California's Budget Battle Now Down to Endgame

Legislators, Governor Poised to Lock in $104.3 Billion Deal

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The prolonged battle over California’s fiscal 2009 budget was nearing a close this week, as Gov. Arnold Schwarzenegger and state lawmakers appeared poised to complete an agreement that would avoid a threatened gubernatorial veto.

The Republican governor had vowed to reject a version approved by both houses of the Democratic-controlled legislature passed earlier in the week, saying it failed to create the kind of “rainy day” fund he has been seeking and would require either big tax increases or education budget cuts next fiscal year.

Faced with uncertainty that they could muster the votes to override the veto, the state’s four top legislative leaders agreed to changes in the $104.3 billion spending plan that, among other things, would set limits on when the state’s rainy-day fund could be tapped. At week’s end, the deal appeared headed for a vote.

The end of the budget stalemate— which has lasted almost three months past the start of the fiscal year on July 1—would clear the way for schools to begin receiving state funds for many categorical education programs. ("California Schools Squeezed in Fiscal Vise," Sept. 17, 2008.)

But aside from the new rainy-day-fund provision and the elimination of what Gov. Schwarzenegger called “accounting gimmicks” to help plug the state’s $14.2 billion deficit, much of the budget approved earlier last week would remain intact, including $7.1 billion in spending cuts.

The earlier version of the budget had been seen as a profound disappointment to both education groups and taxpayer-advocacy organizations.

In a statement, David A. Sanchez, the president of the 340,000-member California Teachers Association, an affiliate of the National Education Association, said it would be “a disaster for students, public schools, colleges, health care, and other vital services.”

The plan would provide $58.1 billion in Proposition 98 funds for public schools and community colleges, which is $1.3 billion higher than the amount proposed by the governor in May and about 2 percent higher than the fiscal 2008 amount. Proposition 98 was a school funding guarantee approved by voters in 1988.

During the impasse, Democrats worked to limit cuts to education, while Republicans were staunchly opposed to raising taxes.

While the budget bill would strengthen the rainy-day fund to cope with future downturns in the economy, it doesn’t include the tight controls on the fund the governor was seeking.

Jack O’Connell, the state superintendent of public instruction, said he agreed that budget reform was needed, but said it shouldn’t take place at the expense of students.

And the agreement struck last week is not necessarily the end of California’s budget saga, which has stretched more than 80 days into the state’s fiscal year.

Key elements—including rainy day fund provisions and a proposal to borrow $10 billion against expected loggery revenues to help stabilize future budgets—would require voter approval, likely in a special election early next year.

The Associated Press contributed to this article.

Vol. 28, Issue 05, Pages 20-21

Published in Print: September 24, 2008, as California’s Budget Battle Now Down to Endgame
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