Legislators Move Forward on Budget
The budget proposal would resolve California’s $26 billion deficit. Among other provisions, it reduces state spending on education, health care, welfare, and other concerns by $15 billion. Unless the state economy recovers, the likely result will be yet another budget deficit in 2010.
With weaker economic activity leading to lower tax revenues and Republican opposition to higher taxes, the governor and legislative leaders said this plan was the best they could do.
The remaining $11 billion deficit will be addressed by taking $4 billion for local governments, reallocating funds, and employing a range of accounting tricks, the AP reported.
Personal income and corporate taxes from 2010 will also be collected earlier than anticipated, to resolve the state’s budget woes, according to the AP. Taxpayers would be able to claim the money on tax returns, but they would get no interest for their “loan” to the state government.
Last Friday, the state had issued 157,711 IOUs, The Wall Street Journal reported. These warrants were worth $682 million.
State Controller John Chiang said his office would need to evaluate the budget proposal before determining when it could stop issuing IOUs.