California lawmakers on Friday approved a state budget filled with spending cuts and creative accounting to fill a $19.1 billion deficit, 100 days after a spending plan should have been in place. But critics fear the governor to be elected on November 2 will immediately face a new shortfall as the budget's rosy revenue assumptions prove unfounded.
That's a familiar story for California, which has seen its revenue plunge in recent years due to recession as well as turmoil in financial and housing markets. Both chambers of the Democrat-led Legislature endorsed the budget, hammered out by top lawmakers and Republican Governor Arnold Schwarzenegger last Friday to end a record stalemate over a spending plan for the most populous US state.
State Senate President Pro Tem Darrell Steinberg said the process had been particularly tortuous, given the weak economic background. "We've done more than OK," he said. California, the biggest issuer of US municipal bonds, has a long history of late budgets that include provisions that raise the eyebrows of public finance analysts. Tax hikes were excluded in the $87.5 billion budget plan at the insistence of Schwarzenegger and Republican lawmakers. The plan's centerpiece is a spending reduction of $7.5 billion. It includes $1.2 billion in revenue from postponing a corporate tax break. Another $2.8 billion is added from transfers from state funds.
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