California’s Assembly passed its main budget bill and moved a step closer to ending a 99-day impasse that threatened to force the nation’s most-populous state to issue IOUs for a second straight year.
The main spending plan, part of a package of measures, passed 54 to 1 today. It plugs a $19.1 billion deficit by cutting spending, counting on better-than-expected tax collections and more money from the federal government. It also suspends some business tax breaks, commits to selling state office buildings and borrowing from existing state accounts.
“This is the latest budget in state history and I’m deeply disappointed it’s taken us 99 days into the fiscal year to reach agreement,” Martin Garrick, the Assembly Republican leader, said during a floor debate on the package. “This compromise helps us navigate through a difficult recession.”
The agreement, if passed by the Senate and signed by Governor Arnold Schwarzenegger, would end the longest-ever period in which the state has operated without an enacted budget and may avert the need for IOUs, which Controller John Chiang has said he might have to use this month. It also frees Treasurer Bill Lockyer to begin issuing $10 billion in short- term notes to pay state bills. The spending plan covers the year that began July 1.
Still Voting
The Assembly is still voting on so-called trailer bills needed to make the budget work. One would defer $5 billion of subsidies for schools and colleges. Without the step, California wouldn’t have enough cash by the end of this month to pay the more than $8 billion of overdue bills that have collected during the impasse. Combined with a $5 billion bridge loan Lockyer is lining up from Wall Street banks, the deferrals will help the state avoid issuing IOUs, aides to Chiang have said.
The main spending plan, part of a package of measures, passed 54 to 1 today. It plugs a $19.1 billion deficit by cutting spending, counting on better-than-expected tax collections and more money from the federal government. It also suspends some business tax breaks, commits to selling state office buildings and borrowing from existing state accounts.
“This is the latest budget in state history and I’m deeply disappointed it’s taken us 99 days into the fiscal year to reach agreement,” Martin Garrick, the Assembly Republican leader, said during a floor debate on the package. “This compromise helps us navigate through a difficult recession.”
The agreement, if passed by the Senate and signed by Governor Arnold Schwarzenegger, would end the longest-ever period in which the state has operated without an enacted budget and may avert the need for IOUs, which Controller John Chiang has said he might have to use this month. It also frees Treasurer Bill Lockyer to begin issuing $10 billion in short- term notes to pay state bills. The spending plan covers the year that began July 1.
Still Voting
The Assembly is still voting on so-called trailer bills needed to make the budget work. One would defer $5 billion of subsidies for schools and colleges. Without the step, California wouldn’t have enough cash by the end of this month to pay the more than $8 billion of overdue bills that have collected during the impasse. Combined with a $5 billion bridge loan Lockyer is lining up from Wall Street banks, the deferrals will help the state avoid issuing IOUs, aides to Chiang have said.
The budget relies on $5.3 billion in federal funds for welfare, education and prison costs, instead of the $3.4 billion Schwarzenegger asked for in May. It also reduces the deficit by $1.4 billion by using more-optimistic tax-revenue forecasts from the state Legislative Analyst’s Office.
The plan cuts state spending by $7.5 billion, less than the $12 billion Schwarzenegger and fellow Republicans had sought. It also counts on the receipt of $1.2 billion from the sale of some state office buildings, which the government would still use through leasing.
Suspending Tax Break
Another trailer bill still under consideration would provide the state with $1.2 billion by suspending for two years a law that lets businesses use operating losses incurred in one year to reduce their future tax bills.
By a 55-1 vote, the Assembly also agreed to ask voters in 2012 to create a budget reserve, or rainy day fund, to be available for unforeseen expenses.
California requires a two-thirds vote to pass budgets in both its Assembly and Senate. Neither Republicans nor Democrats hold enough seats to meet that threshold, creating a stalemate.
The state is the last in the U.S. to enact a spending plan for the current fiscal year. California’s constitution says lawmakers must send a budget to the governor by June 15, about two weeks before the fiscal year begins. The Legislature has met that deadline five times in the last 30 years.
