In exchange, Republicans negotiated a trio of smaller, permanent corporate tax breaks, including roughly $30 million that would benefit a single company owned by a wealthy, politically connected family.
Schwarzenegger had made clear for most of the year that he was more concerned with permanent, systemic changes to the budgeting process than with the line items in this year's spending plan. Lawmakers answered one of the governor's concerns by agreeing to place a measure on the 2012 ballot to double the size of the state's "rainy day" fund and make it harder to withdraw money from the emergency treasury.
Another key concession that Schwarzenegger received from the Democrats who dominate the Legislature is the proposed rollback of a pension boost that state workers received at the height of the dot-com boom. The new, lower pension levels would apply only to future employees.
Current state workers would have their pay cut and be required to contribute more to their pension plan or face furloughs, depending on whether they are covered by a labor contract. The overall state payroll would be frozen under the plan as well. The savings for the state would total $1.5 billion this year.
One of the last remaining pieces of the budget puzzle fell into place late Wednesday as the state and the Service Employees International Union Local 1000, which represents more state workers than any other bargaining unit, struck a contract agreement. Democrats had said they would be unwilling to reduce future employee pensions until a contract was agreed upon.