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Schwarzenegger, Legislative Leaders Reach Budget Deal

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California State Capitol in Sacramento (Justin Sullivan/Getty Images)

California State Capitol in Sacramento (Justin Sullivan/Getty Images)

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SACRAMENTO (AP) — Gov. Arnold Schwarzenegger and legislative leaders said they struck a comprehensive agreement after an intensive five-hour meeting Friday night, signaling an end to California’s record-long budget stalemate after 93 days.

No details were released on how the state plans to bridge a $19 billion deficit, as legislative leaders left the governor’s office in the Capitol. However, Assembly Minority Leader Martin Garrick, R-Solana Beach, indicated Republicans were successful in their quest to ward off tax increases.

“Legislative leaders and the governor have finally reached an agreement on a no-tax budget that protects California jobs,” Garrick said in a statement.

Democratic Senate President Pro Tem Darrell Steinberg of Sacramento said details of the budget would be released during a public hearing Wednesday.

A vote on the compromise plan brokered between the Republican governor and Senate and Assembly leaders of both parties could come as early as Thursday. Legislative staff will work on drafting budget language in the coming days.

“Everyone has worked very, very hard. These are very difficult circumstances in difficult times, not a lot of celebrating, but we all stepped up and did the work we had to do,” Steinberg said.

Senate Minority Leader Dennis Hollingsworth of Murrieta said he expected enough support among Republicans to pass the budget on a two-thirds vote.

Schwarzenegger did not come out to address reporters on the last budget he will negotiate. His spokesman Aaron McLear declined to give details but noted the governor has demanded pension and other budgetary reforms all along. The governor, who will be termed out next year, has been seeking a stronger rainy day fund throughout his tenure.

“He will not sign a budget that increases taxes,” McLear said. “He still feels exactly the same way.”

This year marks the longest the state has ever gone beyond the July 1 start of its fiscal year without an approved spending plan. The $19 billion gap represents more than 22 percent of the state’s $84.5 billion budget last year.

Throughout the impasse, pension reform has remained one of the biggest sticking points. Schwarzenegger wants the Legislature to roll back public employee benefits, while Democratic lawmakers say the administration should work to reach an agreement with unions through collective bargaining.

The leaders also have disagreed on how to raise money, with Republicans refusing to make concessions on taxes or increased fees, and Democrats calling for a delay of corporate tax breaks approved last year.

Although no details were given, a better-than-bleak economic picture was expected to help shrink the budget gap, along with proceeds from the sale of state office buildings.

“It’s a compromise budget on all sides,” Hollingsworth said.

A balanced budget is key to the state’s financial health. California, which has the lowest credit rating in the nation, has so far been able to pay most of its bills. But officials warned that won’t hold for much longer.

Controller John Chiang has said he may have to issue IOUs for just the third time since the Great Depression if next week passes with no budget. Without a budget, the state stopped paying some employees and vendors, and Chiang said he already owes thousands of state contractors nearly $3 billion.

In addition, an estimated $7 billion in planned public works projects could be in danger if a deal is not reached soon, state Treasurer Bill Lockyer’s office has said.

Earlier in the day, lawmakers appeared optimistic that a deal was within reach. Garrick told reporters to “look for the white smoke, or the smell of it,” as he walked into the meeting.

(© 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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