Sacramento Area Local News

SACRAMENTO (CBS13) ― Governor Arnold Schwarzenegger vowed Tuesday afternoon to veto any partial solutions to California's looming $24 billion deficit, but lawmakers said they won't be able to reach a compromise by the fast-approaching midnight deadline and worked to send the partial budget measures to his desk anyway.

Just after 7:00 p.m., Schwarzenegger announced via Twitter that he had vetoed the $3 billion partial budget fix.

"As I promised, I just vetoed a partial budget fix. Now we can get to work on solving the whole problem," he said through his official Twitter account.

Democrat lawmakers have proposed bills that would make $3 billion in cuts, mainly in education, that would keep the state from being forced to issue IOUs for the first time in 20 years.

Gov. Schwarzenegger has called any partial solutions unacceptable and says he "guarantees" a veto for any measure that does not cover the entire deficit.

"The legislature's latest proposal is no different than what Sacramento has been doing for the past two decades -- kicking the can down the alley," said Press Secretary Aaron McLear.

State Controller John Chiang has said that he will begin printing IOUs on Thursday if lawmakers cannot pass a budget that closes the massive deficit for the 2009-2010 fiscal year.

The state controller will begin issuing IOUs to college students who are expecting grants, welfare recipients, the blind and disabled, and private companies that contract with the state to provide a wide array of services.

Counties that administer social services also would not get paid, nor would taxpayers who are still expecting refunds.

The IOUs are intended as a cash-saving move until lawmakers pass a balanced budget.

In normal years, California can take out short-term loans so it has enough cash to pay its bills until spring, when the bulk of its tax revenue starts flowing. This year, it expects to need $7 billion to $9 billion in such loans, but the state treasurer's office says it will not even try to sell those bonds unless lawmakers balance the budget.

Lenders are unlikely to go along with such loans if California has a $24 billion deficit and no credible plan to close the shortfall, because they will be worried that the state will not be able to meet its financial obligations. That has led to the immediate cash crisis.

Schwarzenegger also has ordered 235,000 state workers to take three days off a month without pay if there is no balanced budget by Wednesday, a move that would reduce available staff at state offices. The three furlough days will reduce the workers' pay by 14 percent.

Gov. Arnold Schwarzenegger had proposed cutting $16 billion from state programs, borrowing $2 billion from local governments and raiding other government accounts worth about $6 billion to close the deficit.

Democrats have countered with $11 billion in cuts and nearly $2.5 billion in higher taxes, primarily on tobacco products and companies that drill for oil in California. They also want a $15 increase in the vehicle registration fee, which already was raised earlier this year, to ensure that state parks remain open.

Schwarzenegger and Republican lawmakers have steadfastly refused to raise taxes after the state Legislature approved nearly $13 billion in higher sales, personal income and vehicle taxes earlier this year.

As of Tuesday afternoon, Democrats and Republicans remained at an impasse. Democrats want to moderate Schwarzenegger's cuts to welfare and health care programs for the poor, but Republicans refuse to go along with tax increases to make up the difference.

(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)