- Associated Press - Monday, December 27, 2010

SACRAMENTO, Calif. — In calling California lawmakers back for an eighth special session in seven years, Gov. Arnold Schwarzenegger said the next governor will inherit a budget mess “just like I did the first year when I came into office.”

While he can’t hide the state’s persistent deficit, Mr. Schwarzenegger is seeking to spread the blame for California’s ongoing fiscal problems. The departing governor has faulted a steep drop in tax revenue on the deepest economic downturn since the Great Depression, lamented how a broken political system has resulted in gridlock over budget reforms and even chastised the media for the way they report on the problem.

“I think that it has a lot to do with that you guys are confusing them, too,” he told reporters after announcing his special session, citing reports that said the budget deficit was estimated at $25 billion over the next 18 months rather than focusing on the $6 billion shortfall in the current fiscal year.

Next month, the celebrity governor who swept into office in 2003 after the only recall of a sitting governor in California history will step down without accomplishing his main goal: fixing California’s structural budget problems.

He said he wanted California government to live within its means, but the annual imbalance between what the state collects in taxes and its spending commitments persists.

He said he wanted to “end the crazy deficit spending,” but the deficit is as high as ever and has plagued Mr. Schwarzenegger through most of his two terms.

And he said he would “tear up the credit cards,” but he leaves office with the state owing some $91 billion in total bond debt compared with $34 billion the year he took office, according to the state treasurer’s office. Bond debt as a percentage of the state’s general fund has roughly doubled in that time frame, to just less than 7 percent.

The state’s budget challenge is viewed through a different lens today than when voters ousted Democratic Gov. Gray Davis and installed Mr. Schwarzenegger, optimistic that he had the independence and personality to see through permanent reforms. Voters now give Mr. Schwarzenegger the same low approval rating they gave Mr. Davis before he was booted from office and express skepticism that he and lawmakers can solve the state’s biggest problems.

“He came in riding a wave of protest about various things, but probably the centerpiece was the shape of the budget at the time,” said former state Assemblyman Roger Niello, who served as vice chairman of the Assembly Budget Committee. “He leaves with the centerpiece of our problems, obviously, being the budget.”

He said the job of making long-term structural fixes, such as realigning spending priorities and revamping the tax structure, might be too big even for a personality as outsized as Mr. Schwarzenegger.

Mr. Schwarzenegger says he has made important structural changes that will take time to pay dividends, such as banning future borrowing to cover budget deficits and persuading lawmakers to place a rainy day fund on the 2012 ballot.

He also has overseen tens of billions of dollars in program cuts as the recession wiped out tax revenue and left California with an unemployment rate above 12 percent.

Annualized spending growth under Mr. Schwarzenegger is 1.4 percent, the lowest of any governor in recent state history. That is primarily a factor of lower revenue and deep program cuts during the recession.

His administration also negotiated reforms to welfare, workers’ compensation, health insurance for the poor and the parole system.

“He did the budget reform the hard way, by ripping out spending,” said his chief of staff, Susan Kennedy.

Miss Kennedy defends the governor, saying he started off with a bad hand and had to undo an illegal maneuver by the Davis administration. She served as Cabinet secretary and deputy chief of staff to Mr. Davis but left in early 2003.

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