Budget Stalemate Continues, Governor Now Wants Pension and Retiree Health Benefits Reform

Hours away from being forced to issue IOU’s to pay it’s bills, California’s budget problems evolved into a game of political chicken Thursday, as Gov. Arnold Schwarzenegger and GOP state senators took an all-or-nothing stance on the budget.

On highly unusual bipartisan votes, the Assembly overwhelmingly passed three bills that would free up cash for the fiscal year that starts Wednesday, by cutting school spending and delaying some payments to schools, colleges and local governments.

But the bills sank in the Senate in the face of united opposition by Republican senators and the governor.  Gov.  Schwarzenegger has vowed to veto the democratic majority vote only plan, which Republicans say they will fight on the grounds that it unconstitutionally raises taxes without the required two-thirds vote.

The result was another wasted day in the quest to erase a $24 billion budget deficit before next Wednesday.

State Controller John Chiang has warned that without a balanced budget in place by then, he will begin using IOUs to pay most of the state’s bills.  That would mean approximately $3 billion in IOUs would be sent out in July to everyone from state contractors to college students, welfare recipients and low-income seniors.

Now as the state faces a deadline literally hours away, the governor has announced at the 11th hour that he wants to reform the state’s pension system first.  Call it a ‘revised vision’ for the budget if you will.

“Gov. Arnold Schwarzenegger, calling current benefits “unsustainable,” proposed a sweeping reduction in pension and retiree health benefits for new state workers.

“His plan would give new employees the same pensions received by state workers before a major benefit increase a decade ago, saving the state an estimated $74 billion over the next three decades.

“The new state workers would have to work 25 years, instead of 20, before receiving maximum retiree health coverage that would pay 85 percent of the average HMO premium, instead of the current 100 percent, saving the state $19 billion.

The recent proposal by the Republican governor is one of a series of “structural reforms” he is seeking as he negotiates with the Democratic-controlled Legislature to close a $24 billion state budget gap.

With President Pro-Tem Steinberg (D-Sacrament0) promising a Session that goes until mindight, Tuesday is looking to be a long day for state lawmakers.  Despite the entrenched sides, California’s political leaders realize that solving California’s budget crisis gets $3 Billion harder at midnight.  That’s because the plans by both Democratic leaders and Gov. Arnold Schwarzenegger include about $3 billion in spending cuts in the 2008-09 fiscal year that ends tonight.

As the San Jose Business Journal reports, if those cuts are rolled over into the new fiscal year’s budget, the state’s constitutional funding requirements would have to be suspended and $10 billion expected from the federal stimulus package would be lost.



One thought on “Budget Stalemate Continues, Governor Now Wants Pension and Retiree Health Benefits Reform

  1. Pingback: Governor Declares State of Fiscal Emergency « The Sacramento Citizen Blog

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