California can’t solve budget crisis

California state senators struggle through a long budget negotiation session Tuesday.
California lawmakers worked into early Wednesday but couldn’t pass a budget to avoid the possibility of laying off 10,000 more state workers.

Lawmakers brought blankets and toothbrushes to work Tuesday, planning to stay as long as it took to pass a budget, but as of 2 a.m. PT (5 a.m. ET) Wednesday, it appeared they had taken a step backward. Late Tuesday, Republicans ousted their leader, Sen. Dave Cogdill of Modesto. The move was likely to complicate debate because Cogdill had headed up negotiations with Democrats on the budget impasse. Gov. Arnold Schwarzenegger issued 10,000 layoff notices Tuesday, affecting a wide spectrum of state agencies and employees, in an effort to deal with the budget crisis, a spokesman said. Another 10,000 layoff notices might be sent Wednesday, the spokesman said. All the layoffs would take effect July 1, the start of the new fiscal year. California faces a $42 billion deficit, prompting the governor to declare a fiscal emergency in December. Schwarzenegger had set a Monday night deadline for a budget deal, threatening to start sending the layoff notices if the lawmakers failed. What you’d fix first The Republican governor has butted heads for months with the Democratic majority over easing the $11.2 billion revenue shortfall this fiscal year alone. Cuts would save California $750 million for the year. The $42 billion deficit is for the current and next fiscal years. Interactive: See projected state budget gaps »

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Last month, the state began delaying $3.5 billion in payments to taxpayers, contractors, counties and social service agencies so the state could continue funding schools and making debt payments. Watch more on California’s budget woes » On Tuesday, Kansas managed to work through its budget issues, which had forced the state to suspend tax refunds and caused concern it would not be able to pay state employees. But Gov. Kathleen Sebelius ended the impasse by signing a bill to balance the budget, according to CNN affiliate KMBC-TV in Kansas City, Missouri. The signing of the bill was a key demand for Republicans who had been blocking the Democratic governor’s plan to transfer $225 million into the state’s main bank account from other state government accounts. With her signature, Sebelius ended a cash crunch a half-hour before a key payroll budget deadline. KMBC reported the state’s 42,000 employees should receive their biweekly paychecks on time Friday. Without Sebelius’ signature on the bill, the state may not have had enough money to pay state employees, or provide money for schools and health care providers. Kansas also stopped processing income tax refunds last week because of low funds, said Department of Administration spokesman Gavin Young. “This political game the Republican leaders are playing affects real Kansas families,” Sebelius had said Monday in a statement. “The Republican legislative leadership is jeopardizing our citizens’ pocketbooks for no other reason than to play political games — games in which the only ones set to lose are Kansas families, workers and schools.” Kansas’ money problems stem in part from the recession but also from “substantial” funding to finance public schools and Medicaid, said Senate Majority Leader Derek Schmidt. In Colorado, state workers may face unpaid time off in an effort to spare the state’s colleges and universities millions of dollars in budget cuts, KUSA-TV in Denver reported Tuesday. Interactive: Estimated job growth across the country Gov. Bill Ritter, a Democrat, announced plans recently to furlough some state workers to balance the budget. Roughly $600 million in budget cuts need to be made by the end of this fiscal year, according to KUSA. State lawmakers will debate a bill in the House this week that would require furloughs for state workers depending on how much money they make. “It’s drastic, but we’re in a drastic situation,” Rep. Steve King, R-Grand Junction, told KUSA. In Washington state, proposed budget cuts have led to protests in the capital, Olympia, KOMO-TV in Seattle reported. State officials are looking at some $300 million in cuts as part of a package the governor is expected to sign this week. Lawmakers also are aiming to cut nearly $6 billion over the next two years. But about 100 union members, state employees, school supporters and health care providers rallied on the lawn of the Capitol, telling lawmakers to stop the health care and education cuts and prevent tuition hikes. State employees said they want fair pay, better benefits and pensions and no layoffs. Hawaii faces a nearly $2 billion budget shortfall in the upcoming fiscal year. That figure has led legislators to seek alternative ways of balancing the budget, including possible reductions in health and retirement benefits for government workers, KHNL-TV in Honolulu reported Tuesday. One bill being debated in the Legislature aims to cut off insurance benefits for all employees retiring after July 1 regardless of how many years they had worked. Back East, states such as New York and Florida, which have high unemployment rates and huge budget shortfalls, also are looking to cut programs. In New York, the expected budget shortfall is around $1.7 billion, according to the National Conference of State Legislatures. President Obama took his economic stimulus message to Florida last week to hard-hit Fort Myers. The jobless rate in the area is 10 percent, up from 2.3 percent this time in 2006, and the area’s foreclosure rate of 12 percent is the highest in the nation. Interactive: See where the stimulus money is going »

And Michigan’s Democratic Gov. Jennifer Granholm, whose state has been especially hard-hit by the recession and the auto industry’s near-collapse, said job creation is paramount to turning the economy around. “We see the impact of this every day, and I’m speaking not just for Michigan, but for governors across the country. We need help. We need it now. And it’s not about budgets; it’s about creating jobs in our states,” she said recently on CNN’s “State of the Union With John King.”