- The Washington Times - Monday, January 10, 2005

SACRAMENTO, Calif. (AP) — Gov. Arnold Schwarzenegger announced a $111.7 billion no-new-taxes budget yesterday and proposed closing an $8.1 billion deficit by borrowing money and holding the line on spending growth throughout state government.

The governor’s budget plan, his second since taking office in 2003 after a recall election, calls for borrowing nearly $3 billion and relies heavily on an expected improvement in California’s economy.

Mr. Schwarzenegger said he was taking aim at the “lunacy of our current budget system.”

“If we don’t get control of our autopilot spending, there will be deficits as far as the eye can see,” the governor said. “Cruise-control spending is out-of-control spending. We will never catch up.”

The budget is $6 billion more than last year’s plan, or about 6 percent higher.

Mr. Schwarzenegger, who is required to submit a balanced budget, promised that his budget would not feature the accounting tricks used to paper over deficits in the past.

Also included were proposed constitutional amendments to impose a new spending cap, take authority for redistricting away from the Legislature and base teachers’ pay on merit.

The spending plan was the latest in a series of proposed reforms that the Republican governor has presented to the Legislature this month. He has promised to go to the voters in a special election this summer if lawmakers do not act.

Leaders of the Legislature’s Democratic majority were cautious.

“Hopefully, this is a worst-case scenario,” said Democratic Assembly member John Laird, chairman of the Assembly Budget Committee.

Last year, Mr. Schwarzenegger borrowed nearly $10 billion on the bond market to help close the deficit. He also initially proposed deep cuts in public health and welfare programs, but backed away amid strong opposition. He later yielded to more modest plans to trim funding for state universities, salaries for home health care workers and cost-of-living increases for welfare recipients.

This time, Mr. Schwarzenegger is expected to propose closing most of the gap by curbing the rate of growth in key areas.

That involves curbing the rise in education spending, which represents nearly half of the state’s general tax fund, by about $2 billion, and slowing spending on health and human services, which spends close to $26 billion a year.

The opposition already was lining up.

A coalition of education interests has accused Mr. Schwarzenegger of breaking his promise last year to provide all of the money guaranteed under Proposition 98, a 1988 measure that says schools will receive 40 percent of all general fund money.

Advocates for the poor are worried that the state’s $25 billion public health and welfare system also will suffer cutbacks.

“All we know is that it will be ugly,” said Anthony Wright, executive director of Health Access, a coalition of health care organizations. “There’s nowhere else to cut to get the savings that they need.”

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