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Assembly approves emergency state budget cuts

SACRAMENTO — Assembly lawmakers Friday approved a $1 billion package of emergency spending cuts that freeze funding for schools, cut payments to doctors caring for the poor and vacuum up hundreds of millions in unspent funds for projects for the rest of the year.

The package comes under the state's first fiscal emergency declaration, which Gov. Arnold Schwarzenegger issued last month when he announced falling state tax revenue left California facing an estimated $14.5 billion shortfall.

The fiscal emergency declaration required the Legislature to begin addressing the budget problem within 45 days, rather than waiting until the new budget year that begins in July.

Lawmakers approved the spending cuts with overwhelming bipartisan support. The Senate also was considering the package Friday and was expected to approve it.

"Given the depth of the problem and the breadth of the challenge, this is a good step," said Assemblyman Roger Niello, R-Fair Oaks, the ranking Republican on the Assembly budget committee.

In a vote split along party lines, the Assembly rejected a tax on yachts, motorhomes and private planes.

If the overall package sustains bipartisan support, it will have the two-thirds majority needed to take effect immediately. It also gives Schwarzenegger the power he's sought to freeze thousands of payments to schools and local governments over the summer. If the state doesn't delay those payments until September, Schwarzenegger's budget director has said the state could face a cash shortage.

To close an estimated $14.5 billion budget gap through June 2009, Schwarzenegger has proposed 10 percent, across-the-board cuts to most state programs.

The package lawmakers approved Friday does not address those proposals, but starts to tackle the deficit by endorsing billions in borrowing to cover the shortfall and making about $1 billion in other reductions.

The largest freezes more than $500 million in payments intended for schools that the state has not yet made. Democrats who crafted the plan said it would not hurt districts because they wouldn't have to return money they'd already received and doesn't cut classroom dollars.

The Association of California School Administrators and other education groups disputed that, saying districts had already budgeted the funds and would have to make cuts to compensate.

The package also reduces payments to Medi-Cal providers by 10 percent, for a savings of $544 million, and gives Schwarzenegger largely symbolic support to borrow the remaining $3.3 billion in bond money that voters approved to cover shortfalls in 2004, and to reduce payments to cover other past debts.

In all, Democrats estimated, the package would leave the state with a remaining budget gap of between $7 to $8 billion to solve before July.

Bipartisan support for the spending cuts also allows the Legislature to effectively leave Schwarzenegger's fiscal emergency declaration active, allowing lawmakers to revisit the budget and make additional cuts at any time if the state's fiscal picture deteriorates.

That may be necessary as soon as next week, when the state's nonpartisan fiscal watchdog will issue a report that is expected to show California's economy has worsened since the governor issued his deficit projection.

Schwarzenegger said last month that California faces a $3.3 billion deficit for the remainder of the current fiscal year, which ends in June, and an $11.2 billion shortfall for the budget year that begins in July - a combined gap of $14.5 billion.

Schwarzenegger's proposed across-the-board cuts include slashing over $4 billion for education, or hundreds of dollars in classroom spending for every California student. The cuts also would require releasing 22,000 state prison inmates before the end of their sentences, and closing nearly one in five state parks.

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