California fiscal deadlock over as Schwarzenegger signs budget

Sunday, August 1, 2004

SACRAMENTO -- Gov. Arnold Schwarzenegger signed a $105 billion state budget into law Saturday, noting that no new taxes were imposed while balancing spending with income.

The Republican governor failed to mention that $7 billion in loans and one-time savings are embedded in the spending plan.

After a nearly one-month deadlock, the California Legislature gave final approval on the budget this week. Although Democrats and Republicans found much to complain about in the spending plan, they largely agreed in the end that it represented a good compromise.

Some critics, however, say the plan may lead to more problems because of funding agreements the governor and the legislature have made with groups including schools and local governments.

Still, an upbeat Schwarzenegger told a crowd of tourists and supporters Saturday that he was proud of the compromise.

However, early indications are that workers' compensation insurance rates have not dropped as he had predicted.

The budget closes a deficit estimated in January at $17 billion without raising taxes.

Critics said the loans will only prolong the fiscal pain.

"The governor has really boxed us in," said state Treasurer Phil Angelides, a Democrat and potential rival of Schwarzenegger in 2006. "We will come out of this budget with $7 billion in new debt but in two years the bill really becomes due."

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