California Governor Arnold Schwarzenegger said he supports the plan the Legislature approved today to erase a $26 billion deficit that pushed the most-populous U.S. state to the brink of insolvency.
The Senate and Assembly passed the package of more than two-dozen bills though a marathon 18-hour session. Schwarzenegger told reporters afterwards that he will sign the budget reduction plan within days after using his line-item veto authority to trim spending and bolster state reserves.
Passage of the plan promised to end a two-month partisan battle over how to eliminate holes that emerged in the $100 billion budget just months after spending cuts and tax increases were enacted in February. Voter refusal in May to authorize borrowing against the state lottery added $5 billion to the gap. Without a balanced budget, California paid bills with IOUs to avoid running out of cash, and the ratings on $72 billion of bonds were cut close to high-yield, high-risk junk status.
“This is not an easy budget but it’s a necessary budget,” Schwarzenegger, a Republican, said. “California has experienced an unprecedented drop in revenue, and we must learn to live within our means.”
The package cuts spending by $15 billion, including $6 billion from schools and community colleges, $3 billion from universities and $1.2 billion from prisons. It also raises $4 billion, in part by accelerating personal and corporate income- tax withholding and increasing the amount withheld by 10 percent.
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