Calif. Declares Emergency as Budget Bill Fails to Pass

California yesterday declared a state of emergency as the state government failed to pass a budget bill amid a fiscal crisis.

The new fiscal year (July 2009 to June 2010) started Wednesday but six states, including California, failed to resolve their fiscal deficits and approve budget plans. State coffers are running empty, as home prices and tax revenue have fallen in the worst recession since the Great Depression.

California Gov. Arnold Schwarzenegger declared a fiscal state of emergency Wednesday, saying the state legislature has failed to resolve the fiscal deficit. California is expected to suffer a budget deficit of 26.3 billion U.S. dollars in the new fiscal year.

As part of efforts to reduce fiscal expenditures, branches of public organizations that are relatively underused will be closed three times a month, and 235,000 civil servants must take mandatory unpaid leave from this month and take a pay cut of 14 percent.

Running out of cash, the California government has issued short-term IOUs until the new budget is passed.

Schwarzenegger also convened a special session of his legislature. Accordingly, the legislature must find ways to resolve its budgetary deficit in 45 days, but the outlook is uncertain.

The California senate submitted three bills to overcome the budgetary crisis that includes educational budget cuts, but the bills failed to win the necessary votes.

The biggest reason is the confrontation between Democrats and Republicans over resolving the deficit. With a majority in the legislature, Democrats want to raise taxes but Republicans are demanding a cut in spending.

The governor, a Republican, has said he will veto a bill on a tax hike.

Most other states are also in a similar situation. According to a council of state legislatures, they are projected to run a combined budgetary deficit of a whopping 121 billion dollars in the new fiscal year, up 18 percent from the last fiscal year’s 102.4 billion dollars.

Nevertheless, U.S. media said that of the 46 states that entered the new fiscal year Wednesday, Arizona, California, Illinois, Ohio, North Carolina and Pennsylvania have failed to pass budget bills.

Most states approved budget bills after undergoing intense debates over tax hikes or reducing spending, but the six states have yet to reach a consensus.

In Arizona, Republican Jan Brewer, the leader of his party in the state legislature, opposed a tax hike pushed by Democrats and delayed the approval of their budget bill.

In Ohio, supporters and opponents fought over Gov. Ted Strickland`s proposal to raise extra tax revenue of 933 million dollars by installing slot machines at a horserace course. They also failed to pass their budget bill.

In Connecticut, Republican Gov. Jodi Rell is set to veto a budget bill that includes a tax hike of 2.5 billion dollars over the next two years approved by her state’s Democrat-controlled legislature.

higgledy@donga.com