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SACRAMENTO — With high unemployment continuing to eat at California's tax revenues, and risky budget gimmicks failing to materialize, the state's deficit next year could hit a staggering $25 billion. If worst-case scenarios hold true, several insiders who track the state's financial picture tell the Mercury News, the deficit through June 2011 would be billions higher than previous estimates. Gov. Arnold Schwarzenegger's best-case estimate earlier this week was half that sum, at $12.4 billion. Assembly Republican leader Sam Blakeslee of San Luis Obispo floated a number as high as $20 billion during water negotiations. "It's not outrageous," one budget expert...

On Nov. 1, the government of the state of California began withholding from workers' paychecks 10 percent more than what it had been withholding. The Los Angeles Times described this move -- prompted by California's fiscal calamity -- as "a forced, interest-free loan" from taxpayers to the government. The Times explained to its California readers that "You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less." The ostensible purpose of withholding is to better ensure that taxpayers actually pay the taxes they...

Reporting from Los Angeles and Sacramento - Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners -- holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear. Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers' annual tax bills won't change. Think of it as a forced, interest-free loan:...

LONG BEACH, Calif. (AP) — The California State University system raised student fees Tuesday by 20 percent as part of a budget plan that would also shrink enrollment and furlough nearly all employees for two days a month. The Board of Trustees voted 17-1 to raise undergraduate fees by $672 a year to $4,827 in the nation's largest four-year university system. The fee increase, which follows a 10 percent hike approved in May, is part of the 23-campus system's plan to close a $584 million budget shortfall caused by an unprecedented drop in state funding to CSU, which has with...

SACRAMENTO — Gov. Arnold Schwarzenegger and legislative leaders say they're nearing a deal to close the state's $26.3 billion deficit. And despite California's left-leaning electorate, the final product is almost certain to be settled on Republican terms, with deep spending cuts to most state programs and no new taxes. After huddling in the governor's office until almost midnight Tuesday, the Big Five — Schwarzenegger and the four Democratic and Republican leaders of the Assembly and Senate — reconvened Wednesday afternoon for another lengthy negotiating session. All sides said they are within striking distance of a deal.But emerging from the governor's...

Schwarzenegger, lawmakers express optimism as talks resume to close California's $26B deficit SACRAMENTO, Calif. (AP) -- Against a backdrop of IOUs and expanding government furloughs, Gov. Arnold Schwarzenegger and legislative leaders expressed optimism Saturday that they were moving toward a compromise that could end California's fiscal calamity. Negotiations to close the state's $26.3 billion deficit restarted after two weeks of inaction and partisan bickering. Top lawmakers from both parties said a budget-balancing deal was possible in the coming week. "I would say we're getting very close to a general framework, but there are still outlying questions," said Assembly Minority Leader...

Fitch Ratings cut California's long-term general obligation bond rating by two notches to BBB, the second cut on the rating since late June, based on the state's inability to achieve an agreement on its budget and cash flow solutions amid its severe financial crisis. Legislators in the state have been deadlocked for more than a month on ways to close what is now a $26 billion deficit in a $92 billion general-fund budget. The state plans to issue a little over $3 billion in IOUs to thousands of creditors this month after lawmakers failed to come to an agreement on...

Gov: State's deficit has grown to $26.3 billion Matthew Yi, Richard Procter,Wyatt Buchanan, Chronicle Sacramento Bureau Wednesday, July 1, 2009 Gov. Arnold Schwarzenegger said today that the state's deficit has grown by $2 billion - to $26.3 billion due to the Legislature's failure to pass a comprehensive solution to solve the state's shortfall. The Republican governor also declared a fiscal emergency, citing the Legislature's inability to pass a plan by last night's midnight deadline. The fiscal emergency means that under Proposition 58, lawmakers will have 45 days to adopt a plan to close the deficit. If they fail to meet...

Regulation: Ignoring the first rule of holes, a bankrupt state passing out IOUs welcomes an EPA waiver allowing it to further kill its economy. Too bad the state can't stop the air pollution imported from a growing China. The U.S. Environmental Protection Agency on Tuesday granted California its long-standing request — denied by the Bush administration — for a waiver to allow it to impose even more stringent air pollution rules than currently required by the federal government.The way is now clear for implementation of a 2002 state law requiring new cars to increase their fuel economy 40% by 2016....

