SACRAMENTO — Legislative leaders are drafting a complicated scheme to help close the state's massive deficit by raiding funds voters have set aside for transportation and local government services, Gov. Arnold Schwarzenegger said Thursday, adding that it probably would force a state sales tax hike.
"It is not a good idea," the governor said in an interview with The Times. But Schwarzenegger, anxious to get a budget passed before the state experiences a cash crisis, did not rule out signing off on such a plan.
During the half-hour interview in his office, the governor offered a broad outline of the proposal being discussed in closed-door budget negotiations. Schwarzenegger, who seemed exasperated by his inability to fix California's fiscal dysfunction five years into his governorship, cited the borrowing plans to bolster his point that the state's budget system was in need of reform.
The proposal is being considered as part of a possible compromise between Democrats seeking to close the deficit with $5.6 billion in income tax hikes on the rich and Republicans vowing to block any new taxes.
The legislative plan would balance the state budget with the help of $1.1 billion voters set aside for transportation projects and at least $1.4 billion earmarked for local governments under Proposition 1A, which was approved in 2004, Schwarzenegger said. State law requires that the money be paid back -- at a steep interest rate -- in three years.
In order to ensure that the money is repaid, "I literally would have to guarantee that with a sales tax or something," Schwarzenegger said. "Where [else] do we get the revenues that someone can be saying so freely we can pay back this $2.5 billion we are borrowing?"
Officials involved in the confidential budget negotiations, who agreed to speak on condition of anonymity, said lawmakers also were looking to borrow $200 million voters set aside for early childhood education programs through 1998's Proposition 10.
Local officials and advocates for the programs expressed alarm at the proposal to raid their funds. They accused legislative leaders of ignoring the will of voters, who approved the measures to prevent the state from touching the money in question.
"The money they would take is going to fund a huge amount of projects," said Jim Earp, executive director of the California Alliance for Jobs, a construction trades group. "It would be a complete violation of the spirit of Proposition 1A."
