SAN FRANCISCO - The California Assembly held a four-hour debate on the state budget Sunday, before recording a vote that confirmed that lawmakers were right where they were beforehand - at complete loggerheads over the budget, with no road map to a compromise.

The budget bill put forth by majority Democrats failed on a party-line vote of 45 in favor to 30 against - well short of the 54 votes required to pass the budget with a two-thirds majority vote.

Democrats said they had compromised by including budget-reform measures, including a ballot measure to double the size of the state's rainy-day fund combined with stricter limits on how the fund can be accessed and a mechanism to transfer money into the rainy-day fund during strong revenue years.

But Republicans said the budget reforms do not go far enough, adding that they are adamantly opposed to tax increases in any case.

The Democratic plan included increases in top marginal income tax rates, corporate income tax rates, and limits to tax deductions for business losses.

California is now seven weeks into fiscal 2009 without a budget.

Much of state government continues to function on autopilot without a budget in place, thanks to mechanisms built into the process over time as the annual budget impasse has become institutionalized.

But as the weeks continue to pass without a budget, more pain will be felt.

The state's community college system, for one, does not receive its monthly state apportionments without a budget. That means California's 72 community college districts went without $505 million in state payments due July 29, and will miss another $434 million on Aug. 27 if there is no budget in place, according to the State Controller's Office.

Even without a budget, K-12 school districts will receive $3 billion in state support payments on Aug. 27, but they will not receive $1.29 billion in state payments that fall into different legal categories.

If there is no budget in August, the state does not have the authority to pay more than $583 million in funds due to institutional providers of services for Medi-Cal, the state's version of the Medicaid program for low-income residents.

Some of those institutions will get help from the California Health Facilities Financing Authority, an arm of the State Treasurer's Office.

The CHFFA board voted in July to use up to $4 million from its administrative fund balance to provide short-term, no-interest loans to rural hospitals and community clinics facing late Medi-Cal reimbursements.

The authority is offering loans of up to $750,000 that must be repaid within 45 days of final budget adoption. Recipients do have to pay a 1.25% origination fee. By last week, 12 organizations had applied for $2.8 million in loans.

"Patients and caregivers should not have to suffer because the state has no budget, and these emergency loans will help ensure they don't," State Treasurer Bill Lockyer said in a statement when the loan policy was announced.

Sunday's budget-vote deadlock left both sides pointing fingers at each other.

"It's time for Democrats to stop the games and start negotiating with Republicans on a budget compromise," the Assembly Republican leader, Mike Villines, said in a statement.

"My Republican colleagues have been insistent that we put the budget up for a vote," said Assembly Speaker Karen Bass, D-Los Angeles. "I thought it would be too cynical to think they would want us to have a vote so they could vote it down."

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.