As the end of California’s fiscal year approaches, the Governor and state legislators confront a $24 billion deficit. While Republicans and Democrats wrangle over how to address the gaping shortfall, some members of the press have started to look for a scapegoat for the fiscal train wreck. Many have blamed the California taxpayer’s only protection: Prop. 13, the 1978 measure capping state property taxes at 1% of a home’s assessed value. Perhaps the most egregious example of the finger-pointing is a recent piece from TIME’s Kevin O’Leary, moaning that “Before Prop 13, in the 1950s and '60s, California was a...

As the end of California’s fiscal year approaches, the Governor and state legislators confront a $24 billion deficit. While Republicans and Democrats wrangle over how to address the gaping shortfall, some members of the press have started to look for a scapegoat for the fiscal train wreck. Many have blamed the California taxpayer’s only protection: Prop. 13, the 1978 measure capping state property taxes at 1% of a home’s assessed value. Perhaps the most egregious example of the finger-pointing is a recent piece from TIME’s Kevin O’Leary, moaning that “Before Prop 13, in the 1950s and '60s, California was a...

Democratic legislators trotted out a stick-and-carrot approach to closing the state's budget gap Sunday night, negotiating with the governor on one floor of the Capitol while voting for a package of cuts and taxes on another. Majority Democrats in the Assembly were voting late Sunday on a $23.4 billion package of spending cuts, tax and fee increases, and accounting tricks designed to close a gaping hole in the budget for the fiscal year that starts Wednesday. Unlike last week's efforts, when at least some Republican votes were needed to pass the bills so they could take effect immediately, Sunday's package...

About this time every year, as the Legislature and governor wrestle over how to pass the state budget, somewhere, somebody blames Sacramento's stalemate - and the state of the California's mediocre schools and crumbling roads - on Proposition 13. The wail usually echoes unanswered for a simple reason: Thirty-one years after California voters overwhelmingly passed the law that fixed the rate of property tax increases and required a two-thirds majority of the Legislature to raise taxes and approve state budgets, polls show that Prop. 13 is as popular as ever.But this year, with California and the nation in the throes...

In a controversial simple-majority vote Sunday night, the state Assembly approved raising taxes on oil production and tobacco products as part of a Democratic budget proposal that closes most of the $24.3 billion budget shortfall through June 2010. But the plan met immediate resistance when a spokesman for Gov. Arnold Schwarzenegger vowed that the Republican would veto such an end run around GOP lawmakers. Bills containing new taxes normally require a two-thirds majority to be enacted. "He will veto any majority-vote budget fix," said Schwarzenegger spokesman Aaron McLear. "I think this shows that the Legislature is not yet serious about...

California State Assembly Speaker Karen Bass, a Democrat, did an interview with the LA Times. Thought you may enjoy her response to the following question: How do you think conservative talk radio has affected the Legislature's work? Bass' response: The Republicans were essentially threatened and terrorized against voting for revenue. Now [some] are facing recalls. They operate under a terrorist threat: "You vote for revenue and your career is over." I don't know why we allow that kind of terrorism to exist. I guess it's about free speech, but it's extremely unfair. Now that's a first. I know that politicians...

*SNIP* California has 55 electoral votes. A Democrat can't win the White House without winning California. "Obama to California: Drop Dead," is not the kind of Sacramento Bee headline that the president or his party can afford.

For Time Magazine, Kevin O'Leary has decided that he's figured out why California is in such a budget mess. Is it because the state indulges over generous social programs, or always has some of the highest taxes in the nation, or because the denizens of its capitol in Sacramento are paragons of waste, fraud and theft? Nope. It's because California has Proposition 13, a measure that prevents state government from too easily raising taxes. Yep, O'Leary thinks California is in a mess because it doesn't have high enough taxes. And it's all Reagan's fault. With some of the highest...

Gov. Arnold Schwarzenegger, seeking to conquer what could be the last budget crisis of his tenure, is engaged in a high-stakes negotiating strategy with lawmakers that could force him to preside over a meltdown of state government. As legislators have scrambled to stop the state from postponing payment of its bills and issuing IOUs starting next week, the governor has vowed to veto any measure that fails to close the state's entire $24-billion deficit. *** The governor readily admits that he sees the crisis as a chance to make big changes to government -- to "reform the system," he said...

Afew [sic] hours after California voters approved his Proposition 13 tax-cut measure on June 6, 1978, a bibulous and exultant Howard Jarvis dropped his pants for the benefit of a few reporters gathered in his suite at the L.A. Biltmore Hotel. A reporter had asked Jarvis why he was limping, so his ostensible reason was to show a large, ugly bruise, which he'd suffered in a fall a few days before, on his ample, boxer-clad behind. The surprise gesture, however, also afforded the earthy and profane Jarvis a chance to display his contempt for the press and, by extension, the...

