be subject to budget cuts. State parks will stay open and an off-shore oil drilling project will get the go-ahead.
College students will also be temporarily shielded from the deteriorating economy as those who have been promised grants this year will be able to receive them.
The plan will not entail tax increases, according to Schwarzenegger.
Although the deal is seen as the only viable option for California, officials along with locals do not see the new measures in a positive light.
Senate President Darrell Steinberg said the measures force painful spending cuts upon popular programs.
"This is a sober time because there isn't a lot of good news in this budget," The Associated Press quoted him as saying. "We have cut in many areas that matter to real people, but I think we have done so responsibly."
Karen Bass, the speaker of the California Assembly, in a telephone interview with The New York Times termed the budget as one that would cause pain. "I would characterize this budget as shared pain and shared sacrifice."
"This is, of course, one of the most difficult economic times to face our state since the Great Depression, so none of these were easy choices," said Assembly Minority Leader Sam Blakeslee, a Republican. "I think we selected a path which will lead the state back to the point where we will be strong."
The deal also comes amidst protests in California in condemnation of the conduct of pertinent officials and the blame-game over the issue as well as the budget cuts so far imposed on state services.
A vote on the measures to close the $26 billion deficit is expected on Thursday.
Lawmakers are inclined to vote yes to the budget as top Democrats and Republicans plan to inform rank-and-file members of the state Assembly and Senate on their latest talks with Schwarzenegger.
Tue, 21 Jul 2009 07:22:20 GMT
http://www.presstv.com/detail.aspx?id=101232§ionid=3510203
Gov. Arnold Schwarzenegger speaks about the deal while flanked by top Democrats and Republicans from both the state Senate and Assembly.
Following months of deliberation and conflict between authorities in the financially hit US state of California, lawmakers have managed to seal a deal that is expected to fill a current $26 billion budget gap.
California, whose economy is the eighth largest in the world, has been suffering from the lowest credit rating in the United States, an unemployment rate of around 11.5 percent and an empty state kitty since early 2009.
The situation in California -- heavily dependant on taxes as its source of income -- has been further compounded by the double-digit unemployment, which itself burdens state coffers by lowering income taxes and indirectly influencing sales taxes.
The recent state bid to introduce IOUs into the system to alleviate the concerns of creditors dealt yet another blow to the system as people involved hinted at the possibility that the IOUs of a state forced to borrow even the money required for printing the notes would not bear value.
Lawmakers last February assessed a measure to temporarily counter the fiscal crisis by affixing the state to $14.8 billion in spending cuts, $12.5 billion in tax increases and $5.4 billion in new loans, along with the creation of a $1 billion reserve fund.
But the measures, considered contentious, received a nay vote and were never put into play.
On Monday night, however, Governor Arnold Schwarzenegger joined legislative leaders in telling reporters that over five hours of new closed-door talks had resulted in a budget compromise that would provide temporary relief if it survives the confines of the two houses of the California State Legislature.
"We are very happy to have a basic agreement," Schwarzenegger said outside his office.
"All around I think it is a really great, great accomplishment," added the Hollywood star turned politician, while likening the long-drawn-out budget talks to a suspense movie.
The California governor's optimism toward the newly-reached compromise comes in spite of the agreement envisioning measures he had earlier vowed not to brook.
Under the currently proposed deal, the state will enforce $15.5 billion in cuts in the education sector and in health and welfare services. Around $4 billion will be taken from local governments, and $2 billion will come from new borrowing.
The state will also employ accounting maneuvers to plug nearly $3 billion of the budget hole, around $1 billion of which will come from assigning end-of-year pay to state workers to the next fiscal year.
Controversial plans to release prisoners early, however, will not take effect even though prisons will be subject to budget cuts. State parks will stay open and an off-shore oil drilling project will get the go-ahead.
College students will also be temporarily shielded from the deteriorating economy as those who have been promised grants this year will be able to receive them.
The plan will not entail tax increases, according to Schwarzenegger.
Although the deal is seen as the only viable option for California, officials along with locals do not see the new measures in a positive light.
Senate President Darrell Steinberg said the measures force painful spending cuts upon popular programs.
"This is a sober time because there isn't a lot of good news in this budget," The Associated Press quoted him as saying. "We have cut in many areas that matter to real people, but I think we have done so responsibly."
Karen Bass, the speaker of the California Assembly, in a telephone interview with The New York Times termed the budget as one that would cause pain. "I would characterize this budget as shared pain and shared sacrifice."
"This is, of course, one of the most difficult economic times to face our state since the Great Depression, so none of these were easy choices," said Assembly Minority Leader Sam Blakeslee, a Republican. "I think we selected a path which will lead the state back to the point where we will be strong."
The deal also comes amidst protests in California in condemnation of the conduct of pertinent officials and the blame-game over the issue as well as the budget cuts so far imposed on state services.
A vote on the measures to close the $26 billion deficit is expected on Thursday.
Lawmakers are inclined to vote yes to the budget as top Democrats and Republicans plan to inform rank-and-file members of the state Assembly and Senate on their latest talks with Schwarzenegger.