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Schwarzenegger Budget Plan Includes 'Difficult' and 'Painful' Cuts - 2004-01-09

California Governor Arnold Schwarzenegger has unveiled a budget plan that includes cuts in health and welfare programs, and reduced funds to local governments. He calls the cuts "difficult" and "painful," but says they are necessary. The Republican governor says he plans to work with both sides in crafting a final budget, but many Democrats oppose the funding cuts.

Mr. Schwarzenegger says California's problems, which include a $22 billion debt and a projected shortfall of $14 billion, result from what he calls "dramatic overspending."

"The politicians have made a mess of the California budget," he said. "And now it's time to clean it up."

To achieve a balanced budget, the plan assumes that voters will approve a measure on the March 2 ballot permitting $15 billion in short-term borrowing. The referendum item would also impose a spending cap, and create a surplus fund to provide a financial cushion.

California's credit rating has been downgraded several times in the past year, and Mr. Schwarzenegger says the stakes are high right now.

"If we do not control spending today, we will put every program at risk tomorrow, and California will be bankrupt," he said. "And a bankrupt California will not be able to provide services to anyone."

The new governor says his budget, unlike previous fiscal plans, does not rely on "gimmicks" and that it balances the numbers by making difficult choices.

Mr. Schwarzenegger was elected in October in a special recall vote that removed the former governor, Democrat Gray Davis. But the new governor says he is working well with Democratic leaders.

As he unveiled the $99 billion budget plan, he admitted that getting approval from the state legislature may require persuasion.

But he says he is off to a good start. He has secured the cooperation of California's largest teacher's union to withhold $2 billion in increased spending for education. The spending hike had been planned for the coming year.

He says American Indian gambling interests are also willing to help, possibly paying the state a bigger share of the profits they earn from casinos on tribal reservations.

He says other sectors need to help as well.

"If it is the counties, if it is the cities, if it is the education community, if it is the prison system, if it is the Indian gaming, everyone has to come in and help," he said. "That is what we're trying to do with this thing here."

Some local officials are alarmed at $1.3 billion in cuts in payments to cities and counties that had been earmarked for local police and fire protection.

And many Democrats plan to oppose health and welfare cuts. Instead, they are urging increased taxes on the state's richest citizens.

Mr. Schwarzenegger says a tax hike would not raise enough money to make a significant difference. And he repeated his campaign pledge not to raise state taxes.

Governor Schwarzenegger must negotiate with Democrats, who hold a majority in the state legislature, as he crafts a final budget acceptable to both sides.