SAN FRANCISCO (Reuters) – California Governor Jerry Brown and Democratic legislative leaders have reached a deal that bypasses Republicans and relies on higher tax revenue forecasts and some spending cuts to close a $10 billion gap.

Tax revenue is coming in far ahead of expectations, Brown told a news conference. He said he decided to craft a budget with Democratic allies, who have majorities in both houses of the California legislature, when he determined he could not overcome a “religious reluctance” among Republicans to embrace tax extensions.

Support from the minority Republicans would have been necessary to put a tax measure in front of voters but Democrats can pass a budget without tax hikes using a simple majority.

The new plan projects a $4 billion increase in revenue and spending cuts that will be triggered if the funds fail to materialize, Brown said.

Brown said he would seriously consider a ballot initiative to extend tax increases for several years and to tackle the state government’s “wall of debt.”

State Senate President Darrell Steinberg and Assembly Speaker John Perez, both Democrats, will deliver the necessary votes to advance the plan through the legislature, Steinberg said in the news conference, monitored by webcast.

Legislative aides said lawmakers would begin voting on the plan on Tuesday.

SAN FRANCISCO (Reuters) – California’s governor is mending fences with fellow Democrats in the legislature to get them back on board with his budget proposal after vetoing their spending plan, a spokesman said on Wednesday.

At the same time, Governor Jerry Brown will reach out to Republicans who have been blocking his budget for the fiscal year beginning on July 1, which Democrats said was a major reason they approved a spending plan on their own last week.

“The governor is continuing to talk with lawmakers on both sides of the aisle,” Brown spokesman’s said.

Brown does not intend to draft a new budget plan that could clear the legislature solely with votes from Democrats as some media accounts reported, the spokesman added.

“His approach has not changed,” the spokesman said, noting Brown still sees the budget plan he unveiled in May, known in the state capital of Sacramento as the “May revise,” as the best option for closing a roughly $10 billion shortfall.

“He’s working with the May revise,” the spokesman said.

Brown last Thursday stunned Democrats who control the legislature by vetoing the budget they approved a day earlier and bluntly criticizing its “legally questionable maneuvers, costly borrowing and unrealistic savings.”

SAN FRANCISCO (Reuters) – There’s no reward for a job poorly done, California lawmakers were told on Tuesday as their wages and expense pay were suspended after passing a budget that did not “add up.”

Controller John Chiang on Tuesday said he was acting under terms of a law approved by voters last year, the “On-Time Budget Act of 2010,” to withhold lawmakers’ pay if they miss a mid-June deadline for balancing the state’s books.

Democrats pushed a budget through the legislature last week, but Governor Jerry Brown, a fellow Democrat, vetoed the budget a day later, saying it was filled with “legally questionable maneuvers, costly borrowing and unrealistic savings” and didn’t close a $10 billion gap.

Chiang on Tuesday vowed to withhold paychecks until lawmakers submit a balanced spending plan for the fiscal year that starts on July 1.

Last Wednesday was the deadline for lawmakers to submit a budget to Brown.

“My office’s careful review of the recently passed budget found components that were miscalculated, miscounted or unfinished,” Chiang, also a Democrat, said in a statement.

“The numbers simply did not add up, and the legislature will forfeit their pay until a balanced budget is sent to the governor,” he said.

SAN FRANCISCO (Reuters) – California Governor Jerry Brown on Thursday vetoed an “unrealistic” budget passed by fellow Democrats in the state legislature and insisted on either extending tax hikes or making deep spending cuts.

The hardball move drew immediate praise from financial professionals and other observers, although Democrats who pushed through the plan on Wednesday complained that Brown wanted too much and needed to find Republican support himself or move on from his tax plan which has languished for months.

“California is facing a fiscal crisis and very strong medicine must be taken,” Brown said in a video address, later urging Democrats to cut deeper and Republicans to allow a state vote on the budget.

The veto would “shake up the system in a way that will get a better result, however difficult the next few days may be,” the Democrat governor later told reporters in Los Angeles.

“We are deeply dismayed,” responded Senate President Darrell Steinberg, a Democrat and an author of the vetoed budget. “What’s wrong with declaring partial victory?” he added in a news conference, saying that Brown appeared uninterested in a “Plan B” for closing a $10 billion budget hole.

Budget politics in California, the country’s largest municipal bond issuer, are closely monitored on Wall Street, and federal policy makers are watching the state for a fiscal disaster they fear could spread.

DRAWING A HARD LINE

SAN FRANCISCO (Reuters) – California Governor Jerry Brown on Thursday vetoed an “unrealistic” budget and insisted that the state choose between extending tax hikes or making deep spending cuts to solve long-term fiscal problems.

The hardball move drew immediate praise from financial professionals and other observers, although Democrats who pushed through the plan on Wednesday complained that Brown needed to get Republican support quickly or move on from his tax extensions plan which has languished since January.

“California is facing a fiscal crisis and very strong medicine must be taken,” Brown said in a video address explaining later that the state needed to address a “wall of debt”.

