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Debate over education stalls budget talks

July 16, 2009 12:00:00 AM PDT
There were no budget talks scheduled Thursday after a fight over education funding stalled a deal to close the $26 billion budget gap. Just when leaders were about to come to a compromise, Democrats demanded changes to a voter-approved law so that public schools could get back roughly $11 billion in cuts when the economy rebounds.

"It's a constitutional change, and it can only be changed by the people. They are more than welcome to go out and make that change and ask the people. But we will not do that in-house. That's where it stalled," said Governor Arnold Schwarzenegger (R-California).

The delay in reaching a compromise infuriated State Treasurer Bill Lockyer, who warned Thursday that California's credit rating could slip into junk status. In a scathing letter to the governor and legislative leaders, Lockyer told them, "... to stop using budget negotiations to score points with political allies or against partisan opponents."

Lockyer says junk bond status would cut off access to financing of roads, schools and other public works projects. It is already expensive for California to borrow.

"The Baa1 rating of California is actually the lowest any state has ever been rated. It's actually the only time a state has ever been below A-rating before," said Joe Eschleman, Wells Fargo Advisors.

Because of the impasse, Healthy Families, which is state-funded health care for uninsured kids, will start to put people on a waiting list on Friday. The Basra family is worried about their three children, all of whom have medical issues.

"Yeah, very, very worried ... I applied two weeks back and never got a call back from them," said Amir Basra.

"They are risking the health of the kids. So how can they do that?" asked Noreen Amir.

IOUs are still going out to pay the state's bills. The stalled budget deal costs taxpayers $25 million per day in interest alone.

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