Schwarzenegger's Latest Budget Has $14.3B Tax Increase

Wednesday, December 31, 2008 3:00 PM

SACRAMENTO, Calif. -- Gov. Arnold Schwarzenegger's administration on Wednesday issued its latest plan to close the state's $41.6 billion budget deficit, calling the state's declining fiscal health "a major crisis."

State finance officials say California will run out of money sometime in February and will have to start issuing IOUs to employees and contractors.

The proposal calls for $14.3 billion in tax increases and other new revenue and $17.4 billion in spending cuts over the next 18 months. It also relies on borrowing and a plan the Legislature approved in early 2008 to sell bonds keyed to the future value of the state lottery.

"We are facing a major crisis, probably the most challenging budget situation the state has ever faced," state Finance Director Mike Genest said in releasing the plan.

He said it is imperative that lawmakers act quickly, and not just because the state is running out of cash.

If the recession deepens, Genest said , there could be even greater declines in tax revenue.

"The longer we wait, the harder and harder it gets," he said.

The proposal is unusual for covering the rest of the current fiscal year and the next one starting July 1, rather than just a single year.

http://www.newsmax.com/us/california_bu ... 66787.html