Earlier today, Schwarzenegger announced an agreement with the biggest state labor group that saves California $383 million in employment costs this year, partly by transferring a portion of its pension obligations to workers. The three-year agreement with the Service Employees International Union, which represents 95,000 workers, also calls for unpaid days off and erases two paid holidays, the state Personnel Administration department said in a statement.
Pension Costs Decline
Under the accord, California’s obligation to pay a portion of a worker’s gross wages into the state pension fund declines by 3 percentage points, to 17 percent, and the employee contribution rises by the same amount, according to Lynelle Jolley, a personnel department spokeswoman. The provision, which is codified in one of the trailer bills that must be passed by the Legislature, pushes employee contributions to 8 percent, or 9 percent for those in public-safety jobs.
California will pay $6.5 billion toward state pension benefits this year, Schwarzenegger said, quadruple the amount it paid 10 years earlier.
Today’s accord raises to 132,000 the number of state workers covered by new pension agreements, out of 193,000 represented by unions, said Debbie Endsley, director of the personnel department. The contract also rolls back increases in pension benefits enacted in 1999, Endsley said in a conference call with reporters. “We’ve got a bit to go but this was a significant amount,” she said.
Labor Savings
The agreements will cut the state’s labor expenses by 10 percent this year, Schwarzenegger said in the announcement. He said that he also has directed department heads to cut payroll costs by an additional 5 percent.
“Reaching an agreement with SEIU on a contract is a significant step toward achieving the savings we need to balance this year’s budget,” Garrick, of Carlsbad, said in a statement. “It is our hope and expectation that by reaching a deal with SEIU, we will build momentum for the remaining employee groups to come to the table and conclude contract negotiations.”
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The plan cuts state spending by $7.5 billion, less than the $12 billion Schwarzenegger and fellow Republicans had sought. It also counts on the receipt of $1.2 billion from the sale of some state office buildings, which the government would still use through leasing.
Suspending Tax Break
Another trailer bill still under consideration would provide the state with $1.2 billion by suspending for two years a law that lets businesses use operating losses incurred in one year to reduce their future tax bills.
By a 55-1 vote, the Assembly also agreed to ask voters in 2012 to create a budget reserve, or rainy day fund, to be available for unforeseen expenses.
California requires a two-thirds vote to pass budgets in both its Assembly and Senate. Neither Republicans nor Democrats hold enough seats to meet that threshold, creating a stalemate.
The state is the last in the U.S. to enact a spending plan for the current fiscal year. California’s constitution says lawmakers must send a budget to the governor by June 15, about two weeks before the fiscal year begins. The Legislature has met that deadline five times in the last 30 years.
Earlier today, Schwarzenegger announced an agreement with the biggest state labor group that saves California $383 million in employment costs this year, partly by transferring a portion of its pension obligations to workers. The three-year agreement with the Service Employees International Union, which represents 95,000 workers, also calls for unpaid days off and erases two paid holidays, the state Personnel Administration department said in a statement.
Pension Costs Decline
Under the accord, California’s obligation to pay a portion of a worker’s gross wages into the state pension fund declines by 3 percentage points, to 17 percent, and the employee contribution rises by the same amount, according to Lynelle Jolley, a personnel department spokeswoman. The provision, which is codified in one of the trailer bills that must be passed by the Legislature, pushes employee contributions to 8 percent, or 9 percent for those in public-safety jobs.
California will pay $6.5 billion toward state pension benefits this year, Schwarzenegger said, quadruple the amount it paid 10 years earlier.
Today’s accord raises to 132,000 the number of state workers covered by new pension agreements, out of 193,000 represented by unions, said Debbie Endsley, director of the personnel department. The contract also rolls back increases in pension benefits enacted in 1999, Endsley said in a conference call with reporters. “We’ve got a bit to go but this was a significant amount,” she said.
Labor Savings
The agreements will cut the state’s labor expenses by 10 percent this year, Schwarzenegger said in the announcement. He said that he also has directed department heads to cut payroll costs by an additional 5 percent.
“Reaching an agreement with SEIU on a contract is a significant step toward achieving the savings we need to balance this year’s budget,” Garrick, of Carlsbad, said in a statement. “It is our hope and expectation that by reaching a deal with SEIU, we will build momentum for the remaining employee groups to come to the table and conclude contract negotiations.”
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