Democrats push through California budget package (Reuters)

SACRAMENTO (Reuters) ? California lawmakers used old tricks of delaying payments and rosy revenue forecasts to help nominally close a $10 billion budget gap and meet their budget deadline for the first time in years.

Democrats, who control both the state Senate and Assembly, took advantage of new rules to pass a budget package with a simple majority. They added some new revenue measures, including requiring Internet retailers like Amazon.com to collect sales tax, but stuck mostly to short-term measures.

Governor Jerry Brown did not say if he would sign the legislation, which critics said brimmed with the kind of "smoke and mirrors" he had promised to avoid.

It's also uncertain how the Democrats' budget may affect demands by Republicans for a spending cap and overhauls to the state's pensions and regulations. Brown had hinted they could be part of a budget deal with him.

"What a mockery," said Marilyn Cohen, president of Envision Capital Management in Los Angeles. "The legislature doesn't change its spots."

But investors in the $2.9 trillion U.S. municipal debt market were likely expecting as much so the budget package should not be much of an issue for the state's bondholders, Cohen said. The state constitution guarantees payments.

Republicans, frozen out of the budget process after a breakdown in talks, groused that Democrats rushed through the package to avoid forfeiting pay if a midnight deadline arrived with no budget.

Democrats stressed in speeches on the floors of both chambers that they had backed some $11 billion in spending cuts and other measures in March, expecting that doing so would persuade Republicans to compromise and support Brown's plan for tax extensions.

With Republicans balking at the extensions, Democrats said they had to press ahead with a budget plan of their own.

"We have no choice but to act," said Assembly Speaker John Perez, a Democrat.

California voters last year changed budget rules to allow lawmakers to approve a state budget by a simple majority -- which Democrats have -- so long as taxes are not raised.

That set the grounds for the legislators of California, the biggest U.S. municipal debt issuer whose financial heft is enough to influence the entire U.S. economy, to work a near-miracle in state history -- an on-time budget.

The Democrats' budget plan involves requiring online retailers like Amazon.com to collect sales tax to provide a $200 million boost for the state's revenue, and it would allow the local sales tax to rise by 0.25 percent.

Democrats also proposed more spending cuts along with billions of dollars in delayed payments for education and rosy revenue assumptions, including revenue from the sale of state buildings opposed by Brown.

Brown had urged raising revenue with temporary tax extensions and has said he would not sign a budget with one-time moves that state leaders have routinely employed over the past decade to balance the state's books.

But this week Brown suggested he may be open to an expedient budget.

(Editing by Peter Henderson, Dan Grebler, Diane Craft and Phil Berlowitz)

Source: http://us.rd.yahoo.com/dailynews/rss/business/*http%3A//news.yahoo.com/s/nm/20110616/pl_nm/us_economy_california_budget

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