California’s budget impasse may be at an end

SACRAMENTO
September 15, 2008 12:01am

California’s drifting for two and a half months without a budget may come to an end Monday with the state Assembly and Senate are expected to vote on a compromise $103.4 billion budget for the fiscal year that began July 1.

Floor sessions in both the Assembly and the Senate are scheduled for 4 p.m. today. Members are being given the details behind closed doors prior to the floor sessions.

“Seventy-seven days without a budget. We needed to bring it to an end,” says Assembly Speaker Karen Bass, D-Los Angeles,

in an interview Monday morning with KGO Radio, San Francisco.

Few details of the compromise have been told to the public other than there would be no tax increases and no borrowing from local governments or other state special funds.

Ms. Bass says certain “tax loopholes” will be closed.

“For example, if you’re a millionaire and you receive a jump in revenue, we want you to pay your taxes earlier,” Ms. Bass says in the live interview.

“If you have a yacht, you can no longer duck paying taxes,” she says.

Those who pay taxes quarterly, will have to pay 30 percent of estimated taxes during the first two quarters, she says.

There would be $9 billion in spending cuts.

Just where the ax will fall has not been made public and it was not immediately clear of Gov. Arnold Schwarzenegger would sign the budget. His office on Sunday said the details were being studied.

It had been estimated that the state faced a $15.2 billion gap between expected revenue and planned spending.

The $6 billion gap not addressed by spending cuts would be bridged by closing unspecified “tax loopholes,” and "accelerated revenue collections," a term for collecting one-time revenues in the current fiscal year instead of the following one.

The Legislature’s Republican minority succeeded in cowing the majority Democrats and the Republican governor, who had called for a one-cent increase in the state sales tax.

Democrats needed two Republican votes in the state Senate and a comparably small number in the Assembly to gain the two-thirds majority to pass a budget plan with a tax increase.

The compromise budget gives Mr. Schwarzenegger two things he demanded: the power to cut spending in mid-year if revenues fall and increasing the state’ so-called “rainy day” fund.

If Mr. Schwarzenegger signs the compromise budget, lawmakers are expected to flood him with about 700 proposed laws they have withheld under threat of veto unless there were a budget.

More importantly, hundreds, if not thousands of vendors who have sold the state goods and services since July 1 can get paid. Without a budget, few bills were paid and some smaller service providers were forced out of business or forced to use personal assets to pay their bills to keep operating.

(Editor’s note: As developments unfold Monday, we will update this story. Please check back periodically.)