SACRAMENTO — With a day to go until a cash crisis would force the state to stop paying its bills, lawmakers and Gov. Arnold Schwarzenegger worked into the night Tuesday but failed to reach a budget agreement.
The state Senate, in late session, voted several times as midnight approached in a last-ditch effort to approve $3.3 billion in cuts to education and other programs and stave off, at least temporarily, the IOUs that California Controller John Chiang is set to begin issuing Thursday in lieu of some payments.
Democrats had been hoping to use the funds to help defray the state's projected $24-billion deficit. But the money was allocated for the fiscal year that ended Tuesday, and after that it was too late to make the cuts.
"We have that duty to make sure that no one starves," state Sen. Jenny Oropeza (D-Long Beach) said as she pleaded with GOP senators for their votes.
But Republican senators blocked the plan, which the Assembly approved last week. Schwarzenegger had vowed to veto the legislation because it did not meet his demand that any agreement close the state's entire deficit, an argument echoed by the Republicans in the Senate.
"No one wants to see IOUs issued, but equally important, no one wants to see us continue to avoid the problem," said Senate Minority Leader Dennis Hollingsworth (R-Murrieta).
Beyond any loss of the $3.3 billion in savings, state officials said, failure to make the education cuts could increase the budget deficit by up to several billion dollars, because education funding is based on the prior year's appropriations.
The governor and lawmakers met the legal requirement to approve a budget for the new fiscal year with an agreement they reached in February; however, declining revenues have thrown that budget out of balance, and forced the current negotiations.
A state appeals court panel clouded the budget picture further Tuesday with a ruling that could cost the state nearly $3.5 billion. The judges in the 3rd District Court of Appeal said that since 2007, gasoline-tax funds intended for mass transportation had been improperly diverted by the governor and lawmakers to cover other expenses. The state will appeal to the California Supreme Court, said H.D. Palmer, a spokesman for the Department of Finance.