California cities will sue the state if its new fiscal budget includes "stealing" local gas tax funds, leaders for the League of California Cities warned today. "Our intention is to be prepared to file a lawsuit the day after the budget is signed," Chris McKenzie, the league's executive director, said at a news conference in the Sacramento Convention Center. "The (state) Constitution and statutes have never authorized the state to steal gas tax funds."

California's budget mess got even messier Wednesday, with the failure of legislators to reach a compromise on spending cuts, the state controller warning he will issue IOUs next week instead of checks, and no clear idea of what to do next."How can the people of California have a clue what we're doing if we don't?" asked Assemblyman Jim Nielsen, R-Gerber, as the Assembly debated a proposal to make $11 billion in program cuts to help plug a $24.3 billion budget hole.Nielsen's comment was in reference to the fact that GOP legislators didn't receive copies of the inches-thick bill until an...

California could begin issuing IOUs on July 2 unless the governor and lawmakers reach a budget deal, the latest challenge for the financially strapped state. On Wednesday, the state starts “a fiscal year with a massively unbalanced spending plan and cash shortfall not seen since the Great Depression,” State Controller John Chiang said in a news release. The state faces a $2.8 billion shortfall in July, increasing to $6.5 billion in September, with a “double-digit freefall” in the following months, he said. The state has an estimated $24 billion shortfall for the next fiscal year, after voters rejected propositions in...

Sacramento, CA (AP) -- California refineries and utilities are facing a new levy intended to pay for the state's landmark program to reduce greenhouse gas emissions. If approved, the fee would raise $51.2 million annually for the next three years and would be the country's first statewide carbon fee on industry. The total would drop to $36.2 million by the fifth year. The fee will be considered Thursday by the California Air Resources Board.

The California Legislature on Wednesday voted down $11 billion in cuts to state services, sending members back to the drawing board as they grapple with a $24 billion budget gap.

To hear Gov. Arnold Schwarzenegger and state finance officials tell it, July 28 is California's last stand before fiscal Armageddon. Top financial officers say that's when the state will run out of cash to pay its daily expenses unless lawmakers pass a balanced budget. Schwarzenegger has warned that government will come to a "grinding halt." The state controller describes "a meltdown."

SACRAMENTO, Calif. -- Californians seem to want it all, says first lady Maria Shriver. They oppose billions of dollars in cuts to address the state's massive budget deficit but are not willing to pay more for the services they enjoy. The first lady, visiting Sacramento on Tuesday for the opening of an Abraham Lincoln exhibit at the California Museum, said people talk to her all the time about California's $24.3 billion budget shortfall and Gov. Arnold Schwarzenegger's proposed solutions. Schwarzenegger's proposed cuts include eliminating health care for nearly 1 million poor children, increasing class sizes in public schools, slashing in-home...

The Legislature is poised to vote today on a nearly $24 billion budget-balancing plan that Republicans vow not to support and Gov. Arnold Schwarzenegger pledges not to sign. The Democratic proposal appears dead on arrival, setting the stage for tense negotiations as the state wrestles with a huge budget hole that threatens to leave it unable to pay its bills next month. Senate President Pro Tem Darrell Steinberg hailed his party's budget plan as a compromise that would ease the fiscal emergency without devastating the safety net for vulnerable Californians. "I cannot say that we have a deal," Steinberg said....

Credit markets see a rising risk of default in the Golden State. What are the odds that California defaults on its debt payments? Using the market for credit insurance as a guide, one in four within five years. Those are amazing odds, signalling that those who buy insurance on debt think that the federal government will allow California to fail where it thought that AIG and Citigroup simply had to be rescued. In the past month, rating agencies have warned that California’s $24 billion budget shortfall for the fiscal year beginning in July threatens its credit ratings -- its mark...

SACRAMENTO — Senate Leader Darrell Steinberg wants to put Republicans on record today on two political questions: whether they can accept $11.4 billion in cuts that Democrats are proposing, and whether they will vote on $2 billion in new taxes. On taxes, Steinberg conceded he is unlikely to win a single Republican vote when the Senate takes up the Democrats' $23.3 billion deficit reduction plan. But that, he said, shouldn't stop them from supporting his package of cuts, which will be voted on separately. "If they're going to stand on the argument that cuts are not deep enough and thereby...

California parents beware: Those little tax deductions running around the house are now worth less (in a strictly financial sense, of course). To help balance its budget, California has reduced the state tax credit for dependents. The change will increase a family's California taxes for 2009 by about $210 per dependent compared with 2008. A family with one dependent that normally gets a state-tax refund will get back $210 less when they file their 2009 return next year. A family that normally owes money will have to pay $210 more. Multiply that by two or more dependents, and it really...

