A Budget Deal Will Be Soon, Senate Leader Says

Democrats, abandoning their quest to increase taxes on cigarettes and oil producers in the face of GOP opposition, said on July 2 that a budget compromise could occur in a few days.

Lawmakers and Gov. Arnold Schwarzenegger are struggling to close a $24 billion hole in the budget for the fiscal year that began July 1.

At a press availability, Senate President Pro Tempore Darrell Steinberg, a Sacramento Democrat, said it would take a few days but a deal would be struck soon.

“It’s time we move to a close quickly,” Steinberg said. “Its time to get it done, come to a reasonable compromise.”

There are some almost certain elements of that “reasonable” compromise:

   **  Funding for public schools will be reduced by at least $4.5 billion, $1.7 billion of which are payments owed in the current fiscal year that will be pushed into the next. Schwarzenegger has called for additional cuts of $1.6 billion.

   **  Additional program reductions of $6.5 billion already offered up by Democrats. Among the bigger ones, a $250 million cut to the state’s welfare program and $117 million reduction in the state’s costs of in-home care for the elderly.

   **  Accelerated tax collections that bring $3.8 billion in revenue into the current fiscal year from the next.

If lawmakers reach a deal before the end of the month, which appears to be at least Steinberg’s plan, they can also take $1.4 billion from the University of California and the California State University system, reducing their funding levels to the minimum required by federal law. It was initially thought that the $1.4 billion had to be taken before the previous fiscal year ended on June 30 but the universities don’t close their books until July 31.

Counties and cities continue to fear that borrowing $2 billion from them – an idea first broached by Gov. Arnold Schwarzenegger in May, will be revived and become part of the final budget solution.

Adding up the elements — $4.5 billion, $6.5 billion, $3.8 billion, $1.4 billion and $2 billion yields $18.2 billion. Plus the additional $1.6 billion in public schools the governor proposes gets to $19.8 billion. Almost there.



Filed under: Budget and Economy


  1. Somebody blinked!

    Comment by Curmudgeon — 7.02.2009 @ 4:16 pm

  2. Its time for trimming the budget, there are many programs where the legislature has set the threshold for services (250% of federal poverty level) very high which is allowing too many people to rely on government and taxpayers to meet their needs. Let’s help those who make minimum wages and have families but everyone else needs to set their own priorities for spending and take care of them selves.

    Comment by Management Slug — 7.02.2009 @ 5:24 pm

  3. Can someone explain the $3.8 bil in accelerated collections? Is this revenue from the next FY counted this FY? Cuz that seems like the type of accounting gimmicks that get us into these problems in the first place…

    Speaking of gimmicks, isn’t part of this plan to push $1.7 bil in education costs for this FY into the next FY. So next FY will be even worse? And the Gov wants $1.6 more in cuts – have the Dems even agreed to those cuts?

    And on top of this we still need about $6-7 billion more, correct? Almost there, but still pretty far apart. Where are those cuts going to come from? And remember this deal needs to get done in the next 30 days cuz we lose the $1.4 bil we are taking from the universities.

    And why isn’t anyone asking how the Steinberg seems so confident a deal can now be done? What has really changed? If it is this easy, why didn’t they get it done weeks ago?

    Essentially, this does not seem like a real plan. I read a lot of “borrowing”, “taking”, “accelerating”, “pushing.” Not a lot of “eliminating” and “cutting.” I am not a budget expert, but this just does not seem to make a lot of sense.

    Comment by Dazed and Convoluted — 7.02.2009 @ 11:12 pm

  4. To Dazed and Convoluted: You’re right, it doesn’t make a lot of sense. There’s a whole lot of trying to postpone the day of reckoning. As to the accelerations, here’s the guts of it:

    Quarterly estimated corporate tax payments – already accelerated in the February budget are accelerated even more under the Democratic plan, an idea first presented in the governor’s revised budget in May.

    Instead of making four equal quarterly payments of 25 percent, businesses now pay 30 percent in April and June and 20 percent in September and December. The Democratic plan would boost the June payment, starting in 2010, to 40 percent. The September payment would be eliminated and 30 percent would be paid in December.

    Payroll withholding would be increased by 10 percent, starting in January 2010 – another proposal by the GOP governor – to collect $1.7 billion in income tax revenue sooner.

    Another acceleration move requires businesses and the public sector to withhold 3 percent of any payments to independent contractors. The change brings in nearly $2 billion for the fiscal year starting July 1, falling off to $130 million the following year.

    Comment by admin — 7.03.2009 @ 12:34 pm

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