The California budget crisis is over!

No. Not really. But, it's over for now.

The San Francisco Chronicle reports that Governor Schwarzenegger and state legislators have settled on a tentative budget compromise to close a $26.3 billion gap in the state's finances by making big cuts in education programs and health care services, raiding $4 billion from county government coffers, and enacting $7 billion in assorted accounting gimmickry.
In mostly symbolic moves, changes that have little impact on the bottom line, the state will allow offshore drilling near Santa Barbara and disband the Integrated Waste Management Board, the model for state government cronyism and fat paychecks financed by the public.

Some more highlights:

Prison spending would be cut, but inmates would not be released early.

Cal Grants would be spared, which means college students who have been promised the awards this year would receive them, and HIV/AIDS programs would lose some, but not all, state funding.

"I am glad that we will close the deficit, and I am glad that IOUs will no longer be needed," said Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County). "But make no mistake, this is a budget of shared sacrifice and shared pain. But we did not eliminate or completely shred the safety net in the state."

The Legislature is scheduled to vote on the plan Thursday. Approval would allow the state to begin recovering from this latest fiscal disaster, in which it issued IOUs while its credit rating plummeted toward junk-bond status.

"We accomplished a lot in this budget agreement," said Schwarzenegger, adding that negotiations at times were "like a suspense movie."

The tentative deal contains about $15 billion in cuts, roughly $4 billion borrowed from local governments and the rest from various accounting gimmicks that include early collection of taxes, increasing withholdings and shifting $1 billion worth of state workers' pay from the last day of this fiscal year to the next.

It doesn't appear that county governments are at all happy about having to help the state government balance its books, the executive director of the California State Association of Counties going so far as to characterize the plan as "devastating" for local governments.

In a report from Reuters, prior to the budget deal, any solution is seen as a temporary one:

But a balanced budget is seen as fleeting because California's economy, which is reeling from high unemployment and the recession, will remain in the dumps for some time. Closing the current shortfall does not account for further deterioration in the economy -- and revenue -- that many economists expect.

"It will be horrible next year," said economist Steve Levy of the Center for the Continuing Study of the California Economy.

The UCLA Anderson Forecast unit last month said in a report that California's economy is in for a "continued rough ride for the balance of 2009 and is not going to see economic growth return until the end of the year." The unit also projected the state would suffer double-digit unemployment until 2011.

California's revenues from personal income tax collections, its main revenue source, are posting their worst decline since the Great Depression.

"By no stretch of the imagination is it done," said Christopher Thornberg, an economist at Beacon Economics in Los Angeles. "This isn't going away any time soon."

Earlier in the year, budget projections were deteriorating at the rate of a billions of dollars a month and, since the state hasn't released an update to the $26.3 billion deficit projection for some time now, the gap they're really attempting to close with this deal has likely grown.

Stay tuned.