Gov. Arnold Schwarzenegger talks with reporters after meeting with members of the Senate Democratic caucus at the Capitol in Sacramento on Sunday. (AP Photo/Steve Yeater)
The California Legislature passed a budget early Thursday to help close a $42 billion deficit, ending an epic impasse that involved several all-night sessions and threatened to throw thousands of state employees out of work.
Republican Gov. Arnold Schwarzenegger praised the bill, passed by the Democratic-controlled Senate and Assembly. He came out of his office after the budget vote and disconnected a large deficit clock counting the number of days - 106 as of Thursday - that the Legislature had failed to act since he declared a special session to deal with the state's fiscal problems.
"I'm absolutely delighted about the budget passing," Schwarzenegger said outside his office.
The budget deal flew through the Assembly less than an hour after it won approval by a single vote in the Senate after late-night horse trading to win over a final Republican vote. The vote marked the end of the Senate's longest session at 45.5 hours.
The package included a combination of spending cuts, tax increases and borrowing, intended to close a projected multibillion dollar deficit and avert fiscal disaster for the state. Some 10,000 state workers could have lost their jobs without the budget package.
It plan California's current fiscal year spending by nearly $13 billion from $103 billion to $90.7 billion. For the 2009-2010 bookkeeping year, which begins July 1, it sets a spending plan of $96.3 billion.
The plan would raise the state sales tax by 1 cent on the dollar and increase the fee for licensing vehicles. The state personal income tax rate would go up by 0.25 percent.
On the spending side, education funding would be cut $8.6 billion over two years, likely forcing schools to lay off teachers, slash salaries and postpone spending on construction and textbook purchases.
Senate leaders secured the final vote needed from moderate Republican Abel Maldonado in late-night negotiations by agreeing to his demands for election changes, government reform and removal of a gas tax increase, giving them the two-thirds vote needed to pass the package.
To win Maldonado's support, legislators also agreed to ask voters to revise the state's constitution to allow open primaries for legislative, congressional and gubernatorial elections.
Leaders also met Maldonado's demands to freeze legislators' salaries in deficit budget years and to eliminate new office furniture budgeted for the state controller.
Republicans who broke from their party in passing the tax portion of the package harkened back to former Gov. Ronald Reagan's decision to pass tax increases during hard economic times.
"What would Ronald Reagan do? Ronald Reagan would vote yes," said Sen. Roy Ashburn of Bakersfield.
Maldonado brought out a photograph of Reagan at a tax bill signing in 1972. He said he never thought he would have to defend California against members of his own party.
"This is not about my political career. This is about the health and safety for the people of California," Maldonado said. "My friends, this might be the end for me. This ensures it's not the end for California."
For Ashburn's support, legislative leaders included an amendment he backs that provides a $10,000 tax credit for those who buy new homes. The credit, supported by home builders, would be available starting in March and run through 2010. It would be capped at $100 million.
Californians would be able to use the credit to offset their state income taxes over three years.
Lawmakers also agreed to help the horse racing industry in his district - and throughout the state - by using $32 million in state funding each year to offset maintenance fees at fairgrounds.
During the middle of the marathon budget battle, Republicans in the Senate ousted their leader over opposition to tax increases. Senate minority leader Dave Cogdill ultimately provided Democrats the first of the three necessary GOP votes.
Assemblyman Chuck DeVore of Irvine said the tax increase will further harm the depressed economy.
"We will be right back here in one year with the same problem," he said during the floor debate. "No economist argues increasing taxes especially during weak economic times is going to result in people adding payroll, in people getting back to work ... The opposite will happen."
Newly installed Senate Minority Leader Dennis Hollingsworth warned about the crippling effects of passing the state's largest tax increase in California history.
"You may count this as a win because you got a few Republicans to vote for it," he said. "The taxpayers of California are going to view this as a loss."
Associated Press writer Samantha Young contributed to this report.
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