Top Calif. Lawmakers say they have Budget Deal

The state

California Gov. Arnold Schwarzenegger, center, endorses Republican presidential hopeful, Sen. John McCain, R-Ariz., as former New York City Mayor Rudy Giuliani looks on at left, Thursday, Jan. 31, 2008, after a tour of Solar Integrated Technologies in Los Angeles. (AP Photo/Charles Dharapak)

SACRAMENTO, Calif. - The state's top legislative leaders on Sunday announced what they described as a breakthrough in California's record budget impasse, potentially ending a stalemate that set a new standard for dysfunction in a Capitol with a long history of blown budget deadlines.

It was not immediately clear whether the tentative deal would be accepted by Gov. Arnold Schwarzenegger, who has said he would not sign a budget that failed to include long-term reform.

During a hastily called news conference, the Democratic and Republican leaders of the Assembly and Senate said they closed the $15.2 billion deficit without borrowing or new taxes.

The compromise includes $9 billion in spending cuts, with the rest coming from closing unspecified corporate tax loopholes and something the lawmakers described as "accelerated revenues."

They did not release details, saying they first had to brief their respective caucuses.

"I'm 100 percent sure there's a deal here," said Sen. President Pro Tem Don Perata, standing before reporters and wearing a long-sleeve sweatshirt and running shoes.

The announcement came on the 76th day since the start of its fiscal year that California has been without a budget, the longest impasse in state history.

"It was time to end this," the Democratic senator said.

Without an approved budget, the state has been unable to make billions of dollars a month in payments for some school programs and to hospitals, medical clinics and companies that supply prisons and other state facilities. It would have had to borrow if the impasse dragged into October, costing the state hundreds of millions of dollars in fees and interest payments.

The four legislative leaders conceded their compromise plan will not solve the state's long-term structural deficit, but they said it does have some of the reforms Schwarzenegger sought.

"We are analyzing their proposal but have concerns that budget reform may not be strong enough," Schwarzenegger spokesman Aaron McLear said.

Republicans had adamantly refused to raise taxes, first as Democrats proposed increasing taxes on corporations and the wealthy and later as the Republican governor offered to increase the state sales tax 1 cent for three years.

In the end, no taxes will be raised to close the deficit, according to the proposal announced Sunday. Democrats and Schwarzenegger also did not want to continue the state's borrowing trend, something Republicans had proposed earlier.

Senate Minority Leader Dave Cogdill said fellow Republicans were worried that a tax increase of any kind could be a fatal blow to an economy reeling from the fallout of the housing and mortgage crises. California's unemployment rate is at a 12-year high.

Schwarzenegger had said he will not sign a budget that fails to include long-term fiscal reforms, such as giving him authority to cut spending in the middle of the year when revenue falls and establishing a robust and permanent rainy day fund.

Democratic Assembly Speaker Karen Bass said she would bring a budget bill based on the compromise to a vote Monday.

California has begun its fiscal year without a budget for 23 of the last 32 years.


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