Reporting from Sacramento — Gov. Arnold Schwarzenegger, seeking to conquer what could be the last budget crisis of his tenure, is engaged in a high-stakes negotiating strategy with lawmakers that could force him to preside over a meltdown of state government.
As legislators have scrambled to stop the state from postponing payment of its bills and issuing IOUs starting next week, the governor has vowed to veto any measure that fails to close the state's entire $24-billion deficit.
In doing so, Schwarzenegger has sent the message that he would rather allow the state to begin shutting down than let lawmakers push its troubles off for months by closing only part of the shortfall. The latter prospect could swallow up the rest of his governorship.
"Whatever needs to be done," Schwarzenegger told reporters outside his Capitol office Friday when asked why he would be willing to delay payments to needy Californians. "I know that there is a history in this building of always being late with the budget, to drag it out and to kick that can down the alley. . . . I don't think we have this luxury this time."
The governor readily admits that he sees the crisis as a chance to make big changes to government -- to "reform the system," he said Friday -- with proposals he has struggled to advance in the past.
Among them: reorganizing state bureaucracy, eliminating patronage boards and curbing fraud in social services that Democrats have traditionally protected. The governor also would like to move past the budget crisis to reach a deal on California's water problems that has so far eluded him.
By agreeing to a partial budget solution such as one the Assembly approved Thursday, the governor would lose leverage to accomplish many of those things. Without the pressure of imminent insolvency, Democrats might be less likely to agree to his demands.
But if his strategy fails, he could be blamed for unnecessarily subjecting state residents to misery.
"I don't believe the governor wants his legacy to be that he had the opportunity to avoid IOUs for Californians and that he failed to take it because he wanted to play a game of chicken," Senate President Pro Tem Darrell Steinberg (D-Sacramento) said last week.
California Controller John Chiang has announced that he will begin Thursday issuing IOUs on the scale of $3 billion per month, delaying payments to college students, welfare recipients, the elderly, the blind and the disabled. The state is on track to run out of cash by the end of July.
