The California legislature finally approved a state budget today after months of deadlock. Over the past few weeks, California was facing financial disaster as it had no approved budget, threatening thousands of jobs and potentially sending California into bankruptcy. Today, three Republicans voted “Yes” on the state budget, allowing it to pass.
California Budget Crisis
The California budget plan finally came together after President Pro Tem Darrell Steinberg locked down the State Legislature on Tuesday, barring senators from leaving. The plan will now go before Governor Arnold Schwarzenegger, who must sign the budget into law before it goes into effect.
Here’s what the budget compromise will mean to average Californians:
- Sales taxes raised by one percentage point
- Additional 5% surcharge on state income taxes.
- Increase in the vehicle-license fee from 0.65% to 1.15%.
- $15 billion reduction in government spending, including $8.6 billion from education.
- Elimination of two state holidays
- Furlough of most state workers for one day a month. Governor Arnold Schwarzenegger previously had ordered state workers to be furloughed at least two days a month until the budget passed, which we reported here.
OUCH! All of this will hurt a state that is also experiencing one of the highest unemployment rates in the country. However, without a budget, the state was facing a potential catastrophe. As we reported here, California was not paying out tax refunds because it did not have an approved budget. Governor Schwarzenegger also threatened to lay off 20,000 state workers unless a budget compromise could be reached.
As bad as the tax raises are, they could have been worse. Republican State Senator Abel Maldonaldo refused to vote for the plan until a 12-cent gas tax was eliminated.
California will also receive billions from the federal stimulus package, helping the state to make up some of its budget shortfall.
Here is Abel Maldonado talking about raising taxes yesterday. He was one of the three Republican senators who voted for the plan today: