Governor Arnold Schwarzenegger (R-Calif.) and California’s legislature have come to a budget compromise that will end the state budget shortfall of $26 billion. The agreement calls for spending cuts, borrowing, and fund shifts but not tax increases. Currently, the state is making payments with IOUs.
The compromise will entail cuts in education, health care, prison, welfare, and other program funding. The rest of the compromise involves borrowing money from local governments, shifting money from government accounts, and accelerating the collection of some taxes.
“This is, of course, one of the most difficult economic times to face our state since the Great Depression, so none of these were easy choices,” said the Republican minority leader, Sam Blakeslee. “I think we selected a path which will lead the state back to the point where we will be strong.”
Schwarzenegger has managed to secure an agreement on offshore drilling off the coast near Santa Barbara. The rig, which already exists, will bring in a projected $1.8 billion over time. It is also the state’s first off shore oil project in 40 years.
Small business owners are praising the budget compromise for not raising taxes, even if they will still depend on IOUs.
“I do not want them to raise taxes. I will take vouchers over them raising our taxes,” said one California business owner.
However, Schwarzenegger has been criticized by union groups for reducing payment to workers. One of California’s spending cuts is a mandatory three days off of work per month without pay for some 200,000 government employees. This is equivalent to a 14% pay cut.
“We’re furious about the failed leadership in Sacramento. Their decision shows a lack of political courage to stand up to corporate giants and wealthy special interests,” said Yvonne Walker, a local union official.
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