California's budget crisis grows

July 10, 9:08 AMSF Top News ExaminerHashem Rouhani

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California's budget crisis grows as Gov. Schwarzenegger's newly proposed budget may cost the state badly needed funds.

Gov. Schwarzenegger's budget package may jeopardize $10 billion in federal stimulus funds for California's public schools, colleges and prisons.

Gov. Schwarzenegger's proposal is to borrow $2 billion from local governments, which would then be used to pay for education. That move would free up $2 billion in the state's general fund, which carries the $26.3 billion shortfall.

California has done this in the past. But such a shift would cause the state to break a minimum-funding rule set by the federal government when it awarded stimulus grants to states.

The federal rule is designed to ensure that states use the dollars to stimulate their economies - not to replace dollars cut from their budgets.

Finance experts are still working on critical data analysis of education spending. Lawmakers need to see that analysis before deciding how to proceed with negotiations. 

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