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American states face tough budget choices
Governor Arnold Schwarzenegger declared a fiscal emergency last Wednesday to address California's deficit and ordered state offices closed three days a month to save cash.
- AP
- Published: 22:53 July 5, 2009
Sacramento: Governor Arnold Schwarzenegger declared a fiscal emergency last Wednesday to address California's deficit and ordered state offices closed three days a month to save cash.
The Legislature will have 45 days to send him a plan to balance the state's budget, which ended the fiscal year with a $24.3 billion (Dh89.18 billion) deficit. The shortfall is expected to grow by as much as $7 billion because the Legislature did not enact several stopgap measures on Tuesday.
In Pennsylvania, Governor Ed Rendell said on Tuesday night he didn't think an agreement with lawmakers would come soon. State workers are to receive only partial pay on July 17 and July 24, after which paycheques will be withheld entirely until the impasse is solved. They will then be paid retroactively.
The end of June marked the end of the fiscal year in many US states, meaning lawmakers worked late on Tuesday to pass budgets in a year that has seen the recession take a devastating toll on government finances.
Arizona, Indiana, Ohio, Connecticut and Mississippi also were among the other states that raced against the clock to pass budgets - and avoid crippling consequences.
Fallout from California's budget mess threatened to spread nationwide because of the sheer size of the state's economy, is eighth-largest in the world. Though California is just one of 50 US states, it is home to one in eight Americans.
California's government shutdown will lead to a third furlough day for 235,000 state employees, bringing their total pay cut to about 14 per cent.
"California needed the Legislature to act boldly and with conviction. Their response was not a solution to California's budget problem but an invitation to actually a bigger financial crisis," Schwarzenegger said.
A state employee union that represents engineers immediately said it would sue to stop Schwarzenegger's latest furlough order. The Professional Engineers in California Government already sued over Schwarzenegger's previous furlough orders.
A state appeals court ruling on Tuesday created more difficulties for lawmakers trying to reach a budget agreement by barring the state from raiding local transportation funds to pay for other programmes. In his budget proposal, Schwarzenegger had counted on shifting nearly $1 billion in transit money from local governments to the state.
The administration said it will appeal the ruling.
Schwarzenegger's office said the governor did not want a partial fix. Aides said he believes it would let lawmakers off the hook and make it more difficult to close the entire deficit in the weeks ahead.
One challenge in reaching a compromise has been Democrats' refusal to accept the deep cuts to college aid, children's healthcare and welfare programmes.
California's deficit has been widening this year as tax revenue dipped, leaving the state with too little money to pay all its bills.
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