Gov. Arnold Schwarzenegger vowed Wednesday to let California government come to a "grinding halt" rather than agree to a high-interest loan to keep the state afloat if he and the Legislature do not close the yawning budget gap in coming weeks.
At the same time, the governor reversed himself on a proposal to end health insurance for families of police officers and firefighters who died in the line of duty. Schwarzenegger called the plan, first reported by The Times on Tuesday, a "terrible screw-up" that is being corrected.
The proposed cut was tucked away in a list of regulations that would be suspended if Schwarzenegger's latest budget revisions are adopted. It would have saved the state $1 million in 2009-10.
State finance officials say California coffers will be empty in late July unless the projected $24-billion budget shortfall is resolved quickly. Schwarzenegger said that emergency borrowing would be too expensive and that his threat to block it was necessary to prod lawmakers into swift action.
A loan would only "give them another reason why we don't have to do it now," the governor said. "What we need to do is just to basically cut off all the funding and just let them have a taste of what it is like when the state comes to a shutdown -- grinding halt."
The comments, made in an interview with The Times' editorial board, represent the governor's latest salvo in the battle over California's budget. An emergency loan -- not routine short-term borrowing but a longer-term, higher-interest loan -- would require the governor's approval but not that of the Legislature, unlike his proposed budget solutions. He approved the initial step for such borrowing last year and can revoke it at any time.
In the wide-ranging interview, Schwarzenegger challenged legislative Democrats to resist the influence of special interests fighting the deep program cuts he has proposed to help balance the budget.
Clearly alluding to labor unions that oppose the cuts, the governor said: "Do they want to protect the workers that provide the services, or do they want to protect the people that get those services? The choice is up to them."
Schwarzenegger reiterated his support for a constitutional convention to overhaul state government, calling it "the only hope that I have" for substantive reform. He also took aim at some other elected officials, characterizing them as obstructionists in his quest for change.
