Governor Says He'll Veto Budget

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State lawmakers stayed up into the wee hours of the morning Tuesday to pass a budget that was a record 78 days late. Legislators were only able to grab a few hours of sleep before the Governor vowed to veto the plan. KPCC's Julie Small reports.

Julie Small: The budget bill hadn't even arrived on his desk when Governor Schwarzenegger announced he'd veto it.

Governor Arnold Schwarzenegger: I will not sign a get-out-of-town budget, that punishes tax payers, pushes the problem into next year, and includes fake budget reform. If my veto is overridden, I will send the hundreds of bills on my desk back to legislators with my veto.

Small: And with that, Schwarzenegger declared war on the legislature. And legislative leaders took up the challenge.

Don Perata: Just adding fuel to the fire right now is a mistake, but if it's gonna be a showdown that he's looking for, he's gonna get it.

Small: That's Senate leader Don Perata. The Oakland Democrat says his party and his Republican colleagues are ready to override the governor's veto of the budget bill.

Perata: This was the best that we could do. We're not proud of it, but a lot of innocent people are suffering right now, and this has to stop.

Small: The budget plan cuts $7 billion in state spending; it also raises 9 billion in revenue, mostly by withholding more money from taxpayers. The governor criticized that aspect of the plan, but Perata says that's not why Schwarzenegger threw down the gauntlet. Perata says the real reason is...

Perata: Rainy day fund. That's the whole issue. It's not the budget. He's not critical of all the, all the... you know, I call it the pay day loan play, that we did, and we know, he's not critical of that. He didn't get what he wanted exactly in budget reform.

Small: The governor got most of what he wanted. The plan gives him new authority to cut spending mid-year if revenues fall short of forecasts. It also increases the amount of money the state puts in a rainy day fund to fill in budget gaps when the economy is bad.

It'll total 12 and a half percent of the state's general fund if the governor wanted, although lawmakers said they'd only put in 3 percent of the general fund this year to start. Still, the governor got his rainy day fund.

Schwarzenegger: It is very important that from now on, when we have an economic up year, that we take some of that money and put it aside in a rainy day fund so we never have that fight again, the way we've been fighting over this money, how do we close this hole, and what we do, and how many cuts do we make, and all this.

Small: But the governor wanted lawmakers to state clearly that the government could tap that rainy day fund only in a fiscal crisis. Democrats wanted more budget flexibility than that, and refused to put strict limits on hwo to use the rainy day fund.

That's not what Schwarzenegger wanted. The governor told lawmakers he'll veto the budget bill, and he wants them to go back to work and fix it. But they say the budget reforms they've passed are a good start, and they plan to override the veto.