The fiscal emergency declaration required the Legislature to begin addressing the budget problem within 45 days, rather than waiting until the new budget year that begins in July. Lawmakers approved the spending cuts with overwhelming bipartisan support. In a vote split along party lines, the Assembly rejected a tax on yachts, motor homes and private planes. The largest freezes more than $500 million in payments intended for schools that the state has not yet made. Democrats who crafted the plan said it would not hurt districts because they wouldn't have to return money they had already received.

Schwarzenegger said last month that California faces a $3.3 billion deficit for the remainder of the current fiscal year, which ends in June, and an $11.2 billion shortfall for the budget year that begins in July — a combined gap of $14.5 billion. Schwarzenegger's proposed across-the-board cuts include slashing over $4 billion for education, or hundreds of dollars in classroom spending for every California student. The cuts also would require the release of 22,000 state prison inmates before the end of their sentences, and closing nearly one in five state parks. In all, Democrats estimated, the package would leave the state with a remaining budget gap of between $7 to $8 billion to solve before July.