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Californian lawmakers agree to disagree

CALIFORNIA'S lawmakers failed to agree on a balanced budget by the start of its new fiscal year yesterday morning, clearing the way to suspend payments owed to the state's vendors and local agencies, who instead will get "IOU" notes promising payment.

The notes will mark the first time in 17 years the most populous American state's government will have to resort to the unusual and dramatic measure.

Democrats who control the legislature could not convince Republicans late on Tuesday night to back their plans to tackle a US$24.3 billion budget shortfall or a stopgap effort to ward off the IOUs. The two sides agree on the need for spending cuts but are split over whether to raise taxes.

Democrats have pushed for new revenues while Republican lawmakers and Governor Arnold Schwarzenegger, also a Republican, have ruled out tax increases.

They instead see deep spending cuts as the solution to balancing the budget, but Democrats say that would slash the state's safety net for the needy to the bone.

Tempers flared in the state Senate as the midnight start of the new fiscal year neared.

"There is no excuse to hold this whole state hostage," state Senate President Pro Tem Darrell Steinberg told Republicans during a debate.

Senate Republican Leader Dennis Hollingsworth countered that major cuts were urgently needed. Otherwise, "there will be entire programs that will have to be lopped off," he said.

California lawmakers struggle with budget deadlines practically every year, but this year's fight is taking place amid the state's worst drop in revenues from personal income taxes since the Great Depression as recession and rising jobless pile on to the damage done to the state from its long housing slump.


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