Tags: US | California | Budget

Schwarzenegger Proposes Budget for 'Tough Times'

Friday, 08 Jan 2010 03:28 PM

Gov. Arnold Schwarzenegger proposed an austere budget plan Friday for the coming fiscal year that takes California back to its spending level of six years ago.

To make up for a drastic drop in tax revenue and plug a $20 billion deficit, Schwarzenegger proposed making cuts to health and human services, welfare, transportation and environmental programs.

He also seeks to raise money by rolling back recent corporate tax breaks, expanding oil drilling off the Santa Barbara coast and calling on the federal government for more assistance.

The Republican governor vowed to protect spending for public schools and colleges after cutting their funding by billions of dollars in recent years, actions that have sparked student protests throughout the state.

The continued austerity measures are a fallout from the national recession, which has pummeled California's economy and boosted the state's unemployment rate to 12.3 percent, third highest in the nation.

Schwarzenegger said the state is slowly beginning to emerge from the worst economic downturn in decades but that it would be three to four years before tax revenue recovers.

"Tough times still lie ahead," he said.

Schwarzenegger's budget proposal for the fiscal year that begins in July contains $82.9 billion in spending from the general fund, the state's main account to pay for its daily operations. The amount is $3.1 billion lower than last year and is the lowest amount California has had to spend on government operations since the 2004-05 fiscal year.

It is $20 billion less than the high point of general fund spending three years ago.

The total budget for the coming fiscal year, which includes special funds from fees and taxes dedicated to specific purposes, is $118.7 billion, nearly $6 billion lower than a year ago.

"I know that the budget I laid out today is difficult and it is painful, but California is resilient," Schwarzenegger said at a news conference. "We know that we will get through these tough challenges."

The political divisions over the governor's plan began showing earlier this week after Schwarzenegger previewed some of his proposals in his final State of the State address. As it did last year, debate over which programs will get money from a shrinking pie will dominate state government this year.

Democrats, the majority party in both houses of the Legislature, want to explore more ways to raise money and protect health and human service programs. Republicans, whose votes are needed to reach the two-thirds majority required to pass a state budget, refuse to raise taxes and want to focus on ways to help the private sector create jobs.

Schwarzenegger includes stimulus measures in his budget proposal, including a $500 million plan to train 140,000 workers and create 100,000 jobs. Finding the money to pay for those initiatives will be a point of negotiations in the months ahead.

The governor also vowed to continue targeting the state payroll after ordering government workers last year to take three furlough days a week, which cut their pay by 14 percent. His proposal for the coming year would replace furloughs with a straight 5 percent pay cut and would ask state government employees to contribute 5 percent more to their pension plans.

Departments across state government would be required to reduce their payrolls by 5 percent by mid-July.

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