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The California Legislature on Wednesday voted down $11 billion in cuts to state services, sending members back to the drawing board as they grapple with a $24 billion budget gap.

To hear Gov. Arnold Schwarzenegger and state finance officials tell it, July 28 is California's last stand before fiscal Armageddon. Top financial officers say that's when the state will run out of cash to pay its daily expenses unless lawmakers pass a balanced budget. Schwarzenegger has warned that government will come to a "grinding halt." The state controller describes "a meltdown."

SACRAMENTO, Calif. -- Californians seem to want it all, says first lady Maria Shriver. They oppose billions of dollars in cuts to address the state's massive budget deficit but are not willing to pay more for the services they enjoy. The first lady, visiting Sacramento on Tuesday for the opening of an Abraham Lincoln exhibit at the California Museum, said people talk to her all the time about California's $24.3 billion budget shortfall and Gov. Arnold Schwarzenegger's proposed solutions. Schwarzenegger's proposed cuts include eliminating health care for nearly 1 million poor children, increasing class sizes in public schools, slashing in-home...

The Legislature is poised to vote today on a nearly $24 billion budget-balancing plan that Republicans vow not to support and Gov. Arnold Schwarzenegger pledges not to sign. The Democratic proposal appears dead on arrival, setting the stage for tense negotiations as the state wrestles with a huge budget hole that threatens to leave it unable to pay its bills next month. Senate President Pro Tem Darrell Steinberg hailed his party's budget plan as a compromise that would ease the fiscal emergency without devastating the safety net for vulnerable Californians. "I cannot say that we have a deal," Steinberg said....

Credit markets see a rising risk of default in the Golden State. What are the odds that California defaults on its debt payments? Using the market for credit insurance as a guide, one in four within five years. Those are amazing odds, signalling that those who buy insurance on debt think that the federal government will allow California to fail where it thought that AIG and Citigroup simply had to be rescued. In the past month, rating agencies have warned that California’s $24 billion budget shortfall for the fiscal year beginning in July threatens its credit ratings -- its mark...

SACRAMENTO — Senate Leader Darrell Steinberg wants to put Republicans on record today on two political questions: whether they can accept $11.4 billion in cuts that Democrats are proposing, and whether they will vote on $2 billion in new taxes. On taxes, Steinberg conceded he is unlikely to win a single Republican vote when the Senate takes up the Democrats' $23.3 billion deficit reduction plan. But that, he said, shouldn't stop them from supporting his package of cuts, which will be voted on separately. "If they're going to stand on the argument that cuts are not deep enough and thereby...

California parents beware: Those little tax deductions running around the house are now worth less (in a strictly financial sense, of course). To help balance its budget, California has reduced the state tax credit for dependents. The change will increase a family's California taxes for 2009 by about $210 per dependent compared with 2008. A family with one dependent that normally gets a state-tax refund will get back $210 less when they file their 2009 return next year. A family that normally owes money will have to pay $210 more. Multiply that by two or more dependents, and it really...

A milestone on California's meandering journey toward fiscal insolvency occurred exactly a decade ago when the Legislature enacted a massive increase in state employee pensions on the expedient assumption that it would cost taxpayers nothing. Although the new pensions would generate almost countless billions of dollars in extra income for retirees in the years ahead, the CalPERS board, dominated by union representatives, told legislators that taxpayers wouldn't have to bear the load because investment income, which was flowing into the pension trust fund from high-tech stocks, would continue indefinitely. "They (CalPERS) anticipate that the state's contribution to CalPERS will remain...

Two plans have emerged to close the budget deficit, one proposed by Gov. Arnold Schwarzenegger and another passed by the Democratic-controlled conference committee. Here's how some provisions in the two plans compare and contrast. EDUCATION GOVERNOR'S PLAN • Cuts $4.5 billion from K-12 schools from the budget approved in February, and about $700 million from community colleges. • Allows districts to shorten the school year by up to seven days. • Includes a $315 million diversion from school bus programs to the state's general fund. DEMOCRATS' PLAN • Cuts $3.8 billion from K-12 schools, and $700 million from community colleges....

Washington and Wall Street seem to be treating California as if it were a sideshow in the financial circus of these turbulent times. It’s not. California is home to the largest manufacturing belt in the United States and to Silicon Valley, the nation’s largest high-tech center. California is America’s most populous state with 38 million people. Its GDP of $1.8 trillion is the largest in the U.S. Its economy is bigger than those of Russia, Brazil, Canada, or India. And it’s collapsing. Major California counties are ground zero in the continuing mortgage meltdown: Los Angeles County with 5.32 percent of...

