Deal ends California stalemate on budget

SACRAMENTO, Calif. – Three months into the state’s longest budget impasse, California Gov. Arnold Schwarzenegger and legislative leaders reached a handshake deal Friday to close the state’s $19 billion deficit, leaders announced after a five-hour meeting.

To bridge the gap, they are relying on about $7.5 billion in spending cuts, as well as delaying a corporate tax deduction and using rosy projections for how much the state will receive in tax and federal dollars, according to sources close to budget talks.

Standing outside Schwarzenegger’s office beside the three other legislative leaders, Senate President Pro Tem Darrell Steinberg, a Democrat, said legislators will return to Sacramento next week to finalize their “comprehensive agreement.” The Legislature plans to vet the plan in a joint budget committee Wednesday and hold floor votes Thursday.

“These are very difficult circumstances in difficult times,” Steinberg said. “Not a lot of celebrating. But we all stepped up and did the work we had to do.”

As part of the deal, state leaders will place a measure on the 2012 ballot to strengthen the state’s “rainy-day fund” that is a softer version of one voters rejected last year.

Schwarzenegger and legislative leaders also seem confident that Service Employees International Union Local 1000, which represents 95,000 state workers, will reach a contract deal within the next week that includes pension reductions for future employees. The governor demanded pension cuts and a “rainy-day fund” as conditions to signing the budget.

At 94 days, the budget stalemate already has surpassed the previous 85-day record set in 2008. With a vote Thursday – Day 99 – the delay is certain to reach the century mark by the time Schwarzenegger signs it.

The stalemate has been painful for a select group of state contractors, child care centers, health care providers and low-income college students, all of whom have gone without payment from the state since July 1.