At long last, California reaches budget deal:
California Governor Arnold Schwarzenegger and top lawmakers agreed Monday to close a $26.3 billion deficit in the state’s budget in a deal that includes $15.5 billion in spending cuts, they said.
The government of the most populous U.S. state, also the world’s eighth-largest economy, began its fiscal year on July 1 facing the massive shortfall due to a plunge in revenues caused by the recession and rising unemployment.
Schwarzenegger, a Republican, said during a news conference the budget would be balanced through deep spending cuts and borrowing and shifting of state funds but without raising taxes.
“All around I think it is a really great, great accomplishment,” said the former Hollywood action star, noting the closing rounds of budget talks, which dragged on for weeks, had been like a suspense movie.
The Legislature’s top Democrats and Republicans said they would brief rank-and-file lawmakers on the agreement in the hope of holding votes in the Democratic-controlled state Assembly and Senate Thursday.
Democratic leaders acknowledged the agreement contained painful spending cuts in popular programs, the result of mounting financial woes for the state’s government since 2007.
Public schools, colleges and universities would lose $9 billion in funding, prisons more than $1 billion and cities and counties roughly $4 billion. Many state employees would have to take three furlough days each month through June 2010, which amounts to a roughly 14 percent pay cut.
“There isn’t a whole lot of good news in this budget,” said Senate President Darrell Steinberg.
Well, the good news is the $15.5 billion in spending cuts. The bad news is that taxpayers will be on the hook for yet another $10.8 billion. Those should also have been financed by cutting spending. And in fact, California needs to cut a whole lot more spending beyond that, remove bureaucracies, cut the crushing tax burden, phase out unsustainable pension plans, etc…
This will be a temporary fix for now, California will be running out of cash again sooner or later, and once that becomes evident, the bureaucrats will be back at the table to discuss how to cover the next shortfall.