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

[horsey]

California got what it voted for in Arnold....a movie star and that's about it. Popularity contests are nice but they don't pay the bills.

[SickOfTheCorruption]

Wow! How incredibly disgusting of you. Not all of us voted for Arnold, just like not all of us voted for Bush, so we all deserve what "we" got, huh?

[mounthood]

(I sent this letter and $1 on 11/28/08)

Dear Governor Schwarzenegger:

I have heard the disturbing news that California is headed for a possible financial crisis. This is doubly alarming because California has the reputation of being a prosperous forward-looking state. The image of you, The Terminator, possibly going hat-in-hand to the President of the United States requesting a bailout is very disturbing and unbecoming to your reputation. One would expect it perhaps from a girly-man governor, but certainly not you.
I have enclosed $1 in hopes it might forestall this possibility. Please use it wherever it will do the most good.
On a more personal note, if you find the financial crunch gets deep enough to affect you personally, I would like to suggest a substitute for those expensive Cuban cigars you smoke. I find Swisher Sweets equally satisfying, and much cheaper. My personal favorite is Captain Black Jamaican Sweets.
Give my regards to Maria. Seasons Greetings to you both.

[dtl1218]

You know he doesn't take a salary for being governor.

[armadillious2002]

Republicans don't believe in raising taxes - they just believe in bailouts. Repub economics have absolutely destroyed this once great Nation.

[torrrep]

You're ignorant. We pay the highest state and local taxes in the nation. The Democrats control the legislature. They have for decades. How can you blame Republicans when it is Democrats that control the money?

[spyguy68]

Totally and completely WRONG!

The Total tax load in CA is NOT even close to beign the highest in the US.

The Democrats do NOT have effective control of the legislature. Because of Prop 13, the Republicans actually control the spending since even though they are a minority then have veto power to defeat every budget proposal.

In addition, over 75% of the state budget is legally set and can not be changed by the legislature.

Over half the state budget is for education because prop 13 destroyed the school local funding model and Serento v. Priest required the state government to fund education and a later proposition sets minimum funding for schools.

If any of the MANDATED expenditures are cut, the courts will immediately rescind the cuts. And there is nothign left to cut in the small part of the budget the legislature controls.

When Schwarzenegger was first elected, he had an independent analyst look at the state budget for stuff to cut and what the analyst found was there was no substantial cuts to be made! Everything that could be cut had pretty much been cut!

Taxes are just the cost of living in society. Those, like torrrep that don't want to pay taxes are just greedy bast...

[emily00011]

Borrowing $$ is their dirty little secret.

[emily00011]

Borrowing $$ is their di.rt.y little se.cr.et.

[cornagainstsorcery]

I dunno. I've seen enough "All Celebrity Access" coverage of the culture aristocracy to guess that there's money enough out there to solve this problem if people really wanted to.

[emily00011]

That's it, people don't really want to. It's someone else's problem. No one believes they should have to help pay for the good society they live in. It's a god-given right.

[vietveter]

YO..... HEMAN

Your warning is

AFTER the fact

[NoMercy]

Can't somebody get enough signatures for a total recall?

[cornagainstsorcery]

Nice.

[minimalist syntax]

Raise our taxes finally! We can't take anymore of your draconian cuts to education.

[StrongEagle]

Who keeps voting in the troglodyte Republicans?

[suec03]

Republican voters in Republican enclave districts, often with gated communities or in Republican-heavy rural areas.

[torrrep]

I got a better idea. Kick all of the illegal immigrants out of the schools and you'll have plenty of money.

[suec03]

Most of those Latino students are native-born US citizens. Some have undocumented, employed, sales tax, property tax and social security tax paying parents.

[terris]

Where'd all the Lotto and Casino loot go?

[CaptainHowdy]

Don't worry, the Screen Actors Guild will finish the state off soon... for good.

It was a nice place while it lasted.

Sigh...

[milo9]

Arnold's sins were in not putting anything away for a rainy day and not making his cronies pay their fair share of taxes.

[torrrep]

Arnold doesn't control the spending. The Democratic legislature does.

[suec03]

In California, it takes a supermajority to pass the state budget. There are not enough Democrats to make a supermajority. The Republican leadership has been enforcing party discipline so that the Democrats can't get enough Republicans to join them to pass the budget and put a tax increase before the voters. The Republicans have been opposing all tax increases of any kind and would rather borrow or use accounting tricks.

[rabiddog6708]

I guess Arnie will need to raist taxes. Repubs never learn. After 8 years of Reagan running on deficit spending and not raising income tax (the jerk actually lowered them), George HW Bush was forced to pass the biggest tax increase in history (at that time) to run the government. The Goveninator is now is the position that caused Daddy Bu$h re-election (Repubs never forgave him for raising their taxes).

[torrrep]

You're ignorant. We pay the highest state and local taxes in the nation. The Democratic legislature controls the money. Not the governor.

[suec03]

The Republican minority leaders in the Assembly and Senate have the power in the budget process. The Democratic majority cannot pass a budget without agreement from the Republican leadership due to the supermajority requirement.

[Balzac]

Schwarzenegger is just planning new maneuvers for political advantage. The last budget crisis in Kuleefohneah was manufactured by Arnold's friend Ken Lay in order to bankrupt the state as a basis for the recall of Grey Davis. Now Arnold has new Republikan imperialist tricks up his sleeve for the new budget crisis. As the saying goes, in Chinese, the same character means crisis and opportunity. Republicans are always looking for financial gain from others' misfortune.

[starfire426]

Well....well...well...if it isn't the Beg-a-nator!!!!

[josephebacon]

Borrow and Spend Arnold screwed this state up! I wonder why the press who endlessly trashed Davis is so silent about Borrow and Spend Arnold's endless red ink orgy?

[JBS]

Owned by the same corporations.

[spyguy68]

The gov should lock the legislators in a large room with only bread and water and piss pots until they come up with a balanced budget. If that results in some of the repub legislators being beaten severely, so be it.

Another thing the legislature could do is defund every public service in republican areas, since republicans don't want to pay taxes, they should get no services. This would involve defunding every school in republican areas (schools are over 50% of the state budget), not accepting any convicted criminals from those areas (state prisons are 10% of the budget) and the list goes on. Maybe once the people of California realize there is no free lunch they will quit listening to the anti-tax folks (who do not actually have to provide the service modern societies require).

The democrats and the Gov have done a poor PR job on this. They need to explain to people exactly what they get for their money and ask the people exactly what services they want eliminated to match up with the revenue coming in. Keep in mind that MOST of the state budget is mandated by laws that the people passed by initiatives! The legislature actually only controls a small portion of the budget and there is nothing left to cut that will not land the state in court where the state will lose and funding will be required to be maintained.

California has no realistic option other than higher taxes.

[toypiano]

Imagine that. A republican is in charge and fiscal catastrophe ensues. Now where have I heard that before...

[Sammy00400]

You need to read more and find out why this state has been in a fiscal mess for 30 years now.

[FearlessFreep]

Thank you, Howard Jarvis.

[milo9]

Exactly! California's been screwed up since Howard Jarvis and his god damn Proposition 13. Nobody want's to pay their fair share and the state is going to hell as result. Imagine, Dems agree to cut spending and Republicans refuse to meet them half-way. It's these Republicans who are gumming up the works.