Schwarzenegger's Calif. Budget Curbs Costs

Tuesday January 11, 2005 4:01 AM

By TOM CHORNEAU

Associated Press Writer

SACRAMENTO, Calif. (AP) - Gov. Arnold Schwarzenegger unveiled a $111.7 billion no-new-taxes budget Monday and proposed to close a $9 billion deficit by borrowing money and holding the line on spending growth throughout state government.

The governor's budget plan, his second since taking office in 2003 after a recall election, calls for borrowing nearly $4 billion and relies heavily on an expected improvement in California's economy.

Schwarzenegger said he was taking aim at the ``lunacy of our current budget system.''

``If we don't get control of our autopilot spending, there will be deficits as far as the eye can see,'' the governor said. ``Cruise-control spending is out-of-control spending. We will never catch up.''

The budget is $6.4 billion more than last year's plan, or about 6 percent higher.

Schwarzenegger, who is required to submit a balanced budget, promised his budget would not feature the accounting tricks that were used to paper over deficits in the past.

Also included were proposed constitutional amendments to impose a new spending cap, take authority for redistricting away from the Legislature and base teacher pay on merit.

The austere spending plan was the latest in a series of proposed reforms the Republican governor has presented to the Legislature this month. He has promised to go to the voters in a special election this summer if lawmakers do not act.

Leaders of the Legislature's Democratic majority were cautious.

``Hopefully this is a worst-case scenario,'' said Democratic Assemblyman John Laird, chairman of the Assembly Budget Committee.

Last year, Schwarzenegger borrowed nearly $10 billion on the bond market to help close a deficit. He also initially proposed deep cuts in public health and welfare programs but backed away amid strong opposition. He later yielded to more modest plans to trim funding for state universities, salaries for home health care workers and cost-of-living increases for welfare recipients.

``This budget is not everything that I want, but the fact is, it's a budget forced on us by a broken system,'' Schwarzenegger said. ``Last year, we stopped the bleeding. This year, we must heal the patient.''

Schwarzenegger is expected to propose closing most of the gap by curbing the rate of growth in key areas.

That involves curbing the rise in education spending, which represents nearly half of the state's general tax fund, by about $2 billion, and slowing spending on health and human services, which spends close to $26 billion a year.

The budget also calls for some cuts involving welfare-assistance programs and Supplemental Security Income recipients that Schwarzenegger proposed and then backed away from last year. The governor largely protected from cuts the state's public universities and its mammoth medical plan for the poor and disabled.

Democratic Assembly Speaker Fabian Nunez said many of the proposed cuts unfairly hit the middle class, people with school children and commuters.

The budget also relies on borrowing from various special funds set up to pay for transportation and other projects. The governor earlier proposed an end to such borrowing, though he tapped that money for this budget and proposed doing it again for the 2006-07 fiscal year.

The state's deficit had been estimated at $8.1 billion, but officials raised that figure Monday by about $900 million to reflect a $450 million settlement the state owes on a lawsuit and a $500 million reserve the governor wants to establish.

Advocates were already lining up in opposition.

A coalition of education interests has accused Schwarzenegger of breaking his promise last year to provide all of the money guaranteed under Proposition 98, a 1988 measure that says schools will receive 40 percent of all general fund money.

Advocates for the poor are worried the state's $25 billion public health and welfare system will also suffer cutbacks.

``All we know is that it will be ugly,'' said Anthony Wright, executive director of Health Access, a coalition of health care organizations. ``There's nowhere else to cut to get the savings that they need.''

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On the Net

Governor's home page: http://www.governor.ca.gov/state/govsite/gov-homepage.jsp

California Senate: http://www.sen.ca.gov/

California Assembly: http://www.assembly.ca.gov/acs/defaulttext.asp