Arnold Looking for “Quick” Solution

Gov. Arnold Schwarzenegger said Thursday that he and lawmakers will try to quickly solve the state's $21.3 billion deficit without taxes, gimmicks or much borrowing.
     
The Republican governor told reporters after a prayer breakfast in the capital that voters sent state leaders a clear message during Tuesday's special election: Live within your means.

Schwarzenegger said he took that as a sign voters want more cuts to state programs. He also has proposed selling state assets such as San Quentin State Prison, the Los Angeles Memorial Coliseum and CalExpo, the state fairgrounds in Sacramento.

"All of us have to do the same what ordinary people do out there," Schwarzenegger told reporters, referring to the effects of the global recession. "The reality is the world out there is one-third less in value. And so as soon as everyone can adjust to that, I think everyone is going to be fine."

Schwarzenegger met with legislative leaders for the first time Wednesday to hear their thoughts about his latest budget proposal, which includes a mix of cuts and borrowing.

He said the recession has hit California's economy so hard that the level of state revenue today is the same as it was a decade ago.

Voters this week resoundingly rejected a slate of measures that included higher taxes, funding shifts and borrowing against the assumed value of future state lottery revenues. Two-thirds of those who cast ballots rejected each of the five budget-related measures.

"I think the voters were loud and clear. They said, 'Don't come to us, and solve the problem yourself,"' Schwarzenegger said.

The governor and lawmakers placed the measures on the ballot in February as part of a deal to close a $42 billion budget deficit through June 2010. That deal included $15 billion in spending cuts, $11 billion in borrowing and more than $12 billion in temporary increases to the sales, income and vehicle taxes.

But falling tax revenue and overly optimistic projections about how much money the tax increases would generate caused the state to fall back into a deficit within weeks.

Even if voters had approved the measures on Tuesday's ballot, Schwarzenegger and lawmakers would have faced a $15.4 billion deficit in the fiscal year that begins in July. The gap is now $6 billion larger, according to projections by the governor's office.

On Thursday, the nonpartisan Legislative Analyst's Office said continuing weakness in the economy could deflate tax revenue even further, pushing the total deficit to $24 billion in the coming fiscal year.

Legislative Analyst Mac Taylor endorsed the governor's proposals, released last week, to sell state assets, reorganize government boards and change retiree health benefits for future state employees.

Taylor recommended cutting state employee salaries by another 4.6 percent for some immediate savings. Schwarzenegger has ordered the state to reduce general fund payroll by 10 percent.

Taylor's report warned that the governor's proposal relies too heavily on one-time solutions, such as borrowing from local governments and using federal stimulus money. Rather than take out IOUs to get through the year as Schwarzenegger has proposed, the legislative analyst recommended borrowing from funds dedicated to transportation projects.

"The state cannot continue current levels of service in all state programs," the report stated.

Voters approved just one ballot measure in Tuesday's election, Proposition 1F, which will prohibit lawmakers from receiving pay raises during deficit years. It was placed on the ballot to meet a demand by Republican state Sen. Abel Maldonado of Santa Maria, who made it a condition for securing his vote for the February budget deal.

Maldonado has said he would like to run for statewide office in 2010.

On Wednesday, the citizen commission that determines the pay for lawmakers and other state elected officials cut those salaries by 18 percent, although the action will have no immediate effect. The salary reductions will take place between December 2010 and the end of 2012, meaning lawmakers and officeholders will finish their terms without ever seeing a smaller paycheck.