California Budget Deal Finally Reached

July 21, 2009

(ChattahBox) — California lawmakers reached a tentative deal with Governor Arnold Schwarzenegger over how to close a $26 billion budget deficit, ending a months-long standoff. Under the plan, state lawmakers would cut $15 billion in spending, while the rest of the gap would be filled by taking funds from local governments and through one-time fixes and accounting maneuvers to generate revenue in the 2009-10 fiscal year that started July 1.   Those accounting maneuvers include accelerating income tax withholdings from residents’ paychecks by 10 percent, effectively shifting millions of next year’s revenues into this year’s budget.

The nation’s most populous state faces a $26 billion gap in a $92 billion general-fund budget through June 2010.  As of last week, the state had issued 153,711 IOUs, worth a total of $682 million, which has undergone two recent downgrades to near junk-bond status. The deal includes major Democratic concessions of more than $14 billion in program cuts, hitting low income families, seniors and the disabled but avoiding outright elimination of the state’s welfare-to-work CalWORKS program and the Healthy Families health insurance program for children.

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