California lawmakers pass budget with deep cuts

June 29, 2011

By Tami Luhby @CNNMoney

NEW YORK (CNNMoney) — California lawmakers approved a $86 billion budget late Tuesday that imposes deep spending cuts but does not extend tax hikes.

The budget is a disappointment for Governor Jerry Brown, a Democrat who spent months trying to convince Republican legislators to put an extension of personal income and sales tax increases before the voters.

Unable to do so, Brown and Democratic legislative leaders cobbled together a plan that calls for a total of $14.6 billion in cuts.

“Putting our state on a sound and sustainable fiscal footing still requires much work, but we have now taken a huge step forward,” Brown said in a statement.

Much of the bloodletting was agreed to in March, but this week’s deal would add at least $2.5 billion in additional reductions.

Overall the Department of Health and Human Services would be slashed by $5 billion, while the Department of Corrections and Rehabilitation would see a cut of $1 billion. The state’s two university systems would each lose $650 million in funding.

The budget hinges on the state bringing in $4 billion in more in tax revenues in the coming year than was initially expected. The improving economy has pushed the state’s tax collections billions of dollarsabove estimates in recent months. Brown expects the windfall to continue into fiscal 2012, which starts Friday.

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If tax revenue comes in lower than expected, the budget also would impose an additional $2.6 billion in cuts to higher education, corrections and in-home support services for the elderly and disabled.

The proposal would slash billions in spending for children, the sick, and the elderly, said Senate President pro Tem Darrell Steinberg. And it would hurt the state’s economy, he said.

“This budget is the most austere fiscal blueprint California has seen in a generation,” Steinberg said.

Since the budget does not call for tax increases, it requires only a majority of the Democratic-led legislature to approve it. However, Governor Brown and his fellow Democrats said they plan to put a tax measure on the ballot in November 2012 through a voter initiative — bypassing the requirement for Republican consent.

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