A milestone on California's meandering journey toward fiscal insolvency occurred exactly a decade ago when the Legislature enacted a massive increase in state employee pensions on the expedient assumption that it would cost taxpayers nothing. Although the new pensions would generate almost countless billions of dollars in extra income for retirees in the years ahead, the CalPERS board, dominated by union representatives, told legislators that taxpayers wouldn't have to bear the load because investment income, which was flowing into the pension trust fund from high-tech stocks, would continue indefinitely. "They (CalPERS) anticipate that the state's contribution to CalPERS will remain...

Two plans have emerged to close the budget deficit, one proposed by Gov. Arnold Schwarzenegger and another passed by the Democratic-controlled conference committee. Here's how some provisions in the two plans compare and contrast. EDUCATION GOVERNOR'S PLAN • Cuts $4.5 billion from K-12 schools from the budget approved in February, and about $700 million from community colleges. • Allows districts to shorten the school year by up to seven days. • Includes a $315 million diversion from school bus programs to the state's general fund. DEMOCRATS' PLAN • Cuts $3.8 billion from K-12 schools, and $700 million from community colleges....

Washington and Wall Street seem to be treating California as if it were a sideshow in the financial circus of these turbulent times. It’s not. California is home to the largest manufacturing belt in the United States and to Silicon Valley, the nation’s largest high-tech center. California is America’s most populous state with 38 million people. Its GDP of $1.8 trillion is the largest in the U.S. Its economy is bigger than those of Russia, Brazil, Canada, or India. And it’s collapsing. Major California counties are ground zero in the continuing mortgage meltdown: Los Angeles County with 5.32 percent of...

California voters said no, but Democratic lawmakers are pushing to do it anyhow. The issue involves billions of dollars and a ballot measure so important to schools that the California Teachers Association spent more than $7 million in a failed attempt to pass Proposition 1B. One month after the initiative died, Democrats are proposing to pay schools the same $7.9 billion that was the heart of the measure and to begin payments the same year, 2011-2012. snip- The dispute over $7.9 billion stems from complex provisions of Proposition 98, approved by voters more than two decades ago to ensure a...

With California slipping into a financial sinkhole, Gov. Arnold Schwarzenegger is proposing to save more than $180 million by cutting short the sentences of thousands of immigrants in the state's prisons and turning them over to federal authorities for deportation. The idea faces certain hurdles — for one thing, commuting some sentences will require court approval — and immigration authorities warn that a mass release of inmates from California and other states could swamp the federal system, which is already at capacity. But Schwarzenegger spokeswoman Lisa Page said: "Every dollar not spent to house an undocumented immigrant inmate is a...

The menu of options to close California's massive deficit is short and seemingly clear: Cut spending, raise taxes or borrow. But faced with a money crunch the likes of which the Golden State has never seen, Gov. Arnold Schwarzenegger and legislators have pulled a less obvious tool out of the box. Call it budget magic. Need an extra $2.3 billion? Easy — just make people pay more of next year's taxes this year, by increasing paycheck withholdings and estimated tax payments. How about selling a chunk of a state insurance fund? That's good for a cool $1 billion on paper,...

Do Californians suffer because they themselves have too much political power, and their representatives too little? Politicians tend to say “yes.” So do their hangers-on. George Mitrovich’s fiery indictment of California voters and policymakers for the San Diego Transcript, in a column entitled “The Failed State of California,” is an unsurprising example. According to Mitrovich, a self-avowed liberal Democrat, California’s humongous deficits and other troubles are the combined fault of Governor Schwarzenegger, voters, lawmakers, and special interests — an indictment so generalized that its sheer vacuity might pass for a selling point. But then you notice something. If voters, unions,...

Sure, California's economy has seen better days, our budget is a mess, and we've been wondering whether the federal government might help us out with our cash flow. But the barbs sent our way by politicians and commentators in Washington are getting to be a bit much. Democrats suggest that we're all selfish folks who refuse to tax ourselves enough to support our spending. (They should talk.) Republicans say the entire state is addicted to over-spending. (They should talk, too -- see the rising deficits of the Bush era.) Such commentary has been offered with heaping plates of schadenfreude, as...

With California slipping into a financial sinkhole, Gov. Arnold Schwarzenegger is proposing to save more than $180 million by cutting short the sentences of thousands of immigrants in the state's prisons and turning them over to federal authorities for deportation.

