Schwarzenegger appeals for quick budget deal

Associated Press Writer

SACRAMENTO ” Gov. Arnold Schwarzenegger on Tuesday told a joint session of the Legislature that California’s budget crisis will force a transformation in state government.

The state faces a $24.3 billion deficit and a looming cash crisis that jeopardizes its ability to pay its day-to-day bills. The governor said government must become more efficient and learn to provide services for less in the years ahead.

“Our wallet is empty. Our bank is closed. Our credit is dried up,” he said in the rare midyear appearance, which lasted less than 15 minutes.

His speech comes just four months after he and lawmakers agreed to a two-year budget package that was intended to close a deficit of $42 billion through mid-2010.

Declining tax revenue and overly optimistic assumptions about the tax increases they approved in February have reopened the state’s deficit.

Schwarzenegger said state tax revenue has dropped 27 percent from last year and has returned to 2003 levels.

In a letter to legislative leaders last week, Controller John Chiang warned that California will run out of money to pay its bills on July 29. He called on lawmakers to pass a balanced budget by their June 15 constitutional deadline so the state can access short-term loans in a tight credit market.

Its new fiscal year begins July 1.

“California’s day of reckoning is here,” Schwarzenegger said.

He has outlined a series of cuts that include an additional $5.2 billion reduction to public schools, laying off 5,000 state workers and further cutting the pay of another 200,000. He has proposed eliminating welfare for 500,000 families, terminating health coverage for nearly 1 million low-income children and closing 220 state parks.

“People come up to me all the time, pleading, ‘Governor, please don’t cut my program.’ They tell me how the cuts will affect them and their loved ones,” Schwarzenegger said. “I see the pain in their eyes and hear the fear in their voice. It’s an awful feeling. But we have no choice.”

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