The state of California has been rescued from bankruptcy as lawmakers passed a fiscal plan aimed at closing the state’s budget deficit.
After days of negotiations, a moderate Republican state senator, State Sen. Abel Maldonado decided to switch sides and support tax increases.
His backing granted the final vote needed to pass the package, which calls for nearly 13 billion dollars in new taxes and more than 15 billion dollars in spending cuts.
The plan will be signed by Governor Arnold Schwarzenegger on Friday, who said the package was necessary to avert California’s economy “going off a cliff”.
When signed, officials can restart construction projects and send tax refunds that had been delayed to keep the state from running out of cash.
In late December, California’s chief financial officer warned that the ‘The Golden State’ would run out of money within two months.
State controller John Chiang explained that California had been forced to spend billions of dollars more each month without collecting enough taxes due to its budget crisis and would thus have an empty kitty in late February.
The office of Gov. Arnold Schwarzenegger warned on Tuesday that it would send pink slips out to 20,000 state workers on Tuesday if the budget package fails to gain approval.
Nicknamed “The Golden State”, California generates nearly 13% of US gross domestic product.
The worldwide recession has however sent the state’s huge manufacturing sector plummeting, while unemployment is heading towards 10%, compared with around 7.5% nationally.