California voters said no, but Democratic lawmakers are pushing to do it anyhow. The issue involves billions of dollars and a ballot measure so important to schools that the California Teachers Association spent more than $7 million in a failed attempt to pass Proposition 1B. One month after the initiative died, Democrats are proposing to pay schools the same $7.9 billion that was the heart of the measure and to begin payments the same year, 2011-2012. snip- The dispute over $7.9 billion stems from complex provisions of Proposition 98, approved by voters more than two decades ago to ensure a...

With California slipping into a financial sinkhole, Gov. Arnold Schwarzenegger is proposing to save more than $180 million by cutting short the sentences of thousands of immigrants in the state's prisons and turning them over to federal authorities for deportation. The idea faces certain hurdles — for one thing, commuting some sentences will require court approval — and immigration authorities warn that a mass release of inmates from California and other states could swamp the federal system, which is already at capacity. But Schwarzenegger spokeswoman Lisa Page said: "Every dollar not spent to house an undocumented immigrant inmate is a...

The menu of options to close California's massive deficit is short and seemingly clear: Cut spending, raise taxes or borrow. But faced with a money crunch the likes of which the Golden State has never seen, Gov. Arnold Schwarzenegger and legislators have pulled a less obvious tool out of the box. Call it budget magic. Need an extra $2.3 billion? Easy — just make people pay more of next year's taxes this year, by increasing paycheck withholdings and estimated tax payments. How about selling a chunk of a state insurance fund? That's good for a cool $1 billion on paper,...

Do Californians suffer because they themselves have too much political power, and their representatives too little? Politicians tend to say “yes.” So do their hangers-on. George Mitrovich’s fiery indictment of California voters and policymakers for the San Diego Transcript, in a column entitled “The Failed State of California,” is an unsurprising example. According to Mitrovich, a self-avowed liberal Democrat, California’s humongous deficits and other troubles are the combined fault of Governor Schwarzenegger, voters, lawmakers, and special interests — an indictment so generalized that its sheer vacuity might pass for a selling point. But then you notice something. If voters, unions,...

Sure, California's economy has seen better days, our budget is a mess, and we've been wondering whether the federal government might help us out with our cash flow. But the barbs sent our way by politicians and commentators in Washington are getting to be a bit much. Democrats suggest that we're all selfish folks who refuse to tax ourselves enough to support our spending. (They should talk.) Republicans say the entire state is addicted to over-spending. (They should talk, too -- see the rising deficits of the Bush era.) Such commentary has been offered with heaping plates of schadenfreude, as...

With California slipping into a financial sinkhole, Gov. Arnold Schwarzenegger is proposing to save more than $180 million by cutting short the sentences of thousands of immigrants in the state's prisons and turning them over to federal authorities for deportation.

Lawmaker returns joke gift from Schwarzenegger Rich Pedroncelli / Associated Press A bull testicle sculpture for Sen. Darrell Steinberg was meant as a prod to help with tough budget choices. By Patrick McGreevy and Eric Bailey June 18, 2009 Reporting from Sacramento -- As lawmakers wrangled last week over how to plug California's giant deficit, the governor who once called them "girlie men" sent the state Senate leader a package that has some Capitol insiders tsk-tsking over what they see as an ill-timed display of machismo. The gag gift from Gov. Arnold Schwarzenegger, a metal sculpture of bull testicles, came...

Associated Press article. Go to link to read.

(AP) — SACRAMENTO, Calif. - It was a gift no girlie man would give. Gov. Arnold Schwarzenegger, who has warned lawmakers they need to act boldly and make some tough budget choices, sent Senate President Pro Tem Darrell Steinberg a metal sculpture of bull testicles. It was intended as a gag gift but Steinberg, a Sacramento Democrat, was not amused and returned the football-sized gift with a terse note about the seriousness of the ongoing negotiations.

SACRAMENTO – More budget gridlock appears on the way as legislative Democrats say they'll push for a tax increase and the governor says he'll veto it. For weeks, Democrats crafted a response to Gov. Arnold Schwarzenegger's proposal to balance a $24.3 billion budget deficit. Democrats don't like the governor's plan to close more than 200 state parks and eliminate core welfare programs such as CalWORKS and Healthy Families. Instead, the Democrats who control the State Legislature have proposed dialing back the governor's suggested cuts and replacing the lost savings with taxes on oil and tobacco as well as surcharges on...