Passed budget may not be good enough for governor

Gov. Arnold Schwarzenegger: Governor's Office PhotoState lawmakers approved a compromise budget proposal late Monday, but that proposal appeared to lack the budget reforms necessary for Gov. Arnold Schwarzenegger's approval.

With a combination of more than $9 billion in cuts and more than $7 billion in new revenues - mostly through tweaks in tax withholdings and fees charged to corporations - legislators closed a $17 billion deficit.

Voter approval would be required for two elements of the proposal: Leasing future lottery revenues and dedicating excess state revenues to a rainy-day fund. Those provisions will likely be combined into one ballot measure for a future special election docket.

Schwarzenegger said Monday that he wanted a higher cap for the rainy-day fund and continued donations to the cap under all but a few circumstances, two points that were inserted into the budget.

But outgoing Senate Pro Tem Don Perata (D-Oakland) wouldn't budget on a  third point: limiting use of the rainy-day fund to years when the budget was in deficit.

Tuesday is the 78th day California lacks a state budget, an ongoing record. Legislators released statements after Monday's vote that suggested none were truly happy with the passed proposal.

Assembly Republican Leader Mike Villines (R-Clovis) said the proposal fell short of what many Republicans wanted, including a state spending cap.

"We cannot sit back while our budget problems grow out of hand again," Villines said in a statement. "We must continue to approach our long-term budget problems with urgency and work together to make the fiscally-responsible decisions that will get California back on track."

There was equally little enthusiasm from Perata.

"The Legislature won't have all these accounting tricks to plug the holes," he said of next year's budget, which is assumed to start with a deficit of more than $1 billion. "We've done exactly what the Governor didn't want to do: We have simply rolled the problem into the next year."

It was unclear Tuesday morning what would happen next. If Schwarzenegger vetoes the budget, it could be overturned with a two-thirds vote in the state Assembly and Senate. The budget required a two-thirds vote for initial passage.