2008–2009 California budget crisis

The U.S. state of California had a budget crisis in which it faced a shortfall of at least $11.2 billion, projected to top $40 billion over the 2009–2010 fiscal years.

On September 23, 2008, about 3 months after its due date, Governor Arnold Schwarzenegger signed the 2008–2009 budget. Worsening financial conditions since 2003 left the state with a large shortfall.

A two-thirds vote is required to pass a budget, and in both the original budget negotiations and in the attempt to revise the budget no political party by itself had enough votes to pass a budget. The majority Democrats fought to minimize cuts to programs, while most of the minority Republicans refused to accept any tax increase. The original budget was put together by Democrats and some Republicans using spending cuts, internal borrowing, and accounting maneuvers.

In November 2008, Schwarzenegger proposed spending reductions including the following measures concerning state employees:

In December 2008, Schwarzenegger ordered mandatory furloughs of two days per month for state employees, as well as "layoffs, reductions and other efficiencies" to achieve savings in the General Fund of up to 10%.

Labor organizations filed lawsuits and took other actions in an attempt to stop the furloughs of state workers. On Jan. 29, 2009, a Superior Court Judge ruled that Schwarzenegger had emergency furlough power, and on February the 3rd District Court of Appeal in Sacramento said the appeal to the decision came too late and was incomplete, so judges were unable to determine if a halt to state furloughs is legally justified. As part of the furlough, various state offices were closed on the 1st and 3rd Fridays of every month from February 1, 2009 through June 30, 2010, which was estimated to save the State $1.3 billion.

By February 2009 California State Controller John Chiang delayed $3.5 billion in state payments (such as state tax refunds) for at least 30 days because the state was experiencing cash flow difficulties.

The state legislature passed a budget in February 2009 that depended on the voters approving tax extensions and money redirection into the general fund, which in May the voters did not approve.Governor Arnold Schwarzenegger then proposed $16 billion in cuts and also borrowing money from local governments. In the legislature, the Republicans agreed to lower the income of state employees, but the Democrats resisted these proposals and suggested increasing fees to be paid by smokers and oil wells. Neither party agreed to borrowing money from local governments.

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