Reporting from Sacramento — The state Assembly today unexpectedly approved budget revisions intended to keep the state from having to issue IOUs next week, but even before the measures reached the Senate floor, Gov. Arnold Schwarzenegger declared the package inadequate and vowed to veto it.
Passage of the $5 billion package, which would cut billions from education, push some education costs into the future and defer some other state expenses, came as a surprise to many in the Capitol. GOP lawmakers had declared that they would block any proposals that did not close the entire $24-billion deficit.
But with the prospects of IOUs going to local governments, welfare recipients and college students as early as July 2, Republicans joined the majority Democrats to pass the measures.
Local governments have warned that the state's failure to make its scheduled payments to them in full could force them to stop providing some services. The state controller said Wednesday that California's cash-flow problem was so severe he might have to resort to IOUs next week.
Schwarzenegger, in a statement, said that what lawmakers passed "amounts to nothing more than a piecemeal proposal."
"Since the first day we began working to solve this $24-billion deficit, I have been clear: the Legislature must solve the entire deficit," he said.
If it passes both houses, "I will veto it because it doesn't solve the problem," the governor said.
The measures the Assembly approved would save money only if the legislation is put in place before Tuesday, when the current fiscal year ends.
Among the costs lawmakers would defer are $2.2 billion owed to schools, $700 million for the University of California system, $290 million owed the California State University system and $163 million for community colleges. Nearly $290 million in payments to transportation programs would also be delayed.
The Assembly package also would take $350 million from local redevelopment agencies to help balance the budget. An earlier attempt to take those funds was blocked in court, but lawmakers have rewritten the proposal in an attempt to avert legal problems.
The lawmakers also would also borrow $360 million in lottery funds, which legislative staffers say would be legal even though voters in May rejected a proposal to borrow substantially more from the lottery.
