JUNE 25, 2009

California Republicans Reject Democrats' Budget Plan

By STU WOO

Republican legislators rejected a Democratic plan to cut $11 billion in state spending, saying it didn't go far enough. California faces a $24 billion shortfall in a $92 billion general-fund budget through June 2010.

The setback for Democrats came the same day state Controller John Chiang warned that he will begin issuing IOUs on July 2 to local governments, private contractors and state vendors if lawmakers don't come up with a solution. Such a move would likely further damage California's credit rating, already the lowest among the 50 states.

Majority Democratic legislators have largely accepted Republican Gov. Arnold Schwarzenegger's proposals, putting forth a plan that cuts $5.5 billion from education and $2 billion from higher education. But they proposed adding tobacco and oil-extraction taxes, which Mr. Schwarzenegger and GOP lawmakers decried.

The Democrats mustered a simple majority for their plan but fell short of the two-thirds majority needed to enact the cuts immediately.

The Senate's leader, Darrell Steinberg, said he was committed to passing a plan by July 1, and would force lawmakers to work over the weekend if necessary.

Click here to view the original article in the Wall Street Journal Online website.