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Governor Signs Bills Aimed at Fiscal Crisis:

The Legislature passed, and Governor Arnold Schwarzenegger signed, a $1 billion package of bills intended to address California’s $14.5 billion fiscal crisis.

On Saturday, February 16, Governor Schwarzenegger signed the following six bills, ABX3 3, ABX3 4, ABX3 5, ABX3 6, ABX3 7, and ABX3 8.

On January 10, Governor Schwarzenegger declared a fiscal emergency and called the Legislature into a special session in accordance with the terms of Proposition 58.

As required by Proposition 58, Governor Schwarzenegger proposed his plan for addressing the fiscal emergency. The Governor’s proposal filled more than 900 pages of solutions that turned the projected current year deficit into a $864 million reserve and provided more than $8.7 billion in cash solutions to ensure the state can pay its bills throughout the rest for the current year and the budget year.

In total, the current-year plan turns the current year shortfall of $3.3 billion into a reserve of more than $1 billion, about $178 million higher than what the Governor projected in his proposal. In addition, the plan takes the budget year problem of $14.5 billion down to about $7.4 billion. The plan also provides more than $8.6 billion in cash solutions to ensure the state continues to pay its bills.

The plan targets every area of the budget. Some key elements of the proposal are as follows:

1. In health, the plan reduces Medi-Cal rates by 10 percent, but puts off the cut until July 1 to enable this cut to be further evaluated, and perhaps restored in the regular budget process.

2. In social services, the plan delays the Supplemental Security Income (SSI) Cost of Living Allowance (COLA) by four months, but does not take it away for the year.

3. In education, the plan saves more than $500 million in the current year by reverting and capturing unspent prior-and current-year-funds.

4. In resources, the plan does not approve any cuts that would lead to the closure of state parks.

5. For the cash crisis, the plan provides more than $8.6 billion in cash solutions, but makes changes to the Governors’ proposals that minimize the negative impacts of the solutions on local governments and school districts.

In a statement, Governor Schwarzenegger said, “The Legislature should be commended for working together – both Republicans and Democrats – to make difficult decisions and take this first step toward fixing our state budget. Now that we have proven we are capable of working together to make these difficult but necessary cuts, we must keep going and immediately tackle the next step in solving our fiscal issues: the necessary cuts to our 2008-09 budget.”

Achieving bipartisan support for the spending cuts allows the Legislature to in effect leave the Governor’s fiscal emergency declaration active. This action will allow the Legislature to revisit the budget and make additional cuts at any time if the state’s fiscal picture deteriorates.

courtesy California Chamber of Commerce

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