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Legislative leaders agree on $131 billion state spending plan

By AARON C. DAVIS, | Monday, Jun 26 2006 1:15 PM

Last Updated: Monday, Jun 26 2006 1:15 PM

Legislative leaders on Monday said they had reached a tentative agreement on a roughly $131 billion state budget and hope to bring the spending plan to a vote before Saturday, the start of the new fiscal year.

The announcement indicated Republicans and Democrats have broken a logjam over health care funding for children of illegal immigrants and competing plans for using a tax windfall to pay down state debt.

Speaker Fabian Nunez, D-Los Angeles, Senate President Pro Tem Don Perata, D-Oakland, Assembly Republican Leader George Plescia of La Jolla and Senate Republican Leader Dick Ackerman of Fullerton released a joint statement about their deal.

"We have reached a tentative agreement on a balanced, responsible budget today after several months of productive discussion," the statement said. "It reflects the values of both parties and moves our state forward."

The four offered no details about the record spending plan, but it is widely expected to mirror the draft budget Schwarzenegger proposed in May.

A deal on the budget would clear Gov. Arnold Schwarzenegger's last major governing hurdle before the November election.

It also may give Schwarzenegger another tool to use in his re-election campaign. If lawmakers pass the budget and Schwarzenegger signs it before Saturday, it will be the first time since 2000 that California has had an on-time budget.

Negotiations on the governor's proposed budget progressed more quickly in the Legislature this spring than in recent years thanks largely to a tax windfall of $7.5 billion. The unexpected revenue from rising business profits and stock gains allowed Schwarzenegger to propose spending more than the state will take in next year to increase funding for education, pay down debt and sock away money for reserves.

The overall spending plan is expected to be about 12 percent higher than in the current fiscal year, reflecting the state's rebounding economy.

The billions in unanticipated tax revenue enabled lawmakers to follow Schwarzenegger's lead, funding popular programs while building reserves to appease conservatives who have been critical of the state's deficit spending. The budget is not expected to raise taxes.

Spending on education, the largest slice of the budget, will increase from $50 billion this year to more than $55 billion next year, under a deal Schwarzenegger struck last month that also ended a two-year feud with the state's largest teachers union.

The California Teachers Association has been critical of Schwarzenegger, saying he had backed out of a deal struck shortly after he took office in 2003 to repay schools billions of dollars they were owed.

In recent weeks, funding health care for children of illegal immigrants had caused the most trouble for budget negotiators.

Assembly Democrats had proposed adding $2 million to the 2006-07 budget to expand a health care program to children of parents who make up to 300 percent above the federal poverty line.

The current cutoff is 250 percent under a program known as Healthy Families. Democrats wanted the program expanded by 2008 and to include children of illegal immigrants.

The Department of Finance estimated the expansion would cost taxpayers $302 million annually by 2008, most of which would go to cover illegal immigrants' children.

Schwarzenegger opposed that plan but backed a more modest proposal to reimburse counties $23 million for 87,000 children they now cover, including many illegal immigrants.

Republicans opposed both measures and vowed to block a budget that included either.

Democrats abandoned their broad expansion last week, and health care advocates said the prospects for Schwarzenegger's smaller proposal also had dimmed. The fate of Schwarzenegger's children's health care proposal was not immediately clear on Monday.

Despite the agreement among legislative leaders, lawmakers still face challenges to get the budget passed by the end of the week.

Negotiators planned to continue meeting Monday and Tuesday and said they were still hammering out details of the budget bill, which must be passed by two-thirds of the Legislature.