Budget Deadline Looms – No Side Has Yet to Blink

At approximately 3:05 pm on June 30, with less than nine hours remaining in California’s current fiscal year, Gov. Arnold Schwarzenegger said he would veto three measures, which would save more than $3 billion but must be acted on before midnight, unless budget deal is reached.

For several days the 40-member Senate has been trying to convince two GOP lawmakers to vote for the measures, which require a two-thirds majority to pass. The Assembly has already approved the bills, which, among other things, reduce state support for public schools by an additional $1.3 billion.

The budget signed by Schwarzenegger in February reduced state aid to public schools by $8.6 billion over two fiscal years.

 “The three bills of partial solution will be vetoed without any doubt,” said Schwarzenegger at a press availability in front of Capitol office. “The key thing is not to piecemeal this. It’s very important we address the total problem.”

Lawmakers and the GOP governor are trying to close an estimated $24 billion gap between revenues and spending commitments for the fiscal year that begins July 1.

The $24 billion stems from the worsening economy and plummeting state tax collections. The budget signed in February closed a $42 billion gap.

“I will be here to midnight to make sure we get this done. We are running out of cash,” Schwarzenegger.

While a total solution is necessary, logistically the mechanics of passing the measures to create one is unlikely to be completed before midnight.

However, the three bills make spending cuts and other changes in the law that affect the current fiscal year. Approving them after midnight nullifies the savings contained in them.

Besides cuts to public schools which would receive an additional $4.5 billion reduction in the fiscal year beginning July 1 under both the governor’s budget plan and the Democratic majority Legislature, other payments owed them would be pushed off or delayed into the following fiscal year.

Schools would receive $1.7 billion owed during the fiscal year that begins July after July 1, 2010. And the dates for another $2 billion in payments to public schools would be moved. The  $1 billion due in October would be paid in         December. Another $1 billion owed in November would be pushed to January 2010.

The bills also impose a $1.4 billion cut in funding for the University of California and the California State University system. That brings the universities down to the minimum level require by federal law.

Higher education would also see more of its payments deferred under three bills.

 For UC, the $500 million already being deferred under the February budget would increase to $1.25 billion in payments. Of the new $750 million in deferrals, $250 million would be repaid in October, the rest no earlier than April 2010. The $290 million owed to the California State University system in July would slip to October.