“We are deeply dismayed,” responded Senate President Darrell Steinberg, a Democrat and an author of the vetoed budget. “What’s wrong with declaring partial victory?” he added in a news conference, saying that Brown appeared uninterested in a “Plan B” to what he outlined in January.

HARD LINE

Brown, 73, returned to lead the state three decades after his first stint as governor and is fond of saying that “breakdown” can pave the way for “breakthrough” in politics.

“Today I have vetoed the California state budget. I do so reluctantly but with clear purpose. For a decade the can has been kicked down the road and debt has piled up,” Brown said in a video posted on YouTube.

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.

SACRAMENTO, June 15 (Reuters) – California legislators on Wednesday passed the main bill of a budget package that would rely on an Internet sales tax, spending cuts and fee hikes, and a host of rosy forecasts to close a $10 billion shortfall.

Democrats, who control the state Assembly and Senate and can pass a bill that does not raise taxes without Republican support, aim to pass the entire package of bills before a deadline at midnight. If they do approve a budget by then the state controller would start to dock their pay.

Governor Jerry Brown, who had promised to avoid “smoke and mirrors” in the budget, has not indicated whether he would sign his fellow Democrats’ legislation, though he has indicated he is open to some expediency on a spending plan.

“This is a solid budget,” state Senate President Darrell Steinberg told reporters.

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 biggest municipal debt issuer, whose financial heft is enough to influence the entire U.S. economy, to work a near-miracle in state history — to have an on-time budget.

Democrats are pressing their budget package to meet the legislature’s June 15 deadline to approve a spending plan after the state controller said he would not pay lawmakers if they missed it and because Republicans had been withholding votes Governor Brown needed for his plan to put a tax hike extension to a statewide vote.

SACRAMENTO, California (Reuters) – Democratic lawmakers in California trying to pass a state budget by a Wednesday deadline are considering forcing Internet retailers like Amazon.com to collect sales taxes, cuts at universities and one-time accounting moves to help close a deficit of about $10 billion.

Details of the plan emerged from lawmakers’ aides as the state Senate and Assembly prepared to vote on a budget blueprint crafted by Democrats who control both chambers.

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, and instituted a rule that they don’t get paid after their budget deadline until a state spending plan is passed.

With no sign of support from the handful of Republicans necessary to pass Governor Jerry Brown’s plan to put tax hike extensions to a statewide vote, Democratic lawmakers this week moved on to their back-up budget plan.

It involves a requiring online retailers like Amazon.com to collect sales tax to provide a $200 million boost for the state’s revenue, allowing the local sales tax to rise by 0.25 percent, which only requires a majority vote, and spending cuts on top of $11 billion in cuts and other moves approved in March.

The plan also involves billions of dollars in delayed payments for education and rosy revenue assumptions, including revenue from the sale of state buildings opposed by Brown.

The Democrats’ plan would leave a reserve of about $600 million, compared with the $1.2 billion reserve Brown urged.

SAN FRANCISCO (Reuters) – California lawmakers face a Wednesday deadline to pass a budget or forfeit pay but have not found common ground to close a $10 billion shortfall.

Despite concerns for the state’s credit rating and their own reputation, Democrats who control the legislature do not have Republican support to increase taxes to help close the deficit.

Democratic Governor Jerry Brown has suggested he could be open to an expedient budget for the year beginning in July.

Following are a few budget options for Democratic lawmakers, who could also ignore the June 15 deadline altogether and brace for the all-too-familiar summertime budget battle with Republicans:

LEGISLATORS PUT TAXES ON STATE BALLOT

Brown wants Californians to vote on a tax hike but Republicans oppose an election. Democrats could amend an existing voter-approved tax measure to include tax extensions and forward it to the ballot. They would not need Republican support since a simple majority would suffice to amend the measure, rather than the two-thirds for a new tax measure.

The downside for Democrats would be that doing so could be perceived by the public as a dodgy tactic and a court challenge would be likely.

SAN FRANCISCO, June 14 (Reuters) – California lawmakers face a Wednesday deadline to pass a budget or forfeit pay but have not found common ground to close a $10 billion shortfall.

Despite concerns for the state’s credit rating and their own reputation, Democrats who control the legislature do not have Republican support to increase taxes to help close the deficit.

Democratic Governor Jerry Brown has suggested he could be open to an expedient budget for the year beginning in July.

Following are a few budget options for Democratic lawmakers, who could also ignore the June 15 deadline altogether and brace for the all-too-familiar summertime budget battle with Republicans:

LEGISLATORS PUT TAXES ON STATE BALLOT

Brown wants Californians to vote on a tax hike but Republicans oppose an election. Democrats could amend an existing voter-approved tax measure to include tax extensions and forward it to the ballot. They would not need Republican support since a simple majority would suffice to amend the measure, rather than the two-thirds for a new tax measure.

The downside for Democrats would be that doing so could be perceived by the public as a dodgy tactic and a court challenge would be likely.