Top lawmakers reach budget deal

July 20, 2009 12:00:00 AM PDT
Top state lawmakers have finally reached a budget deal with Gov. Schwarzenegger. They were in meetings for most of the day until all the last minute details were covered.

Details of agreement to close California deficit

This agreement is a first step toward ending the IOUs the state has been issuing this month, but it must make it through both houses of the Legislature.

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Schwarzenegger emerged from his office shortly before 7 p.m. to announce the deal after more than five hours of closed-door talks. He told reporters: "We are very happy to have a basic agreement."

The plan will include $15 billion in cuts. The rest of the deficit will be made up by a combination of borrowing, shifting money from other government accounts and accelerating the collection of certain taxes.

Schwarzenegger and Republican lawmakers refused to raise taxes any further, limiting lawmakers' options. Democrats had fought to preserve basic social services, including welfare, in-home support and health care for low-income children.

Legislative leaders and the governor have been in closed door meetings almost all day trying to wrap up the last few remaining issues to solve the budget deficit. They reconvened around 4 p.m. ending with a deal just before 7 p.m. That's when Gov. Schwarzenegger emerged from his office to announce the deal after more than five hours of closed-door talks. He told reporters: "We are very happy to have a basic agreement." The Democratic and Republican leaders of the Assembly and Senate were at his side.

Earlier in the day, Democratic leaders said they were pretty positive their meeting would likely be the last and that the stalemate was coming to an end. Budget negotiations have been stuck over the last few days over how to pay back public schools for the funding cuts they've had to endure. This afternoon's sticking point seemed to be over how big the state's rainy day fund should be.

Democrats said if this second meeting was short, it would be good news. Nonetheless, they warn this final compromise will be full of things for everyone to hate.

"This is a very difficult deficit to close and you know people are going to feel a lot of pain in a lot of different areas, but you know I think the pro tem and myself have protected what was most important for Californians, certainly education, transportation and health and human services," said Assembly Speaker Karen Bass, D-Los Angeles.

In order to close the $26 billion deficit, ABC7 learned, more than half of that would be solved through cuts, which would be very painful because leaders cut $16 billion in February.

One Republican leader said they thought they could avoid the early release of prisoners.

The Associated Press contributed to this report.

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