Guv, Lawmakers: No Deal for California

They burned the midnight oil but still didn't solve $24 billion black hole

By JESSICA GREENE

Updated 6:45 AM PST, Wed, Jul 1, 2009

Print Email Share TWITTER FACEBOOK

AFP/Getty Images

Lawmakers burned the midnight oil Tuesday trying to hammer out a budget deal but left the Senate chamber in failure.

The California Senate just couldn't approve a stopgap plan to stave off the need for IOUs and ease the state's $24 billion budget deficit.

Voting along party lines, the Senate rejected three bills designed to save $5 billion, including $3.3 billion in education funding cuts.

The measures fell two votes short of the two-thirds majorities needed to send them to the governor's desk, but Gov. Arnold Schwarzenegger has already said he won't sign any bill short of a complete solution to the deficit.

The new fiscal year starts today so that means lawmakers must come up with a deal or state Controller John Chiang will start issuing IOUs Thursday to contractors who do business with state and local governments and taxpayers who are still owed refunds. The total could reach up to $3 billion -- just for July.

The first batch of IOUs would add up to $53.3 million, according to the controller's spokewoman.

Senate President Pro Tem Darrell Steinberg says that's "an irresponsible position to take when our problems are already as severe as they are."

Failure to approve the cost-saving measures will add to the state's deficit, perhaps by as much as $7 billion, because of the state's complicated school-financing system.

Schwarzenegger plans to declare a new state of fiscal emergency today and launch a special session and propose more program cuts to resolve the huge budget black hole, spokesman Aaron McLear told the Sacramento Bee.

The governor will also be signing an executive order to force more than 200,000 state workers to start taking another unpaid day off -- a third furlough day each month, according to McLear.

So, why not turn in an IOU to your boss today instead of handing over that important project that's been expected for weeks? How about the mortgage? Tell the bank you don't have the money and put it off with an IOU. Of course, you'd face a penalty and that's just what California will be facing.