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California Assembly Approves Budget

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By TOM CHORNEAU, Associated Press Writer

SACRAMENTO, Calif. - The state Assembly approved a compromise budget Tuesday that covers a record deficit by slashing spending and raising fees, but relies on borrowing that could leave the state facing a financial crisis next summer.

The proposal approved in the House's longest session ever now goes to Gov. Gray Davis (news - web sites), who has indicated he will sign it. Analysts say Davis, who faces a historic recall election in October, could get a boost in the polls with a budget plan in place.

The budget proposal avoids raising sales and income taxes, but counts on a $4 billion annual car tax increase that state officials triggered earlier this year and the elimination of a tax break for manufacturers.

After more than 27 hours of negotiations, the budget bill passed 56-22. That was enough to give the near-$100 billion proposal the two-thirds majority required to pass it.

The proposal largely protects education funding for the next year. Public health and human service programs are also expected to be maintained at the same levels as last year.

The plan uses a complex tax swap that allows the state to borrow nearly $11 billion to help bridge the state's revenue shortfall.

But because lawmakers could not agree on imposing deeper cuts or raising more revenue through taxes, they delayed for at least a year a decision on how to deal with part of the deficit that could reach $8 billion by next summer.

Because spending has far outpaced tax collections in a slumping economy the past two years, officials forecast earlier this year that California taxpayers would face a $38.2 billion deficit by next July if aggressive steps were not taken.

Passage of the budget should ease Wall Street investor concerns but it's not likely to change the state's low credit rating. Last week Standard and Poor's, one of the country's most influential rating agencies, downgraded California's debt to one notch above junk bond status.

The budget deal came only a few days after the effort to recall Davis qualified for a special election this fall. Davis is expected to sign the budget Thursday and begin focusing his energy on saving his job.

The monthlong deadlock was caused by disagreement between Democrats and Republicans over tax increases and spending cuts.

Democrats, who hold big majorities in both houses but need Republican help to muster budget-approving two-thirds votes, wanted a half-cent sales tax to help close the budget gap. Republicans said the gap could be closed using existing revenues and deep cuts.

The Senate approved the compromise Sunday night and sent it to the Assembly, which took up the matter at noon Monday.

Negotiations continued through the night and Speaker Herb Wesson said he would hold members on the floor as long as necessary, breaking a 26 1/2-hour continuous session record set in 1963 during an education dispute.

"Yesterday I decided it was important for us to work around the clock to get this job done," Wesson said, reminding his colleagues that he used to coach football. "Sometimes in the fourth quarter, people get tired. Sometimes when people get tired they need to press forward and that's what we've done."

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They are "borrowing" money from next years taxes? did I interpret that right? :doh: There's NOTHING dumber than a snake in the grass politician....

The plan uses a complex tax swap that allows the state to borrow nearly $11 billion to help bridge the state's revenue shortfall.


but relies on borrowing that could leave the state facing a financial crisis next summer.

Sure sounds like robbing Peter to pay Paul.

What happens next year? Push it back another year, accumulating even more debt?

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Here is even some more info...check out those spending elephants!

Assembly passes compromise budget

By Alexa H. Bluth and Gary Delsohn -- Bee Capitol Bureau

Published 4:04 p.m. PDT Tuesday, July 29, 2003

Capping what Speaker Herb Wesson said was “the longest day in legislative history,” the Assembly on Tuesday sent Gov. Gray Davis a $100 billion budget after Democrats agreed to pay for $300 million in programs demanded by reluctant Republicans.

The budget, which attempts to close a record $38 billion deficit, was approved 44 days after the Legislature’s constitutional deadline. Wesson and others said the combination of borrowing, deep cuts to programs and dozens of fee hikes will still leave an $8 billion gap next year without further structural changes.

The vote came some 27 hours after the Assembly convened Monday morning.

California Assembly Speaker Herb Wesson locked lawmakers in the state Capitol overnight Monday after a middle-of-the-night attempt to win approval of a compromise crafted and approved in the state Senate fell short.

The first vote - before midnight Monday - was nine votes short of the two-thirds margin required to pass a budget. The final vote was 56-22, two more than required.

As the standoff drifted into the wee hours early Tuesday morning, lawmakers milled about, dozed off at their desks on the Assembly floor and scoured the Internet to read morning headlines about their own antics, as the Democratic leader met with lawmakers throughout the pre-dawn hours to try to pry loose the needed votes to end the month-long standoff.

"We've just got to keep talking," Wesson said. "It would be irresponsible for us to send people home without doing our job."

Wesson said he was looking for a third of the Republican caucus -- or 11 people -- to put up votes for the budget, saying the plan granted their demand to avoid new tax increases and "they can't have their cake and eat it too."

"When you come up with four votes, it's not enough literally and it's not enough to send a signal that they really are willing to resolve the budget," said Assemblyman Darrell Steinberg, D-Sacramento.

But GOP lawmakers continued to balk, even wearied from the sleepless night.

"It's going to take more Democrats," said Assemblyman John Campbell, R-Irvine.

The budget -- crafted by the Senate's top leaders and approved in the Senate on Sunday evening -- relies on $4 billion from an increase in the state's vehicle license fee, which is scheduled to take effect in October, but it does not include any of the tax increases that Democratic lawmakers and Gov. Gray Davis had proposed.

The plan will be sent to Davis for line-item vetoes and his signature. Davis has indicated he would sign it.

Some Democrats said Monday they were unhappy with aspects of the deal but were prepared to support the compromise plan.

"It's certainly imperfect," Steinberg said. "It comes down to a matter of not-so-great choices."

He said that times in Sacramento "are too volatile" to stretch out the budget debate in light of the efforts to oust Davis midterm in an Oct. 7 election.

Steinberg said Democrats plan to continue to tackle the state's budget imbalances even after sending the budget to Davis.

But others were less willing to go along with the Senate-driven compromise.

"This budget is a get-out-of-town-alive budget and simply rolls all the problems into the next year," said Assemblyman Keith Richman, R-Northridge, who said he will not vote for the plan.

Some Democrats were unhappy that the plan did not contain tax hikes they sought and was likely to leave the state with a roughly $8 billion deficit by year's end.

The spending plan includes deep cuts to higher education -- including raising community college tuition from $11 to $18 per credit -- and state-funded health services, but largely spares K-12 schools. It is anchored by a substantial amount of borrowing, including the sale of $10.7 billion in deficit bonds to finance a portion of the shortfall over the next five years.

The budget also relies on $2.2 billion in new federal funds designed to repay states for anti-terrorism and security costs, and it expects a second sale of bonds that will be backed by the expected revenues from a 1998 settlement among states and cigarette makers.

The proposed budget also makes reductions in the state's health care services -- including a 5 percent rate reduction for doctors, pharmacies and managed-care plans that provide Medi-Cal services. But it spares a raft of optional health care benefits for Medi-Cal recipients that Davis had proposed eliminating.

The spending plan includes a provision that would allow the governor in the future to make budget cuts midyear without the approval of the Legislature.


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