Politics & Government

Schwarzenegger, GOP reject stopgap for California budget

California's budget problems evolved into a game of political chicken Thursday, as Gov. Arnold Schwarzenegger and GOP state senators took an all-or-nothing stance that could lead to issuing IOUs to pay the state's bills.

On highly unusual bipartisan votes, the Assembly overwhelmingly passed three bills that would free up cash for the fiscal year that starts Wednesday, by cutting school spending and delaying some payments to schools, colleges and local governments.

But the bills sank in the Senate in the face of united opposition by Republican senators and the governor – despite the fact that the measures were part of the budget-balancing plan Schwarzenegger proposed last month.

The result was another wasted day in the quest to erase a $24 billion budget deficit before next Wednesday.

State Controller John Chiang has warned that without a balanced budget in place by then, he will begin using IOUs to pay most of the state's bills.

Chiang says the action will be necessary so he can save enough of the state's dwindling cash supply to make constitutionally mandated payments to schools and state bondholders.

Thursday's trio of bills would have freed up an additional $4 billion to $5 billion in cash that Assembly Budget Chairwoman Noreen Evans, D-Santa Rosa, said could fend off the need for IOUs through August.

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