Gov. Arnold Schwarzenegger and California's legislative leaders agreed Monday on a plan to close a $26 billion budget shortfall, potentially getting the state back on firm financial ground so it can stop issuing promissory notes.Call me nervous anytime a Democrat is happy with a budget agreement. However, it seems that the governor held true to his promise not to allow tax increases, so that's a positive.
The governor and leaders from both parties announced the compromise after more than five hours of closed-door talks. If the agreement survives its run through both houses of the state Legislature, it would provide temporary relief to an epic fiscal crisis that has sunk the credit rating and forced deep cuts in education and social services of the world's eighth-largest economy.
Most analysts and top lawmakers expect that California -- home to celebrities and dot-com millionaires -- will face multibillion dollar deficits into the foreseeable future as the economy struggles to recover and tax revenue lags far behind the level of the boom years.
On Monday, the focus was on balancing a state budget that had been thrown way out of whack by declining tax revenue since Schwarzenegger signed it in February during a rare emergency session of the Legislature.
"We are very happy to have a basic agreement," Schwarzenegger told reporters after emerging from his office shortly before 7 p.m.
The Democratic and Republican leaders of the Assembly and Senate were at his side.
The plan will include $15 billion in cuts. The rest of the deficit will be made up by a combination of borrowing, shifting money from other government accounts and accelerating the collection of certain taxes.
Schwarzenegger and Republican lawmakers refused to raise taxes any further, limiting lawmakers' options. Democrats had fought to preserve basic social services, including welfare, in-home support and health care for low-income children.
"We have closed the deficit. ... We have protected the safety net," said Assembly Speaker Karen Bass, a Democrat.
The state has been living above its means for many years. They're going to have to learn to control themselves.
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It is fascinating how government can only make cuts in programs that the public deems essential...at least that is what the media is given to report. Meanwhile, businesses go about their cost cutting with little fanfare, the media focusing upon the inevitable job cuts, but neglecting the myriad minor acts that indeed pile up considerable savings.
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