Feb. 20, 2009 -- From Tinseltown to Thousand Oaks, California has been crushed by the financial crisis. The state has the nation's second-highest foreclosure rate, near-double digit unemployment and the country's lowest bond rating. The state's economy has teetered on the brink of total collapse for weeks.
Facing a $42 billion deficit, Gov. Arnold Schwarzenegger sent state workers home unpaid and stopped income tax refunds.
Lawmakers finally reached a compromise Thursday morning but only after being locked in the state capitol all week to work out a deal.
The $143 billion budget aims to close that $42 billion deficit through 2010, which means increased taxes and deep service cuts that will affect most Californians, from students to the elderly.
Democrats had to back away from their opposition to spending cuts: The package includes $15.1 billion less in spending. Republicans, for their part, set aside their opposition to tax increases — allowing $12.8 billion in tax hikes.
The deal also calls for billions in borrowing and measures intended to stimulate the state's economy.
"Now, instead of worrying every day only about IOUs or a flood of red ink, we can start moving California forward once again," Schwarzenegger told a news conference Thursday.
Oscars Less Glittery
Critics, however, said the new budget does little to stimulate the state's troubled economy, and many residents are worried about the future.
"People are going to feel a lot more pain than people are feeling right now," Los Angeles resident Stephen Hootstein said.
Even the extravagance and excess typically associated with the Oscar awards will be dialed down Sunday.
"You're not going to be seeing the lavish parties," said Melissa Magsaysay, an assistant editor at the Los Angeles Times. "I think that Hollywood and celebrities are definitely sensitive to what's happening, especially because the state that California's in."
But there are signs the Golden State hasn't lost its glimmer.
Employees Volunteer to Work for Nothing
In what some might call a Hollywood ending, city workers, including police, in the town of Redlands volunteered to take furloughs or work a few hours each week without pay to help keep fellow employees from being laid off.
"I would be crazy to sit here and tell you that I am happy and looking forward to giving up 5½ hours; that's $200-plus I'm losing every pay period," said Cpl. Kelvin Bryant of the Redlands Police Department. "We don't want to see anyone lose their jobs."
The Associated Press contributed to this report.