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Gov. Proposes Bond Measure of $15 Billion

Under the plan, the state would borrow the money to cover the shortfall in this year's budget. He also seeks a cap on future spending.

November 19, 2003|Evan Halper and Peter Nicholas | Times Staff Writers

SACRAMENTO — On his first full day as governor, Arnold Schwarzenegger proposed putting a $15-billion bond measure before voters in March, saying long-term borrowing is necessary just to clean up the deficit he inherited from Gray Davis.

"We have to now do the kinds of things to make good for the damage done in the last few years," the governor said Tuesday. "We're not here to point fingers at anyone. That time is over. It's not the election now. It's just this is the reality."

Schwarzenegger also said he would ask voters to approve a cap on future state spending, to prevent crippling deficits from occurring in years to come.

The governor provided no details on the cap, which will be complicated to craft, and his proposals were met with skepticism by leaders of the Legislature, which must approve them by Dec. 5 to make the March ballot.

"To basically go into more debt in the future general fund, to do this is questionable," said Senate President Pro Tem John Burton (D-San Francisco).

Noting that Schwarzenegger had not yet proposed spending cuts and that the borrowing would do nothing to help balance the 2004-05 budget, Burton said: "I think they're starting to learn. They're going to dance as fast as they can because this is a very, very serious, difficult situation. If you say no education [cuts], no taxes, you need that magic wand."

The budget proposals were the centerpiece of a wide-ranging news conference that marked Schwarzenegger's debut. Holding forth in a local auditorium to accommodate scores of journalists from many countries, the governor mixed serious policy discussion with lighthearted bantering for 28 minutes. He reaffirmed his commitment to repeal the law that allows illegal immigrants to obtain driver's licenses and said he would soon propose changes in the workers' compensation insurance program.

The flurry of proposals was designed to make maximum use of the leverage Schwarzenegger has as a popular governor elected by voters who have told pollsters they are angry with "politics as usual."

Schwarzenegger offered no suggestions of budget items that he would propose to cut -- beyond saying that he would forego his own salary of $175,000 -- but promised $2 billion in unspecified cuts.

"I'm working right now with the legislators and Democrats and Republicans," he said. "Each one of them will want to present to us their package and their ideas. And as I said yesterday and in the past, we want to make this not a Democrat or Republican kind of thing, we want to make it bipartisan. Have both parties come together and present their great ideas. That's why we don't have any specifics right now."

Democratic leaders insisted that it's the governor's responsibility to suggest how to balance the budget.

"When they call a special session, the ball is in the governor's court," Burton said.

Republicans praised the governor's initiative.

"He is delivering on his promises," said Assemblyman John Campbell (R-Irvine). "He said he was going to lower the car tax. He did. He said he was going to repeal the driver's license bill. He is. He talked about seeking a spending limit. He is. And he promised to deal with workers' compensation as the biggest drag on the economy, and he is. It's quite remarkable what he has done in 36 hours."

A few hours later, after a "Big Five" meeting of the new governor and the four legislative leaders, Assembly Speaker Herb Wesson (D-Culver City) said: "He's given us a skeleton. We'd like to see more meat on the bones."

Wesson's own tenure may be in jeopardy. Members of the Democratic caucus were nearing a vote on whether to replace him, a move that could further slow legislative action.

To balance this year's budget, legislators included more than $12 billion in borrowing that has yet to take place because of legal challenges. If voters approve Schwarzenegger's proposal, it would remove the legal concerns but not address the fiscal ones.

Borrowing for as long as 30 years to cover current expenses is considered poor fiscal practice. Some Wall Street analysts voiced skepticism about the bond proposal, noting that it also does not help the state balance its budget beyond July 1.

"It looks like you are moving sideways," said David Hitchcock, public finance ratings director at Standard & Poor's bond rating agency.

Earlier proposals floated by the governor's staff called for larger borrowing, which could have helped balance next year's budget but might have jeopardized the state's credit rating. Hitchcock said there was concern about whether the market could handle the larger bond.

State Treasurer Phil Angelides, whose office would have to sell the bonds, said he opposed the idea, saying it was "ludicrous" that Schwarzenegger's first budget proposal is to borrow more money.

"It does not move us one inch closer to a balanced budget," said Angelides, a Democrat expected to run for governor in 2006. "I cannot think of when I have ever seen the first move out of the box being substantial borrowing."

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