Some states start new fiscal year shaky

SACRAMENTO, July 1 (UPI) -- The 2010 fiscal year began Wednesday with many U.S. states scrambling to balance budgets and cut services, while avoiding shutdowns.

In California, the state Senate adjourned after failing to pass a stopgap budget that would close a $24 billion deficit, possibly forcing the state to issue IOUs to its vendors.

A California appeals court panel muddied the budget outlook Tuesday with a ruling that could cost the state nearly $3.5 billion, the Los Angeles Times reported. The 3rd District Court of Appeals said that, since 2007, gasoline tax funds meant for mass transportation were improperly diverted by the governor and lawmakers to cover other expenses. A state official said the decision would be appealed.

With the start of fiscal year 2010 looming, Arizona, Illinois, Mississippi, North Carolina and Pennsylvania worked to reach budget agreements, with three of the states nearly succeeding, newspapers reported Wednesday.

In Pennsylvania, Gov. Ed Rendell held little hope for quick passage of a budget package, The Philadelphia Inquirer reported.

A 2010 budget passed by the Arizona Senate awaited approval in the state House, the Arizona Republic reported.

North Carolina lawmakers agreed to a temporary spending bill to keep government open while budget discussions continue, The (Raleigh) News and Observer said.

Mississippi lawmakers sent budget bills to Gov. Haley Barbour, including a bill that would raise the state's cigarette tax by 25 cents on cheaper cigarettes, the Jackson (Miss.) Clarion Ledger reported.

The recession and lousy economy contributed to tense state budget sessions, one analyst said told The New York Times.

"A lot of states had already cut spending, and then revenues continued to come in lower than expectations," said Brian Sigritz, with the National Association of State Budget Officers. "States are looking at having to go back after making cuts to make additional cuts."