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California fiscal emergency declared

Governor Arnold Schwarzenegger declared a state of emergency today over California’s finances. The state budget is more than a month overdue and lawmakers need to close a $19 billion deficit. The deficit is 22% of the $85 billion general fund budget that the governor signed last July. That fiscal year ended in June.

“Without a budget in place that addresses our $19 billion budget deficit, every day of delay brings California closer to a fiscal meltdown,” Schwarzenegger said in a statement.

Democratic State Controller John Chiang has said that he could be forced to issue IOUs as early as next month. The state’s cash would go into the red by October.

In the declaration, Schwarzenegger ordered three days off without pay per month for tens of thousands of state employees, until a budget is passed. The administration estimates that payroll savings will be $147.2 million per month, about $80 million of that from the general fund.

Legislators return from their month-long vacation next Monday.

Certain employees are exempted from the new order: specifically the Board of Equalization and the Franchise Tax Board, the Employment Development Department, State Compensation Insurance Fund, the California Housing Finance Authority and the California Earthquake Authority. All employees of the Highway Patrol and the Department of Fire and Forestry Protection are also exempt. Also excluded are about 37,000 state workers in six unions that reached tentative labor agreements with the Schwarzenegger administration. Another six unions, which represent about 150,000 state employees, have not yet come to terms with the governor.

-Bill at

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