California Budget Deal Falls Short

Here we go again:

SACRAMENTO, California (Reuters) - California's leaders failed to reach a final budget agreement to close a $19.1 billion deficit on Monday, the 89th day of their stalemate over a spending plan, top lawmakers said.

California's budget has suffered massive shortfalls in recent years as a result of plunging revenue caused by the mortgage crisis, housing downturn, financial market turmoil and double-digit unemployment in the most populous U.S. state.

"We've got a little bit more work to do," Assembly Speaker John Perez told reporters after a closed-door meeting with Governor Arnold Schwarzenegger and other top lawmakers in the state capital of Sacramento.

State Senate President Pro Tem Darrell Steinberg said budget talks would resume at noon on Tuesday and that he hoped an agreement would be reached quickly so the full legislature could vote on a budget next week.

"We're almost there," Steinberg said.Schwarzenegger, a Republican, and leaders of the Democrat-controlled legislature had agreed on a framework for a budget deal on Thursday, signaling a final agreement was near despite sharp partisan differences over how to balance the state's books.

Democrats have pressed for raising revenue and spending cuts to fill the state's budget shortfall. Schwarzenegger and Republicans in the legislature's minority have held out for deep cuts and oppose tax increases to raise new revenue.

At more than $19 billion, California's budget deficit equals more than $500 for every person in the state and the political fight in Sacramento over closing coincides with the state's gubernatorial campaign.

I worry about California. For the past couple years it was federal bailouts that allowed the state paper over its Ponzi scheme finances. That is over, I do not know if the GOP will retake Congress this year, but they will surely make enough gains to put a stop to the bailouts. When that happens does California make the needed cuts, or do they play politics as usual with the hope that Obama will somehow get billions of dollars funneled to them. Personally I see the first massive political battle of next year being a California bailout.