Budget talks stall over education funding

July 16, 2009 7:57:18 PM PDT
California treasurer Bill Lockyer warned the budget stalemate in Sacramento is threatening the state's ability to build schools and highways.

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Although Governor Arnold Schwarzenegger, R-Calif., said on Wednesday that a deal was close, no budget talks were even scheduled for Thursday.

The stalled budget talks center largely around education. Just when leaders were about to close in on a compromise, Democrats demanded changes to a voter-approved law so that public schools could get back roughly $11 billion in cuts when the economy rebounds.

"It's a Constitutional change, and it can only be changed by the people. They are more than welcome to make that change and ask the people. But we will not do that in-house. That's where it's stalled," said Schwarzenegger.

Another delay in reaching a compromise infuriated Lockyer.

In a scathing letter to the governor and Legislative leaders, he told them "to stop using budget negotiations to score points with political allies or against partisan opponents."

He went on to say Wall Street is running out of patience with California's budget problems and that every day that passes pushes the state closer to junk bond status.

Lockyer says junk bond status would cut off access to financing of roads, schools and other public works projects -- it's already expensive for California to borrow.

"The BAA1 rating of California is actually the lowest a state has ever been rated. It's actually the only time a state has ever been below A-rating before," said Joe Eschleman from Wells Fargo.

The Basra Family is on pins and needles, wondering about the state budget. Because of the impasse, Healthy Families, which is state-funded health care for uninsured kids, will start to put people on a waiting list as of Friday.

The Basras are worried about their three children, all of whom have medical issues.

"Very, very worried. I applied two weeks back and never got a call back from them," said Amir Basra.

"They are risking the health of the kids. So how can they do that?" said Noreen Amir.

IOUs are still going out by the thousands to pay California's bills. Every day without a budget, it costs California taxpayers $25 million and for every day there isn't a budget fix.

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