Schwarzenegger, California lawmakers reach budget deal

Gov. Arnold Schwarzenegger and legislative leaders agreed Monday to balance California's $26 billion deficit by cutting broadly across state government, shifting costs into the future and capturing funds from cities and counties.

"We came to a basic agreement, a budget agreement that of course has be ratified by the Legislature," Schwarzenegger told reporters. He said the final hours of negotiations were "like a suspense movie."

Despite the accomplishment, Senate President pro tem Darrell Steinberg said that "this a sober time."

"There isn't a whole lot of good news in this budget. We have cut, and we have cut in many areas that matter to real people," said Steinberg, D-Sacramento. "But I think we have done so responsibly."

State leaders believe their budget plan is credible enough to acquire billions of dollars in short-term loans that will end the states reliance on IOUs for only the second time since the Great Depression. California is in the throes of a cash shortage because it is relying on a February spending plan that assumed higher revenues and solutions rejected by voters in May.

The proposal includes spending cuts to programs ranging from schools to welfare-to-work to prisons. It takes money from local governments, including borrowing $2 billion that the state will repay starting in 2013.

But Democrats also ensured that California will pay $9.5 billion to education once the state's economy rebounds as compensation for 2008-09 school cuts. They also avoided suspending Proposition 98, the state's constitutional guarantee for education funding.

The compromise package is also filled with changes to state government not normally associated with budget deals. It increases sanctions on welfare recipients in an attempt to encourage more people to work. But Democrats said they avoided wholesale cuts in welfare-to-work, Healthy Families and Cal Grant programs.


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