Legislature Approves Budget

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California’s State Assembly on Friday passed a plan to erase a $26 billion deficit that pushed the nation’s most-populous state to the brink of insolvency.

The package of more than two-dozen bills now goes to Governor Arnold Schwarzenegger for his signature. The measures, based on a compromise reached by the governor and legislative leaders July 20, divert tax money from municipalities, force companies and individuals to pay income taxes sooner and cut spending on schools, welfare and public health programs. It will also expand oil drilling off the coast.

Assembly passage promises to end a two-month partisan battle over how to eliminate holes that emerged in the $100 billion budget just months after spending cuts and tax increases were enacted in February to bolster the state’s finances. Without a balanced budget, California has been forced to pay bills with IOUs to avoid running out of cash and the ratings on $72 billion of bonds were cut close to high-yield, high-risk junk status.

The package cuts spending by $15 billion, including $6 billion from schools and community colleges, $3 billion from universities and $1.2 billion from prisons. It also raises $4 billion, in part by accelerating personal and corporate income- tax withholding and increasing the amount withheld by 10 percent.



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