Gov. Schwarzenegger, legislative leaders remain mum on compromise to close $19 billion gap

California nears budget vote to end record impasse

SACRAMENTO, Calif. — Despite reaching a long awaited budget agreement, Gov. Arnold Schwarzenegger and legislative leaders remain mum about how they plan to close California’s $19 billion deficit.

Late Friday night, leaders of the state Senate and Assembly from both parties stood together outside the governor’s office after an intensive five-hour meeting that signaled an end to the state’s record-long budget stalemate that has lasted 94 days.

“Legislative leaders and the governor have finally reached an agreement on a no-tax budget that protects California jobs,” Assembly Minority Leader Martin Garrick, R-Solana Beach, said in a statement.

This year marks the longest the state has ever gone beyond the July 1 start of its fiscal year without an approved spending plan. The $19 billion gap is more than 22 percent of the state’s $84.5 billion budget last year.

The impasse prompted the governor to call for a second round of three-day-a-month furloughs, which has resulted in about a 14 percent pay cut for tens of thousands of state workers. The California Supreme Court is expected to issue a decision Monday on whether the governor has the authority to furlough.

“Everyone has worked very, very hard,” Democratic Senate President Pro Tem Darrell Steinberg of Sacramento said. “These are very difficult circumstances in difficult times, not a lot of celebrating, but we all stepped up and did the work we had to do.”

Republicans stood steadfast against tax increases and Garrick indicated they got what they wanted.

Legislative staff will work on drafting budget language in the coming days. Steinberg said all the information would be released during a public hearing Wednesday. A vote on the compromise plan was expected Thursday.

It’s unclear how the budget will reflect on Schwarzenegger, who leaves office next year at the end of his term.

Throughout the impasse, pension reform has remained one of the biggest sticking points. Schwarzenegger wants the Legislature to roll back public employee benefits, while Democratic lawmakers say the administration should work to reach an agreement with unions through collective bargaining.

He also demanded a stronger rainy day fund as well as spending and tax reforms. Schwarzenegger spokesman Aaron McLear declined to give details but noted the governor has been clear in his demands all along.

“He will not sign a budget that increases taxes,” McLear said. “He still feels exactly the same way.”

The leaders have disagreed on how to raise money, with Republicans refusing to make concessions on taxes or increased fees, and Democrats calling for a delay of corporate tax breaks approved last year. Although no details were given, a better-than-bleak economic picture was expected to help shrink the budget gap, along with proceeds from the sale of state office buildings.

A budget vote next week would bring much relief to the state, which has the lowest credit rating in the nation. While California has so far been able to pay most of its bills, officials warned that a prolonged impasse would have brought more financial pain to the most populous state in the nation.

Controller John Chiang has repeatedly warned that he may have to issue IOUs for just the third time since the Great Depression if next week passes with no budget. Without a budget, the state has already stopped paying some employees and vendors.

Chiang said he already owes thousands of state contractors nearly $3 billion.