Amid State Struggles, Calif. Faces Deep Budget Shortfall

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• GWEN IFILL:

  As the federal government struggles to turn the national economy around, state governments are dealing with the consequences of the slide up close. Forty-three states reported budget gaps totaling $47.4 billion in January.

  And nowhere has the rubber hit the road with more force than in California, where lawmakers are struggling to make up a two-year $41 billion projected deficit in the Golden State alone. Without a budget agreement, the state is poised to lay off 20,000 government employees and suspend public works projects.

  For a closer look at the challenges facing California, we're joined by Speaker of the California Assembly Democrat Karen Bass and John Myers, Sacramento bureau chief for KQED Public Radio.

  John Myers, I want to start with you so you can give us some of the nuts and the bolts. Where do things stand tonight?

  JOHN MYERS, Sacramento bureau chief, KQED Public Radio: Gwen, as we speak now, the California State Senate is considering a tax increase, a $14.4 billion tax increase, to try to solve part of the problem.

  It's still unclear whether or not there are enough votes. California is one of those states where it takes a two-thirds supermajority to both pass a budget and to increase taxes. That means a few Republicans have to vote for it. And at this point, they are at least one Republican vote short.

  That's the real sticking point at this point. And we've been going on marathon sessions here at the State Capitol in Sacramento for the last three days.

• GWEN IFILL:

  John, we've seen the pictures of all the legislators asleep at their desks or sleeping on the floor. What is driving the dispute that seems so irresolvable so far?

• JOHN MYERS:

  Well, I think it's a combination of things. It's a philosophy. It's a notion of, what is the best thing to do or what's the least bad thing to do, probably. You know, you have a very healthy debate. Democrats think that the worst thing you can do is completely dramatic cuts in state spending, especially to the state's social safety net.

  Republicans, however, think that a tax increase is the absolute worst thing, especially in these recessionary times.

  Gov. Arnold Schwarzenegger and the Democratic leaders of the legislature have proposed kind of a "half of each" kind of plan, where they've got taxes, cuts, and some borrowing, actually, to get out of that $41 billion hole. But until you can get Republicans to kind of cross that line — and, you know, the interesting part of this, Arnold Schwarzenegger is a Republican — but until he can find enough fellow Republicans to buy into his way of thinking and the Democrats' way of thinking, we're stuck.