Schwarzenegger Declares Emergency: California "Is Headed For A Fiscal Disaster"

SACRAMENTO, Calif. — Gov. Arnold Schwarzenegger declared a fiscal emergency Monday and called lawmakers into a special session to address California's $11.2 billion deficit.

The state's revenue gap is expected to hit $28 billion over the next 19 months without bold action. The emergency declaration authorizes the governor and lawmakers to change the existing budget within 45 days.

The state is likely to run out of cash in February.

"Without immediate action, our state is headed for a fiscal disaster, and that is why ... I am wasting no time in calling a fiscal emergency special session," Schwarzenegger said in prepared remarks.

The Republican governor and Democratic lawmakers have proposed a combination of tax increases and spending cuts, but Republican lawmakers steadfastly refuse to raise taxes.

No compromise could be reached during a special session last month, which pushed the problem to a new Legislature being sworn in Monday. But there appeared to be little reason to believe that Republican lawmakers would budge.

"If anything, I think our resolve (against raising taxes) is deeper than it has ever been because of the economic realities," Senate Minority Leader Dave Cogdill said Monday.

Democrats don't have the two-thirds majority in either the Assembly or Senate that is required to pass tax increases or a state budget.

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During last month's session, Democrats proposed $8.2 billion in spending cuts and $8.2 billion in tax increases. Republicans rejected it and instead sought an economic stimulus program.

Schwarzenegger asked for both, offering essentially the same plan rejected last month.

His proposal includes raising the state sales tax by 1.5 percentage points _ or 1 1/2 pennies on the dollar _ for three years, generating $3.5 billion in the current fiscal year. He also seeks to increase the annual fee for registering vehicles.

The stimulus would focus on loan modifications to prevent more home foreclosures and saving an unemployment insurance fund from insolvency by raising taxes employers pay into the pool and slightly reducing benefits.

Schwarzenegger enacted the fiscal emergency under a voter-approved initiative. If the Legislature fails to address the current-year budget deficit within 45 days, the initiative prevents them from acting on any other bills until it's resolved.

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Associated Press writers Samantha Young in Sacramento and Solvej Schou in Los Angeles contributed to this report.

Comments

[LDnearthesea]

I'm a native Californian, and a son of a son of the Golden West State. The Repugs have totally screwed this state over, and they always have. Read Joan Didion's book 'Where I Was From.' California has a history of letting certain people become "entitled" more than others. In the recent past, property owners were made to be more entitled than renters through 1978's Prop 13. Gated community residents have been made to be more entitled that those living in urban or old suburban areas. All in all, when one looks at all the Mcmansions, all the Silicon Valley development, and similar business developments in other parts of the state, plus the old money that is in the hands of many of the wealthier agriculture-owning families, as they've never had to pay for all that water they use, one wouldn't have to wonder where all the money has gone. This is a state where the rich have been enabled to hoard lots of their dough at the expense of the idea of community for everyone, rich, poor or middle class, with tax policies, passed by Repugs through votes or through obstruction in Sacramento, that have always, always, favored the richest Californians over anyone else, and basically caused a class warfare of sorts. Pat Brown is the one governor who made sure that their was some equity about how the wealth was spread, and education in particular flourished at that time.

[Bookkillrr]

What are you people talking about when you mention "illegal's" in California? I sure don't see them.
I am like Arnold. If Arnold does not see them, there is no need to address the problem. I don't see illegals working. I don't see illegals sending their kids to public schools. I don't see them working on hundreds of construction jobs all over town. I don't see them anywhere. How can they be a drain on the system if they don't exist? Can we impeach Gov Arnold and replace him with the Gov that was elected? How do we stop the Republicans from removing elected people from office due to a popularity contest? I am still stunned that an elected governor was replaced so easily.
Really, a couple of wealthy people decided they could start the ball rolling to replace a legally elected gov from office, and they did it. That needs to be addressed.

[raker]

How much fun would a gay boycott of California be at this critical moment? Movies, TV, music, wine, much of our food supply. The opportunities are endless. Let Californians live off their love of jeebus. Join in all you parents, grandparents, friends and neighbors of gay people whose rights were taken from them in the last election in California. (By the way, your rights are on the line too.) Can I interest you in a nice French wine?

[sak]

I love it. The "illegals" so-called, Hispanics and gays could all just stay home. That would really put California in a fix, especially those wealthy folks who use these upstanding citizens or not as the case may be to fix their hair, design their clothes, landscape their homes, take care of their children, wash their cars, pick their vegetables, fix their food, etc. The state would literally stop.

[Dystopic]

with climate change, the california wine industry is toast. Their reds have never been worth the bottle they were put in.

[booker52]

I just took a road trip in Calif and seen for myself how the lack of money is hurting there. The rest stops are closed!!!! All of them!!! Talk about cross your legs and hold it, that would be Calif!!! Just one of the many ways the foreclosures have hurt that state.

