Bonds News

California budget signed; bond sales to resume

SACRAMENTO, Calif., Aug 24 (Reuters) - California Gov. Arnold Schwarzenegger signed a $145.5 billion budget on Friday, nearly two months behind schedule, and the state treasurer said the state was now ready to go ahead with new bond sales.

“I’m pleased the legislature and governor finished their work before the delay took a toll on our bond credit ratings and increased taxpayers’ borrowing costs,” Treasurer Bill Lockyer said in a statement.

“And with a final budget, we can now start the process of selling bonds the remainder of this year to finance infrastructure projects, stem cell research and other crucial programs.

The California Senate approved a $145.5 billion total 2007-08 budget on Tuesday after a two-month stalemate that delayed state payments worth more than $3 billion since the beginning of the new fiscal year in July.

“We have been able to show the rating agencies the state has made progress in getting its fiscal house in order,” Lockyer said. “But clearly, this year’s lengthy impasse will not increase the agencies’ confidence.”

California, which requires a two-thirds majority to approve budgets in the legislatures, has in recent years typically failed to deliver an on-time spending plan before the July 1 deadline. Both Republicans and Democrats have said they would like to work out a way to speed up the process in the future.

“We also set aside a reserve fund of $4.1 billion, the biggest ever -- and we did all this with a general fund spending increase of just six-tenths of 1 percent, so this is a very prudent spending plan,” Schwarzenegger said.

California’s state and local spending have continuously gone up in recent years. According to the Tax Policy Center, state and local governments spent amounts equal to 20.6 percent of residents’ personal income in 2005, up from 18.4 percent a decade ago and 16.4 percent in 1987.

Democrats criticized Schwarzenegger on Friday for moving to cut $700 million from the approved budget with his line-item veto authority.

“It doesn’t seem to make sense for the governor to talk about wanting to improve the state’s long-term fiscal stability while at the same time making short-sighted cuts in treatment for homeless people with mental illness, protective services for vulnerable seniors, and basic health care, all important programs that would also save the state money in the long run,” California Assembly Speaker Fabian Nunez said.