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legality could be heard. On August 25, 2010, the Sacramento County Superior Court scheduled a hearing for November 2010 to consider the merits of the State Controller's refusal to lower pay. Despite all of these extraordinary actions and events, the 2010 legislative session ended on August 31, 2010 with all then - proposed budget plans failing to be approved by the Legislature, on party -line votes. On October 4, 2010, the California Supreme Court upheld the Governor's authority to furlough State workers when there is no budget in place. The Legislature passed the $87.5 billion 2010 -11 Budget on the morning of October 8, 2010, over 100 days late, and Governor Schwarzenegger signed it that night, exercising his line -item veto authority to reduce spending by $963 million in order to raise the reserve level from $375 million to $1.3 billion. Total 2010 -11 State Budget expenditure reductions were $8.4 billion, assuming federal funds of $5.4 billion and other solutions of almost $5.5 billion. The 2010 -11 State Budget included pension reform measures, suspension of the Proposition 98 minimum guaranty to provide $49.7 billion in spending on K -14 Education in 2010 -11 with related settle -up measures, personnel cost reductions from savings from recent agreements with unions and reductions and the extension of a temporary suspension of businesses' ability to use net operating losses to reduce tax liabilities. In light of such a tumultuous 2010 State Budget process, on November 2, 2010, State voters approved Propositions 22, 25 and 26 of 2010. Proposition 22 amended the State's Constitution to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services. Proposition 22 also prevents the State from redirecting redevelopment agency property tax increment to any other local government, including school districts, or from temporarily shifting property taxes from cities, counties and special districts to schools, as in the ERAF program. Proposition 22 is intended to, among other things, stabilize local government revenue sources by restricting the State's control over local property taxes. Proposition 25 lowered the vote threshold for lawmakers to pass the State Budget from two - thirds to a simple majority. Proposition 26 requires a two - thirds affirmative vote in the State Legislature and local governments to pass many fees, levies, charges and tax revenue allocations that under previous rules could be enacted by a simple majority vote. 2011 -12 State Budget Set forth below is a summary of the 2011 -12 State Budget and budget process. Initial LAO Report on Fiscal Year 2011 -12; Legislature Called into Special Session on Budget Deficit. In their initial report for Fiscal Year 2011 -12, the LAO forecasted that the State's general fund revenues and expenditures would show a budget deficit of $25.4 billion, consisting of a $6.1 billion projected deficit for Fiscal Year 2010 -11 and a $19 billion gap between projected revenues and spending for Fiscal Year 2011 -12. The LAO projected that the State will continue to face annual budget problems of approximately $20 billion each year through Fiscal Year 2015 -16, and recommended that the Legislature initiate a multi -year approach to solving the State's recurring structural budget deficit, addressing permanent revenue and expenditure actions each year, together with temporary budget solutions, until the structural deficit is eliminated. On December 6, 2010, lame -duck Governor Schwarzenegger declared a fiscal emergency and called the new Legislature into special session to address the anticipated 2010- 11 general fund deficit. 22