Final details left for discussion in Calif. budget

[July 20, 2009]  SACRAMENTO, Calif. (AP) -- Gov. Arnold Schwarzenegger and California's top lawmakers are set to resume talks Monday with the hope of hammering out the final details on a deal to close the state's $26.3 billion budget deficit.

The negotiations come as the state pays its bills with IOUs for the first time in nearly 20 years and as major credit agencies threaten the state's already basement-level bond rating. The dismal economy has forced a new round of cuts just 4 1/2 months after California closed a previous $42 billion deficit.

The state's four top legislative leaders had been scheduled to meet with the Republican governor Sunday to work out what all sides expected to be the final budget deal. But the meeting was abruptly postponed by scheduling conflicts.

Assembly Speaker Karen Bass said she expects a budget vote by Thursday despite Sunday's delay.

"I feel very, very upbeat that we really will be able to have a deal in the next day or so," said Bass, a Democrat from Los Angeles.

Aides to the governor and leaders spent the weekend trying to work out legislative language that could resolve the remaining issues.

Those issues include borrowing from local governments, guaranteeing that schools will be repaid money they lose during poor economic times, and saving money for future budget emergencies.

They also include Schwarzenegger's plan to permit oil drilling from an existing rig off the Santa Barbara coast. The proposal opposed by many conservation groups would be the state's first new offshore oil project in more than 40 years.

"It's worth a couple billion dollars and has the added benefit of tearing down those oil rigs at the end, so it's good for the environment," Schwarzenegger spokesman Aaron McLear said Sunday. He said terms of the lease are still being worked out, but the drilling would likely run for 20 to 30 years.

Most of California government would continue to shut down for three Fridays each month through June because of employee furloughs ordered by Schwarzenegger. The three furlough days effectively reduce most state workers' pay by about 14 percent. But officials said state employees will not likely have to endure an additional 5 percent salary cut that the governor had proposed.

The largest state employee union, Service Employees International Union Local 1000, is asking its members to authorize job actions that could include a walkout to protest the furloughs. The ballots are due by July 31.

"I'm extremely angry," said union president Yvonne Walker, who represents 95,000 of the more than 200,000 state workers. "That's money that's not being spent in each of the counties in California by state workers."

Legislative leaders were trying to work out the details of borrowing $4 billion from local governments.

Cities and counties already are laying off firefighters and police officers because of their own budget problems, and some are threatening to sue if the state takes their money for its own needs. Legislative leaders said they have little choice, however, once Republicans led by Schwarzenegger refused to consider raising state taxes or fees.

"Any way you cut it, local government will feel the pain, as will most Californians," said Bass. "There is no way that we get out of this budget without everyone feeling the pain."

The leaders have a tentative deal to repay schools $9.5 billion in installments in future years without amending the state Constitution. The money was cut from schools last year, and Democrats and Schwarzenegger had differed on the legal and fiscal means to reimburse them under the requirements of voter-approved Proposition 98. The measure sets minimum funding levels for schools.

They were still negotiating the final levels of cuts to state programs and proposals Schwarzenegger says are needed to limit waste and fraud. Aides said negotiators had scaled back Schwarzenegger's proposals for dramatic cuts to state prisons, but hadn't decided if early releases of inmates would still be needed.

"We're getting closer," McLear said. "But there's not final agreement on any of those issues."

[Associated Press; By DON THOMPSON]

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