California voters approved two financial measures Tuesday that Governor Arnold Schwarzenegger says will put the state back on the right track. The new governor staked his reputation on the measures, and their passage was a personal victory.
California's economy is as large as that of many nations, but the debt-ridden state is undergoing a fiscal crisis that threatens its credit rating. The two measures intended to remedy that, Propositions 57 and 58, passed by wide margins, and Tuesday night Mr. Schwarzenegger celebrated.
"Never again can our state spend more money than it takes in. Never again will our politicians deficit-finance our spending habits. And never again will our state be driven to the verge of bankruptcy," he said. "Never again."
Proposition 57 allows the state to borrow $15 billion as a one-time emergency measure to pay its bills and refinance existing debt. Proposition 58 requires the state to balance its budget and creates a surplus fund for years when income is low.
Both measures were headed for failure before Mr. Schwarzenegger turned on his charm, and raised $10 million for an advertising blitz. He got his message across in broadcast ads like this one.
For years, the state has been overspending and deficits have been papered over with borrowing. Now $14 billion of debt comes due in June.
Mr. Schwarzenegger said failure to pay the bill would be disastrous.
The actor-turned-politician met with skepticism when he entered the recall race last year against then-Governor Gray Davis. The "Terminator" star won decisively, and promised to end gridlock in the state capital.
That promise seemed impossible to keep. Mr. Schwarzenegger, a Republican, had a Democratic legislature that even the previous Democratic governor couldn't get along with. Mr. Schwarzenegger enlisted the help of former Governor Davis to promote the propositions, and also campaigned with Democratic State Controller Steve Westly.
Wednesday, Mr. Westly was encouraged by the success of the two propositions, and says New York investors will now reconsider investing in California. "I am more optimistic than I have been any time in the last several years," he says. "And I'll tell you, I think Wall Street is looking at this and feeling very good about it."
There is much to be done to improve the state's economy and its business climate, says Vance Baugham, who works to bring new business to the San Gabriel Valley in suburban Los Angeles. He looks to Mr. Schwarzenegger and other politicians to tackle issues like soaring costs for workers' disability insurance, which the state administers. He says costs are rising so fast that some businesses have moved to other states.
"The businessmen have to create the business, but we need an environment that's conducive to business, which means a user-friendly tax structure that allows them to work on that bottom line that allows them to invest back into equipment and keeps them competitive globally," says Mr. Baugham.
One leading Democrat who was against the borrowing measure, state treasurer Phil Angelides, still opposes the many cuts that the governor plans to enact to balance the budget. But six in 10 Californians in a recent survey approved of the new governor's job performance. And by an overwhelming majority, they gave him the mandate he requested in pursuing his solution to the fiscal crisis.