California budget talks deadlocked

SAN FRANCISCO (AFP) – California lawmakers remained deadlocked Wednesday over a plan to increase taxes to tackle the state's budget deficit as Republicans ousted their legislative leader for his support of tax hikes.
As Governor Arnold Schwarzenegger sent layoff notices to 20,000 state workers and officials prepared to halt hundreds of construction projects, legislators voted against more than 14 billion dollars in new taxes.
The taxes are part of a package, along with nearly 16 billion dollars in spending cuts, that Schwarzenegger and legislative leaders say is needed to fill a budget deficit expected to reach 42 billion dollars by 2010.
"If we do not pass this budget today, the California dream will turn into the California nightmare," state Senator Alan Lowenthal said of a budget stalemate that already has led to a ratings downgrade for state bonds and could force the cash-strapped state to soon stop paying its bills.
California is the only state that requires a two-thirds legislative majority to both pass a budget and pass any tax increase.
Though Democrats control both chambers of the state Legislature, they need three Republicans to join them to reach that two-thirds vote.
So far, despite the pleas of Republican Governor Schwarzenegger, only one Republican in the Senate has agreed to vote for the package.
That lone Republican, Dave Cogdill, spent three months helping to negotiate the budget package.
But late Tuesday night, his Republican colleagues ousted him from the post of Minority Leader and replaced him with a staunch anti-tax senator.
"It's a shame it ended this way," Cogdill said. "This budget needs to get out, and we need to put people to work again in this state."
Other Republicans continued to insist they will stand by their pledge against raising taxes, and called again for more spending cuts.
"I think it's time that we need to stop treating the taxpayers of this state of California as a personal ATM," said state Senator Tony Strickland. "Funds are overdrawn."
Legislators brought sleeping bags and pillows to the Senate chamber on Tuesday night. They have been meeting virtually non-stop since Saturday in an effort to pass a budget. One senator, a dentist, passed out toothbrushes to colleagues.
Earlier this month, the Standard & Poor's agency cut the rating on California bonds to the lowest credit grade of any of the 50 US states.
California, which with 36.5 million residents is home to one of every eight Americans, will receive a large chunk of the 787-billion-dollar federal stimulus package signed into law Tuesday by President Barack Obama.
But that still won't be enough to bridge the state's budget deficit, which is increasing at a rate of 500 dollars a second.
The tax increases proposed by Schwarzenegger and legislative leaders would increase the state sales tax from 7.25 percent to 8.25 percent, add 12 cents per gallon to gasoline taxes and impose new taxes on activities ranging from a round of golf to car repair.

Hold on Cali we are in for one hell of a ride....

Hope the IOU's we will be getting as out tax return's helps (yeah right).