Josh Barro, Real Clear Markets
Next month, California's governor plans to ask Washington for another bailout to help close his state's $21 billion budget gap for the next fiscal year. This request comes with an appealing twist, though: it wouldn't cost federal taxpayers a dime.
Instead of asking for more money, Arnold Schwarzenegger is expected to ask Washington to release California from rules that inhibit budget cuts. Schwarzenegger would use this leeway to cut spending by as much as $8 billion. Details are expected next month, but the bulk of the cuts will likely be in school aid and Medicaid.
Last year's American Reinvestment and Recovery Act (popularly known as the stimulus package) extended hundreds of billions of dollars in aid to the states, but with strings attached-they had to maintain existing service levels in programs getting stimulus support, or in some cases increase them. This placed high-service states like California at a disadvantage, as they must maintain already-high baselines that do not apply to other states.
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Schwarzenegger Seeks The Right Bailout