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California's fiscal pickle – state and local budgets that are many billions of dollars out of balance – may have just gotten worse by hundreds of billions of dollars. The Governmental Accounting Standards Board has dropped a bombshell with preliminary new rules that, if adopted, would force governments to increase projections of pension liabilities by using tighter "discount rates" – effectively, lower assumptions of pension fund earnings. The huge California Public Employees' Retirement System, the California State Teachers' Retirement System, the University of California Retirement System and dozens of locally managed pension funds would no longer be able to minimize...

In 2004, Gov. Arnold Schwarzenegger barnstormed around the state for Proposition 58, using an oversized credit card as a prop and vowing that it was time for the state to "tear up its credit card." Now Attorney General Jerry Brown has concluded that Assembly Democrats' plan to borrow billions to help ease the state's $19.1 billion deficit could be deemed illegal under that ballot measure if challenged in court. "We conclude that a court could reasonably determine that the proposed transaction violates Proposition 58," the attorney general's office said in a letter to Schwarzenegger's legal affairs secretary. Assembly Speaker John...

California lawmakers' constitutional deadline to pass a state budget by June 15 will be ignored today – again. Only once in the past two decades has the deadline been met, last year, but that spending plan was quickly unraveled by the economy and needed more than $20 billion in fixes. California finds itself sinking again in red ink, a projected $19.1 billion, and no compromise is in sight between Democrats intent on raising billions in revenue and Republicans adamantly opposed. Gov. Arnold Schwarzenegger, through a spokesman, expressed a sense of urgency about today's missed deadline. "Our deficit grows every day...

Taxpayers would be on the hook for increasing their contribution to the state employees' pension fund by $600 million a year — at a time when the state budget is $19 billion in the red — under a recommendation approved Tuesday by a committee of the California Public Employees' Retirement System. The increase, which is expected to be endorsed by the 13-member board at a meeting Wednesday, is $400 million more than fund executives had expected to seek from the state. The state currently contributes $3.3 billion a year to employees' pensions. The jump in the state's annual contractual payment...

Want to know what lawmakers and interest groups are saying about Gov. Arnold Schwarzenegger's revised spending proposal for the next fiscal year? Find a collection of responses after the jump. We will update the list as more responses roll in, so be sure to check back. Click here to read our full story on the budget proposal. The full text of the plan can be found here. Democratic lawmakers and officials: Senate President Pro Tem Darrell Steinberg: We will not pass a budget that eliminates Cal-WORKS. Outright. We will not be party to devastating children and families. Period. It's not...

The Golden State is not so golden anymore. California is broke. With a $20 billion dollar deficit and tax revenues down 27% from last year, Governor Schwarzenegger looks to Washington D.C. for a bail-out ... Unemployment is statistically 12.3%, but functionally, it runs closer to 20% of the work force. Nowhere is unemployment more tragic than in the Central Valley, the fruit and vegetable producer of the world. The unemployment rate in arguably the most fertile land on the planet is near 30% as residents line up in bread lines to feed their families. How did this happen? What happened...

With even well-managed counties, cities and schools finding themselves in the same budget hole that has swallowed state government, California now confronts a financial crisis that may be unrivaled — though it is also maddeningly difficult to quantify. So just how broke is California? California's collective deficit may be double the state government's $20 billion budget gap. Now consider that California has 58 counties, 480 or so cities and nearly 1,000 school districts — plus dozens more special districts, like transit agencies and water boards. Amid California's harshest slump since the Great Depression, officials from one end of the state...

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...