Governor's budgets: 1 gloomy, 1 worse

<p>SACRAMENTO -- Just days before next week's special election on budget-related propositions, Gov. Arnold Schwarzenegger on Thursday unveiled two new proposals to slash billions out of the state budget and to cut thousands of state jobs.</p><p>His first budget plan would tackle the current projected $15.4 billion deficit; the second is a backup in case voters, as polls indicate, reject the budget measures, driving up the deficit to an estimated $21.3 billion.</p><p>"I understand that these cuts are very painful and they affect real lives," Schwarzenegger said at a news conference. "This is the harsh reality and the reality that we face. Sacramento is not Washington -- we cannot print our own money. We can only spend what we have."</p><p>Billions of dollars in spending cuts and tax increases agreed to earlier this year by Schwarzenegger and the Legislature have not been enough to keep up with a sharp drop in tax revenue as the recession batters the state's economy.</p><p>Voter approval of three of the six ballot propositions -- 1C, 1D and 1E -- would give Schwarzenegger and legislators $5.9 billion more in general fund revenues to close the current deficit.</p><p>Nevertheless, the governor's first plan calls for layoff notices today for 5,000 state employees; cutting $9 billion in program cuts, including $3 billion from schools; shortening the school year by five days; speeding up collection of or increasing $2.8 billion in fees; and borrowing a staggering $7.5 billion from financially strapped local governments and a cash-strapped private investment market.</p><p>It would also slice $510 million each from the University of California and California State University systems, replacing the money with federal stimulus funds.</p><p>Schwarzenegger's second plan, based on the measures losing, would seek $2.3 billion more in spending cuts for schools, $1.7 billion higher fees, $1.4 billion in additional borrowing, the early release of 38,000 prison inmates and add park fees, including at Sonoma Coast State Beach.</p><p>Schwarzenegger said that, under the worst-case plan, the additional school cuts would shorten the school year by 7.5 days and would lead to teacher layoffs and larger class sizes.</p><p>It would also take a total of $1.2 billion total from the state university systems, and remand about 19,000 illegal immigrants in state prisons to the federal government, saving about $182 million.</p><p>Neither plan includes tax increases. The governor and legislators closed a $40 billion gap in February in part with $12.8 billion in temporary tax increase.</p><p>On Thursday, Schwarzenegger declared, "To look for new revenues is out of the question."</p><p>He said borrowing money from cities and counties, which don't have to repaid for three years, was unavoidable and preferable to tax increases.</p><p>"I despise going to local governments," he said, " . . . but we are now in such a terrible situation, there is really no other way out."</p><p>Among other elements, the budget plans would:</p><p>Sell state property, including the Los Angeles Coliseum, Cal Expo in Sacramento, the Cow Palace in San Francisco and San Quentin State Prison.</p><p>Cut monthly aid to low-income elderly, blind or disabled.</p><p>Cut payments to in-home health care workers and limiting services to the most needy.</p><p>In addition, under the worst-case budget, the governor would seek to:</p><p>Reduce some felony convictions to misdemeanors, sending up to 23,000 inmates to county jails, saving $100 million for the state but driving up counties' costs.</p><p>Add a 2.8 percent insurance surcharge on all residential and commercial property to fund emergency response agencies, raising $76 million a year.</p><p>Schwarzenegger's budget proposal will go to the Legislature, which has until June 15 to pass a spending plan, although the constitutional deadline is rarely met.</p><p>Critics said the governor was releasing his proposals ahead of time as a scare tactic to persuade voters to support the ballot measures.</p><p>"This is a desperation move," said Mike Roth, spokesman for the No on 1A campaign, which opposes the proposition that would create a spending cap and extend a series of tax increases.</p><p>Schwarzenegger and lawmakers called for the special election in February when they passed a two-year budget package, which they said at the time would solve California's deficit through June 2010.</p><p>Whether they pass or fail, three of the six measures on Tuesday's ballot will have an immediate effect on next year's budget: Proposition 1C, which is intended to raise $5 billion by borrowing against future lottery revenue, and Propositions 1D and 1E. The last two transfer money from mental health and child development programs previously approved by voters.</p><p>Proposition 1A has been the most contentious. It would create a spending cap, which most state employee unions oppose, and extend for one to two years the increases in the sales, personal income and vehicle license taxes that lawmakers enacted in February. The extension of those tax increases would generate an additional $16 billion between 2011 and 2013 and is a provision that has raised the ire of conservative groups.</p><p>This article was compiled from reports by the Associated Press and Sacramento Bee.</p>