If California takes the revenue from counties and cities, what happens to the counties and cities and how are they supposed to pay for their needs? California's revenue has dropped dramatically and negates the ludicrous claim that unemployment is only at 10%..it most obviously is substantially higher and not moving in a good direction yet. sammieswife.
The state's ability to function by issuing IOUs to contractors was projected to last until early September without a balanced budget in place. Payments to the state pension funds and paychecks to state workers would have been in jeopardy beyond that point.
While California has been criticized for spending beyond its means, much of the current deficit can be traced to a steep economic downturn that has robbed the state of tax revenue.
Personal income fell this year in California for the first time in 70 years, leading to a 34 percent plunge in income tax revenue during the first half of the year.
The $26.3 billion shortfall amounts to roughly a quarter of the state's general fund, the account that pays for day-to-day state services. The sheer size of the deficit meant that any effort to balance the state's books would be felt throughout the state, from college students seeing a sharp increase in fees to local police and fire departments that face cuts as the state takes money from city and county governments.
"This is a sober time because there isn't a lot of good news in this budget," said state Senate leader Darrell Steinberg, D-Sacramento. "We have cut in many areas that matter to real people, but I think we have done so responsibly."
Details of the agreement were scarce beyond the total amount of spending cuts, but the governor and lawmakers said education would be fully funded.
Evaporating tax revenue combined with Republicans' firm stand against new tax increases had complicated negotiations to balance the budget. Democrats, who hold majorities in the Assembly and Senate, wanted to preserve as much as possible of the state's welfare-to-work program and health care program for low-income children after Schwarzenegger had proposed eliminating them.
Education funding in a state with 6.3 million public school students was among the most contentious issues in recent days.
Specifically, lawmakers and the governor negotiated over how to repay schools $9.5 billion that had been cut from education budgets last year. It was not immediately clear how that debate had been resolved.
Legislative leaders also struggled over whether to take some $3.7 billion from local governments. About $2 billion of that would come from property taxes and would have to be repaid within three years, but city and county representatives said they wanted a guarantee.
Paul McIntosh, executive director of the California State Association of Counties, called it the largest raid on local governments' coffers in state history.
Cities and counties already are laying off firefighters, police officers, sheriff's deputies and park workers because of their own budget problems. Some are threatening to sue if the state takes their tax revenue for its own needs.
"This is, of course, one of the most difficult economic times to face our state since the Great Depression, so none of these were easy choices," said Assembly Minority Leader Sam Blakeslee, R-San Luis Obispo. "I think we selected a path which will lead the state back to the point where we will be strong."