Arnold Schwarzenegger signs $145-billion California budget

SACRAMENTO -- After vetoing $510 million in spending passed by the Legislature, Gov. Arnold Schwarzenegger signed the state's tardiest budget this morning, allowing more than 80,000 state vendors with outstanding bills to be paid.

The governor's cuts include the elimination of $191 million in tax credits for elderly renters and property owners, and the postponement of one of the signature achievements of his first term: a program to help reduce prescription drug prices for low-income Californians.

The final budget spends $145 billion. It sets aside a $1.7-billion reserve fund -- nearly $1 billion more than the Legislature approved. Schwarzenegger said his desire for a bigger fiscal cushion was the motivation for most of his vetoes.

"It's painful," he told reporters at an unrelated event this morning. "I had to think about it, rethink about it, but we needed the money, and I just wanted people to understand that the Legislature gave me no choice but to make those cuts to be fiscally responsible."

"Our economy, not in this state alone but in the country and worldwide, is in a situation where we have to be very, very careful with our spending," he said.

At a briefing, Schwarzenegger's budget director, Mike Genest, told reporters that even the increased reserve fund was "not nearly adequate," given the ailing economy.

State Controller John Chaing, a Democrat who has sparred with Schwarzenegger over efforts to control spending, said the budget "was out of balance the moment it was signed."

In a statement, Chaing said: "This budget dooms those most harmed by the record-setting budget stalemate -- students on financial aid, nursing homes, child care centers and other providers of critical public services -- to relive the same nightmare next year. "

For the second year in a row, the governor stripped funding from a program he and Democratic legislators created in 2006 to negotiate lower prescription drug prices for Californians. Schwarzenegger's campaign had trumpeted that law to help him win reelection, but the state has not announced any discounts negotiated with pharmaceutical manufacturers as a result of that law.

Genest said the governor decided to eliminate the property tax program for the elderly because there was no way to legally trim it down. He said it would return next year if lawmakers have money to pay for it.