Tags: California | Budget | Relies | Federal | Aid | Pension | Rollback

California Budget Relies on More Federal Aid, Pension Rollback

Wednesday, 06 Oct 2010 02:55 PM

An agreement to end California longest-ever budget impasse seeks to fill a $19 billion deficit by using higher revenue projections and more money from the federal government than what has been promised.

The budget counts on California getting $5.3 billion in federal funds for welfare, education and prison costs instead of the $3.4 billion Governor Arnold Schwarzenegger estimated in May. The plan narrows the deficit by $1.4 billion by using tax- revenue forecasts from the state’s Legislative Analyst office instead of those used by Schwarzenegger in May, according to a copy of the budget posted on the Senate website.

The most-populous U.S. state has been operating without a spending plan for a record 98 days amid a stalemate between Schwarzenegger, a Republican, and Democrats who control the Legislature over how to close the gap. They reached a deal behind closed doors Oct. 1, and have withheld the details of the agreement until today. They expect to vote on it tomorrow.

“As California begins to emerge from the global recession, the 2010-11 budget provides a way forward to protect the public structures of education, public safety, infrastructure, and vital services,” lawmakers said in an outline of the proposal that is to be presented to a budget conference committee today.

“The budget does not increase any tax rates and implements significant ongoing reform in the areas of budget and public pensions,” the statement said.

IOU Potential

State Controller John Chiang has said a prolonged impasse may force him to issue IOUs for a second straight year to conserve cash to make priority payments such as debt service.

The budget plan cuts spending by $7.5 billion, less than the $12 billion sought by Schwarzenegger and Republicans. Almost half the cuts come from schools. It also counts on $1.2 billion the state will save by suspending for two years a business tax credit that lets companies carry forward a portion of net operating losses.

The proposal also borrows about $2.8 billion from internal state accounts.

Schwarzenegger in January said the state should get $6.9 billion from the federal government. He lowered that number when he revised his budget in May.

The budget would also grant a tax break sought by Republicans that allows companies to avoid paying a 20 percent penalty when they understate their tax liability by more than $1 million. This would cost the state $132 million a year.

The agreement also proposes a law that would roll back pension benefits for new state employees to 1999 levels by requiring workers to contribute more from their pay, retire when they are older and base benefits on the three years of highest wages instead of one.

Lawmakers also will be asked to place a measure on the statewide ballot that would ask voters to require a contingency reserve fund of up to 10 percent of the general fund. Any excess money when the state runs a surplus can be used to pay down debt service.

© Copyright 2017 Bloomberg News. All rights reserved.

1Like our page
2Share
Headline
An agreement to end California longest-ever budget impasse seeks to fill a $19 billion deficit by using higher revenue projections and more money from the federal government than what has been promised.The budget counts on California getting $5.3 billion in federal funds...
California,Budget,Relies,Federal,Aid,Pension,Rollback
492
2010-55-06
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved