Skip navigation
Newswire

Calif. Senate OKs $3.5 bln in current year cuts

SACRAMENTO, Calif., Feb 24 (Reuters) - The California Senate on Monday approved $3.5 billion in spending cuts to ease the state's budget crisis but left out a car tax increase that had derailed earlier budget legislation.

The bill now goes to the state Assembly where lawmakers will decide whether to send on to Gov. Gray Davis legislation that helps to close a budget shortfall of $26 billion to nearly $35 billion over the next 17 months.

The spending cuts, seen as crucial by Wall Street ratings agencies which have downgraded California's credit in recent months, are for the current fiscal year 2002-03. The state's fiscal year begins on July 1.

"It's very important we proceed with these cuts and get on to the budget year process a very important responsibility we have to achieve a balanced budget on time," said Senate Budget Committee Chairman Wes Chesbro, a Democrat.

The Democrat-controlled state legislature earlier this month passed virtually the same package of spending cuts. But the bill was never sent to Davis because he vowed to veto any legislation linking the cuts to vehicle license fee increases, a move that angered his fellow Democrats.

This time around, however, the Davis administration has been trying to convince lawmakers a steep drop in general fund revenues will trigger an automatic rise in the so-called car tax anyway -- a situation that might mollify Democrats.

California, like many U.S. states, is in the middle of a fiscal crisis due to the slack economy and weak stock market, which have shriveled tax revenues.

The governor has proposed a budget plan for fiscal 2003-04 that includes steep program cuts and tax increases to close California's budget deficit.

But with Democrats seeking to protect state programs and Republicans fiercely opposed to tax hikes, lawmakers have had a tough job solving the problem.