State deficit fix relies on loans
The Associated Press
SACRAMENTO -- Leaders of the Legislature's Democratic majority criticized Gov. Arnold Schwarzenegger's budget, saying his plan uses billions of dollars in borrowing to close the deficit and takes heavily from schools and public health programs.
But lacking their own budget plan and wary about a politically charged special election looming on the horizon, Democrats said Tuesday they are willing to negotiate.
"Last year, the governor was most successful whenever he worked in a bipartisan manner." said Assemblyman John Laird, a Democrat from Santa Cruz and chairman of the Assembly Budget Committee. "We stand ready to work with him."
Democrats are setting aside a long-standing call for tax increases to close the state's $8.6 billion deficit next year and instead will concentrate on closing tax loopholes and chasing more federal support.
The Republican governor's $111.7 billion budget allows for increased funding almost across the board and represents $6.4 billion more in spending than the current year's budget.
But expenses are also accelerating; caseloads of the public health and welfare system continue to grow as well as enrollments in public schools and the number of prison inmates.
Schwarzenegger's spending plan puts strict limits on the rate of growth next year, which translates into far fewer dollars for key programs and less services.
The deficit, estimated in recent weeks at $8.1 billion, was raised Monday to $9 billion to account for a $500 million reserve the governor wants and a $450 million settlement of a flood case the state lost last year.
The governor's plan calls for no new taxes but uses $3.5 billion in loans to help close the budget gap. Another $2.2 billion in unanticipated tax income that education leaders want would be used for other purposes in Schwarzenegger's budget.
H.D. Palmer, spokesman for Schwarzenegger's Finance Department, noted that the governor has said he also wants to work with lawmakers to get a bipartisan budget agreement.
But there are clear partisan divisions, particularly among Democrats over the governor's plans not to give a cost-of-living increase for welfare recipients, which saves about $260 million; and the elimination of a property tax subsidy for needy seniors, saving about $140 million. Democrats said they want to try closing tax loopholes.