Page last updated at 00:01 GMT, Saturday, 25 July 2009 01:01 UK

California passes key budget deal

Mr Schwarzenegger is shown in a scene from his Twitter video he posted Tuesday July 21
Mr Schwarzenegger talks about the budget in a Twitter video

California lawmakers have passed a plan to plug a state deficit of $26bn (£17bn), and sent the deal to Governor Arnold Schwarzenegger to sign into law.

The package of 31 bills passed the Senate, but the Assembly rejected two key measures that cut income by $1.1bn.

A plan for offshore oil drilling and a proposal to take petrol tax from local governments were vetoed.

The resulting loss of income will force Mr Schwarzenegger to make deep cuts in public spending to close the gap.

Financial hole

The deal already includes $15bn in spending cuts in education and healthcare, and calls for pay cuts for state workers. It also accelerates the collection of some taxes.

The package was agreed on Monday by the Republican governor and leading lawmakers from California's Democrat-controlled legislature after more than two weeks of intense negotiations.

The deal amounts to a revision of a budget package approved by California's lawmakers in February that was designed to plug the state's deficit until the summer of 2010.

But the recession has sharply reduced California's revenues, forcing the state to send promissory notes, or IOUs, to thousands of contractors who provide state services.

Earlier this month, Mr Schwarzenegger declared a fiscal emergency after legislators missed a deadline to agree a budget.

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