Lawmakers begin debate on $26B budget deal

SACRAMENTO, CA As lawmakers prepare for a possible vote Thursday night, two issues might be in trouble -- oil drilling and the borrowing and raiding of local government money. It is unclear if all 30 bills will actually pass tonight.

We already know numerous interest groups give this budget compromise a huge thumbs down because of the severe cuts across the board, but Wall Street is the one to really impress. California's credit rating is near junk bond status, and investors will scrutinize whatever budget revision is approved and decide whether to let the state back into the credit market.

"We're going to have to open up the hood and let them kick the tires. We basically have to prove to them that the solutions that are in this budget are adequate enough," says H.D. Palmer from the California Finance Department.

No doubt the budget compromise leaders negotiated contains what critics call "accounting gimmicks." For instance, 10 percent more will be taken out of your paychecks in state income taxes beginning in October, but you'll get it back when you file your taxes next year. State workers will also get their June 30th paychecks on July 1st, shifting the obligation to the next fiscal year.

"Accounting gimmicks just make things worse for next year. Accounting gimmicks are false. They give the false sense of security that the books are all balanced," says Ted Costa from People's Advocate, Inc.

Then there's the raiding of local government money -- a move some call unconstitutional. To balance the state budget, Sacramento will take nearly $4 billion in gas tax and redevelopment funds over two years. A lawsuit it ready to go, even before the ink dries, to stop the state from taking those monies.

"Why would they put something like in the budget that they knew was wrong, unless they expected to use it to buy some time? I think it's a continuation of the smoke and mirrors. They want to look like they put a responsible budget together, knowing full well they have not," says Chris McKenzie with the League of California Cities.

Here's the kicker: State Controller John Chiang said today he can't guarantee he'll be able to stop issuing IOUs, even if this budget revision is approved. He said just because there's a state budget doesn't mean there's money in the state treasury.

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