California begins new budget year without spending plan

09:10, July 02, 2010      

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With the start of a new budget year on Thursday, California still sees no sign of closing its 19.1-billion-dollar deficit, a newspaper report said.

With the budget deadline looming, Governor Arnold Schwarzenegger and top Democrats huddled late Wednesday to discuss ways to break the impasse in negotiations, but to no avail, the Los Angeles Times said on Thursday. California started the new budget year with no spending plan in place and with no agreement imminent between state legislators and Schwarzenegger on how to close the deficit, the paper noted.

The fallout will affect state employees and others who depend on government money, said the paper, adding that payments for community colleges and vendors that do business with the state are also in jeopardy because of the budget delay.

California's top finance officials have warned of further reductions in the state's already woeful credit ratings on Wall Street. Schwarzenegger has proposed deep cuts, including the elimination of the state's main welfare program and of day care for 142,000 low-income children to balance the books.

The leaders of the Assembly and Senate, both Democrats, have yet to unite behind a budget plan. They announced on Wednesday they have reached agreement only on broad principles, such as suspending corporate tax breaks and increasing school funding.

"There has been quite enough damage, thank you, to public education and to health and human services," Senate President Pro Tem Darrell Steinberg, a Democrat, told reporters. "That's where we are going to stand."

Both Democratic leaders' proposals to close the shortfall, which represents roughly a fifth of the general fund, include borrowing and a new levy on oil. Republicans oppose new taxes.

An agreement that has the support of the governor and GOP lawmakers -- some of whose votes are needed to pass a budget -- is nowhere in sight. Legislative leaders have announced that most lawmakers will be allowed to return to their districts next week for summer recess.

Each day that passes without a budget is a lost opportunity to cut spending or collect more taxes. "Every day from July 1 on, we lose 52.5 million dollars," Schwarzenegger said this week.

Without a budget in place, the state cannot legally pay 1.2 billion dollars of its 21.2 billion dollars in July bills, according to the controller's office.

Those sums include money for community colleges, vendors that contract with the state and grants for college students. State Treasurer Bill Lockyer, a Democrat, said in a statement Wednesday: "A protracted budget delay would benefit no one except California bashers and Wall Street speculators who profit from bad headlines and political dysfunction."

Source: Xinhua


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