Lawmaker returns joke gift from Schwarzenegger Rich Pedroncelli / Associated Press A bull testicle sculpture for Sen. Darrell Steinberg was meant as a prod to help with tough budget choices. By Patrick McGreevy and Eric Bailey June 18, 2009 Reporting from Sacramento -- As lawmakers wrangled last week over how to plug California's giant deficit, the governor who once called them "girlie men" sent the state Senate leader a package that has some Capitol insiders tsk-tsking over what they see as an ill-timed display of machismo. The gag gift from Gov. Arnold Schwarzenegger, a metal sculpture of bull testicles, came...

Associated Press article. Go to link to read.

(AP) — SACRAMENTO, Calif. - It was a gift no girlie man would give. Gov. Arnold Schwarzenegger, who has warned lawmakers they need to act boldly and make some tough budget choices, sent Senate President Pro Tem Darrell Steinberg a metal sculpture of bull testicles. It was intended as a gag gift but Steinberg, a Sacramento Democrat, was not amused and returned the football-sized gift with a terse note about the seriousness of the ongoing negotiations.

SACRAMENTO – More budget gridlock appears on the way as legislative Democrats say they'll push for a tax increase and the governor says he'll veto it. For weeks, Democrats crafted a response to Gov. Arnold Schwarzenegger's proposal to balance a $24.3 billion budget deficit. Democrats don't like the governor's plan to close more than 200 state parks and eliminate core welfare programs such as CalWORKS and Healthy Families. Instead, the Democrats who control the State Legislature have proposed dialing back the governor's suggested cuts and replacing the lost savings with taxes on oil and tobacco as well as surcharges on...

Governor Arnold Schwarzenegger will be in Fresno on Thursday to address concerns over the state budget crisis. The governor is expected to answer local leaders, who worry the state could take local money slated for road maintenance,to help balance the state budget. Fresno just signed onto a lawsuit this week to block the raiding of local funds. Governor Schwarzenegger will be at the Tower Theatre at 10 a.m. for the meeting. His visit comes just one days after he fired a warning at Democratic lawmakers who are considering raising taxes to solve the budget crisis. He called the idea of...

Across state government, there is a migration going on. With the state’s general fund $24.3 billion in the hole —a number that seems to get revised upwards every few days — both state workers and agencies are trying to move away from depending on the general fund. The new goal is to tap so-called “special funds,” pots of money made up of various combinations of user fees, federal dollars and other sources.

Gov. Arnold Schwarzenegger has been taking a beating from the public for recent comments intended to force Californians to stop blaming illegal immigrants for the state's budget crisis. Schwarzenegger is not backing down. In fact, he's ratcheting up the rhetoric. In the process, he's comforting the afflicted and afflicting the comfortable. There's more of that on the way. During a recent meeting with the San Diego Union-Tribune editorial board, Schwarzenegger compared the tendency of Californians to treat Latino immigrants as scapegoats for the state's economic crisis to how Jews were blamed by the Nazis for Germany's economic difficulties following World...

Two of California's top pollsters said Tuesday that Gov. Arnold Schwarzenegger and some lawmakers are miscasting last month's special election as a clarion call against any new taxes to solve California's fiscal crisis. Instead, pollsters Mark DiCamillo and Mark Baldassare characterized the May 19 vote against five budget measures as an order to a dysfunctional state government to fix California's budget mess – and do so quickly. "We've heard a lot of people say the vote means 'no new taxes.' I would question that," said Baldassare, survey director for the Public Policy Institute of California, in the pollsters' joint appearance...

California’s leading public pollsters, Field Poll director Mark di Camillo and Public Policy Institute of California chief Mark Baldassare, did their usual post-election analysis at today’s monthly luncheon of the Sacramento Press Club. It was an indicative event with regard to the current state of state politics. A relative handful of those in attendance were practicing journalists, tracking the fast diminishing state of state political journalism, and most of the questions (or speeches) after the presentations were posed by non-journalists. After a lengthy awards ceremony of scholarships for the journalists of tomorrow (hmm …), the two Marks, as they are...

The Obama administration has turned back pleas for emergency aid from one of the biggest remaining threats to the economy -- the state of California.

Tuesday, June 16, 2009 Lawmakers Reject State Worker Pay Cut By Jim Sanders A new across-the-board pay cut for state workers was rejected Tuesday by the Legislature's joint budget conference committee. The 5 percent salary reduction had been proposed by Gov. Arnold Schwarzenegger to save $470 million and preserve cash in the coming fiscal year's general fund budget. The legislative committee rejected the pay cut by a party-line vote, 6-4, with no Republican support. The measure was one of dozens under consideration to bridge a projected $24 billion budget shortfall. Even with the committee's action, the pay cut and other...