Governor Schwarzenegger signs state budget, calls for more budget reform

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Governor Arnold Schwarzenegger signed the state government's budget in Sacramento Tuesday. The $143 billion plan is 85 days late. KPCC's Julie Small reports that's why the governor skipped the usual signing ceremony in the Capitol Rotunda, and instead began lobbying for more budget reform.

Julie Small: Waiting for Schwarzenegger to sign the budget was a bit like standing at the finish line of a marathon when most of the runners have already passed. Last year, the governor signed the budget under the capitol dome, flanked by dozens of applauding state legislators. This year they'd already recessed. So the governor signed the $144 billion spending plan in his office with little fanfare.

Governor Arnold Schwarzenegger: Let's sign it, because then people can get paid.

Small: Santa Cruz Democrat John Laird, who chairs the Assembly budget committee, was one of the few remaining legislators in the building. Laird interpreted the governor's decision to forego a signing ceremony.

John Laird: It says that's there's no reason to celebrate.

Small: But inside his office, the governor said there was something to celebrate. For one, he fended off Republican attempts to borrow money from local governments to close the deficit. He invited a crowd of city and county officials to his office to applaud as he scrawled his signature on the blue leather-bound budget.

Schwarzenegger: That's it. [Snaps pen cap back on, local officials applaud]

Small: Schwarzenegger then headed straight to the steps of the Capitol to claim more victories: He got more money in the state's "rainy day" fund. He made it harder to take the money out of that fund. He won the power to cut a billion dollars more in the middle of the year if revenue falls short of expectations. But the governor said he still didn't feel much like partying.

Schwarzenegger: Because it is inexcusable to have a budget that is three months late. And it is three months late because both of the parties stayed in their ideological corners and refused to come out. That is why the budget took so long.

Small: The governor threw his support behind Proposition 11; the November ballot measure would change how California draws the lines for Assembly and Senate districts. It would take that power away from legislators and give it to an independent committee.

Schwarzenegger also talked about the need to punish legislators for passing the budget late by withholding their pay. But Assemblyman John Laird says neither change would get California a better state budget.

Laird: If he was a legislator for 10 minutes, he'd probably have a different opinion.

Small: Laird says the legislature's problem is that California's constitution requires a two-thirds majority to pass a budget and to raise taxes. He says that dooms any budget plan or any tax that Republicans oppose, and he says the governor should know that.

Laird: He should believe it after the fact that he put his own budget out there and couldn't persuade one member of his party to go for it. And I don't think the consequences he lays out are the consequences that would have changed it. I think a simple majority would really make us have an on-time budget every year.

Small: Laird says unless that happens, state lawmakers will pass budgets that don't solve the state's ongoing deficit, like this year's plan. It relies on a combination of cuts to services and one-time gimmicks to bring in new revenue without raising the taxes. But gimmicks or not, the governor's finance director Mike Genest says...

Mike Genest: We think this budget works as is. But there are clearly all sorts of downside risks. There are always downside risks.

Small: Genest says that's why Schwarzenegger used his "blue line" veto to cut another half-billion dollars from the state's general fund. Genest says the cuts, mostly to health and human services, bolster the state's cash cushion.

Even then, he says California will start the next fiscal year more than a billion dollars in the hole. Genest admitted that hole could deepen if the weak economy hurts the state's plan to borrow $10 billion against the future proceeds of the California lottery.

Genest: In six months or a year, when that lottery proposal is ready to go to the street to be bid, there's still going to be people loaning money. There's going to be money flowing here and there.

This is a good investment, we believe, for people, so we're confident that it can work. Obviously the financial situation is a huge question mark over everything, and I don't think anyone right now has the exact answer to it.

Small: If the plan to borrow against the lottery fails, or voters fail to approve it, Genest said California's deficit would jump to $6 billion next year.