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Lawmakers arnold strike bduget agreement Original Source Link: (May no longer be active)
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California's Schwarzenegger, Lawmakers Strike Budget Agreement
July 27 (Bloomberg) -- California Governor Arnold Schwarzenegger and legislative leaders said they've reached agreement on a $103 billion spending plan, breaching an impasse that's held up passage of a budget 27 days into the fiscal year.
The budget, which still must be approved by two-thirds of the Democratic-controlled Legislature, has no tax increases. Schwarzenegger relies on $7 billion in bonds, loans and internal transfers and about $5 billion in spending cuts to cover a $14 billion projected deficit for the fiscal year that began July 1.
Record budget deficits for the last three years have left California with the lowest credit rating and highest borrowing costs among U.S. states. The failure to pass a budget on time was a setback for the Republican governor who vowed to tame the deficits and bring an end to the legacy of late spending plans that helped topple his predecessor, Gray Davis.
``I'm a very happy governor,'' Schwarzenegger told reporters in his Capitol office about 11:30 p.m. Sacramento time. ``We negotiated very hard and proved that when Democrats and Republicans work together, we can do the impossible.''
Assembly Speaker Fabian Nunez, a Democrat from Los Angeles, said a vote on the floor could come as soon as tomorrow. Lawmakers may have to vote on the plan and sent it back for the governor's signature by the end of the day Thursday if California is to improve on last year's budget, which lawmakers passed on July 29 and was signed into law by Davis on Aug. 2.
Popularity
The budget stalemate chipped away at Schwarzenegger's popularity four months after he convinced voters to approve $15 billion in deficit bonds over initial resistance. His approval rating among residents fell to 57 percent from 64 percent in May, the Public Policy Institute of California poll said.
Proceeds of the bond sale were used to pay off debt that matured in June, easing investors' concerns. A 20-year California bond sold in February yields 4.97 percent, 0.21 percentage points more than top-rated municipal bonds, according to Municipal Market Advisors and Bloomberg data. That's less than half the 0.54 percentage point difference on March 2, before the bond sale was approved.
The budget has been criticized by California Treasurer Phil Angelides, a Democrat who's said he plans to run against Schwarzenegger in 2006. An advocate of raising taxes on the wealthiest taxpayers to fill budget deficits, Angelides has said the governor's budget would drive the state deeper into debt.
State Credit Card
Schwarzenegger, who promised during his recall campaign to ``tear up the state's credit card,'' has said he wants to sell $1 billion of bonds for the state's contribution to public workers' pensions, as well another $1 billion backed by annual payments from Indian tribes from gaming revenue.
The governor also plans to use $2.7 billion from the proceeds of a $15 billion deficit bond he convinced voters in March to approve as a way to pay off past debts. His plan also borrows $2.6 billion from local governments over the next two years, as well as $1.2 billion in transportation funds this year, to help balance the budget.
``The governor promised when he ran in this tumultuous recall that he would balance the budget and he'd deliver it on time,'' Angelides said Monday in an interview in Boston for the Democratic National Convention. ``And he has failed on both promises.''
Compromise
The impasse was breached when Schwarzenegger and Republicans dropped their insistence that any attempt to borrow tax revenue from local governments in the future be done only with a four- fifths vote of the Legislature. They instead agreed to a two- thirds vote and $1 billion limit twice every 10 years.
Democrats conceded to a Republican demand that lawmakers change a law signed last year by Davis that encourages workers to sue their employers for labor violations.
``We all had to agree to things that we don't like,'' Senate President John Burton, a Democrat from San Francisco, said as he stood with Schwarzenegger to announce the agreement.
Republicans also backed off efforts to win the repeal of a law requiring schools to pay union-scale wages to bus drivers and other workers as part of the budget.
Democrats also convinced Schwarzenegger to pare back planned cuts to health and welfare programs, using the loans and borrowing rather than slashing services.
``We were able to produce a budget that I believe is fair,'' Nunez said.
The agreement comes as Controller Steve Westly warned the he wouldn't be able to make as much as $570 million of payments to schools, universities and local governments tomorrow if a budget agreement isn't signed by then. Westly, a Democrat who teamed with Schwarzenegger to convince voters to back the $15 billion bond, had urged compromise.
``The day of reckoning for the budget impasse is at hand. California needs a budget now,'' Westly said in a statement. ``I am doing everything in I can to keep vital services going, but California can't pay its bills without a budget -- and the bills are stacking up.''
To contact the reporter on this story:
Michael B. Marois in Sacramento at mmarois@bloomberg.net.
To contact the editor responsible for this story:
Mark Pittman at at mpittman@bloomberg.net.
Last Updated: July 27, 2004 05:54 EDT
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