[sak]

I have news for the rest of the country. California is really in a fix. The schools are falling apart, some teachers do not even get health care anymore, the malls are empty, the restaurants are empty - at least in the suburbs - and the foreclosure epidemic has hit big time. A friend of mine saved for years to buy some land in Pollack Pines. He paid off the land in twelve years. Then he build a home. The construction loan, which normally would roll over into a regular loan did not. He cannot get a loan to save his life. This was his dream home. He has been given a foreclosure notice. It looks like he will lose his home, along with the 34 acres that is already paid off because no bank will give him a loan. Understand that this is a guy who does have a great job and his wife also has a good job. They live out in the boonies and their family has been in the area for over 200 years. How does that help the economy? They did it all right. They saved, they waited, they were frugal, they worked hard and lived in a tiny little trailer for four years while the house went up and now they may lose it all. It is disgusting.

[coyoteincorrales]

Rest stops closed? ALL of them? Not true. Just got back from a trip to CA last week -- the four rest stops on I-40 between Needles and Barstow are open. Used two of them.

Nevertheless, The Gropinator is a terrible gov. But, sometimes in a democracy you get what you deserve.

[PartyofLogic]

repeal prop 13 NOW!! and how about initiating an international airport exit tax??? Even countries like Bhutan collect monies that way!

[sak]

Easy for you to say repeal Prop 13. If that happens, hundreds of thousands of elderly will lose their homes. We are among them. When you are on a fixed income and have paid for your home, it is not moral or ethical for the state to kick you out on the street. The alternative housing costs a fortune and senior facilities run from $3500 to over $7000 per month. What is your solution for thiat? At least now we are members of the community and can spend a little money now and then because our home is paid off and we do have Social Security. Don't be so quick to shove the old people out on the street.

[dm92]

The real solution is somewhere in between. I am a relatively liberal democrat living in northern NJ. I don't necessarily agree with Prop 13, but I TOTALLY get it. Here is NJ where every municipality (even very small ones) are pretty much self-contained and have their own services and school systems, property taxes are used to fund the schools and provide revenue to the county governments (oh yes, their hands are also in the till). The problem is that the taxes are insane and they continue to grow. My wife and I moved into our home in 1993. From then to last year, our property taxes literally doubled. We then added some space to our home, then went through a townwide property revaluation for tax purposes - we then added another 50% to our taxes. We both agree that taxes have to be paid for the greater common good, but in some places it has gotten completely out of hand. I don't quote my tax number to people outside of my town because I get tired of the look I get when I quote it to people (that mixture of pity, disgust and why?). As things stand today, when I retire, even when my home is payed for, there is NO way I could afford to continue living there with the property taxes so high.

[eleutheros]

As "Balzac" points out earlier in these comments, one only look to the ENRON gang and energy grid management. Maybe the breath of fresh air, Sarah Palin can find a way to funnel some of Alaska's oil money to California? Although, with the price of oil plummeting .........

[Dystopic]

I helped build Enron's trading floor. Enron had traders that turned down top spots in Wall Street as traders. California sent some peon civil servants to battle with these guys, and had their a$$es handed to them.

California - too stupid not to fail

[MilwaukeeDan]

Ahnold is sounding a lot like Henry Paulson, only Ahnold says it this way, "Da werld vill end if ve don't get da money".

[wagthedog1001]

Oh, NO! CollyPhonya is getting retribution from the gods of the gays! NOT too big to fail.

[Charmed]

But Arnold you're a Republican....surely this report has to be wrong because we all know that republicans are the masters of fiscal responsibility. They are the only ones who can balance a budget......they would never allow an agency to go under....

[poochytown]

Why is it that Americans always want something for nothing? We decry the high taxes of, say, Sweden and then we are upset because we don't have the stability and amenities that those taxes purchase. Unrealistic. I blame the GOP.

[MsDoc]

I've got it !!!! How about a series of charity concerts?

Gala balls? Wine tasting parties? Autograph sessions by the rich and famous?

Fiddle lessons so the Gov can play while California bu rns?

[joerace]

Here is some FREE advice. Why don't you deport the thousands of illegal gang bangers that are in jail. California spends about $70,000 per yer per inmate to warehouse these animals that are not US citizens. Then get rid of all the other illegals that are sucking off California without paying into the system. Save billions a year!

[MsDoc]

Interesting how the cost of supporting the illegals is rarely mentioned.

We really need to seriously address this problem. It seems to me that we need to establish a road to citizenship or send them home. As for the criminal element.... they need to be extradited to their native countries. We create enough of our own.

[BOBIUFROMCA]

WE should start by cutting the lawmakers pay checks to mininum wage..... thats all these morons deserve

[kellygrrrl]

I'm with you!

[robin50]

Hey Arnold aren't your problems of your own making? Now you think us in the so called fly over country should help you why? Seeing that we all have our own problems,

[rcozad]

Gosh! Is this the same ARNOLD Schwarzeneggar than ran a very effective recall election against then Gov. Davis ? Wasen't Arnold the one that said that Gov. Davis was totally at fault for the poor budget then? Gee I'll bet he won't take sole responsibility for this mess as in retrospect he makes Davis look like the GOOD OLD DAYS! You made your bed California enjoy!!!

[Heavy]

Arnold, now you can go look in the mirror and thank your party for effing up everything they touch.