Calif. lawmakers try again to close deficit

SACRAMENTO (AP) - California lawmakers were preparing to meet again Sunday night to consider California's $24.3 billion budget shortfall before the state is forced to start issuing IOUs.

Both houses of the Legislature scheduled evening sessions, although Democrats and Republicans remain divided over how to solve the deficit, which equates to roughly a quarter of the state's entire general fund.

Democrats have proposed avoiding sending IOUs to state contractors by cutting $11 billion in spending and using other solutions to immediately save cash, but Gov. Arnold Schwarzenegger and fellow Republicans want to address the entire deficit at once.

"Over the next 72 hours, we're going to talk with the governor and Republicans about finding some sort of path to fix our budget deficit and stem the cash crisis before the state has to resort to IOUs," said Jim Evans, a spokesman for Assembly Speaker Karen Bass, D-Los Angeles.

Democrats oppose Schwarzenegger's proposal to completely eliminate some safety net programs for the poor, including a welfare-to-work program and health care for nearly 1 million lower-income children. Schwarzenegger and Republican lawmakers are steadfastly opposed to further tax increases after the governor and lawmakers raised the sales, personal income and vehicle license taxes in February.

Time is running short, with the new fiscal year beginning Wednesday. Without a balanced budget, the state controller has said he will have to start issuing $3 billion in IOUs on Thursday because the state will not have enough tax revenue coming in to meet all its payment obligations.

The pay-you-later warrants will be sent to state contractors, college students, low-income seniors, the disabled and others who depend on or deliver social services.

Bass and Senate President Pro Tem Darrell Steinberg, D-Sacramento, were scheduled to meet again with Schwarzenegger before the Sunday night legislative sessions.

On Saturday, the governor proposed other options to help close the deficit, including reducing state pension benefits for new hires, shifting enrollment for the state's health insurance for the poor online to reduce government jobs and requiring in-home caretakers to submit to fingerprint and background checks to prevent fraud.

Most of those ideas would do nothing to address the immediate shortfall but would allow Schwarzenegger to implement some government reforms.

The Republican governor has proposed filling the shortfall by cutting $16 billion, borrowing $2 billion from local governments, taking $6 billion from other government accounts, accelerating personal and corporate income tax collections, and cutting state employee pay by another 5 percent.

On Friday, Schwarzenegger ordered state employees to take a third furlough day each month unless an agreement is reached by Tuesday - extending furloughs that began in February.

The latest furloughs would reduce pay for 235,000 state workers by about 14 percent.

California already has a budget in place for the 2009-10 fiscal year, thanks to a two-year budget package approved in February, but the spending plan is badly out-of-balance. The main culprit is the recession, which caused a 34 percent plunge in personal income tax revenue during the first five months of the year.