December 18, 2003

Schwarzenegger Declares Fiscal Crisis


Filed at 6:32 p.m. ET

SACRAMENTO, Calif. (AP) -- Gov. Arnold Schwarzenegger declared California in a fiscal crisis Thursday and invoked emergency powers so he could impose $150 million in spending cuts without the Legislature's approval.

``I had to do this,'' Schwarzenegger said at a news conference announcing the move.

The cuts, expected to come from social service programs, free up money for city and county governments that have lost more than $300 million since the governor voided an unpopular tripling of the state's car tax.

During his campaign to oust Gov. Gray Davis, Schwarzenegger promised to eliminate the tax hike Davis and the Legislature had agreed to in July. Repealing the tax was Schwarzenegger's first official act as governor last month, but he has yet to replace the billions of dollars the tax would have generated for local government services, particularly police and fire services.

The same budget agreement that increased the car tax gave the governor the power to cut this year's budget without legislative approval.

Some legislators said Thursday they were surprised by the emergency declaration and said it is the wrong way to react to budget problems.

``I think a lot of us are worried about where he's going to get the money from,'' said Democratic Assemblyman Joe Nation. ``I don't think you get yourself out of a hole by digging deeper -- his action just means that there will be more devastating cuts down the road.''

Although some Democrats have questioned the legality of Schwarzenegger's move, Democratic state Controller Steve Westly -- who will be the one to issue the checks to local officials -- said he supports the idea and believes it is legal.

``Our police officers and firefighters must not be held hostage,'' Westly said. ``This is an appropriate but temporary solution. The governor and the Legislature now have six months to cut waste and solve California's fiscal crisis.''

Schwarzenegger has sponsored legislation to repay cities and counties with reserve funds, but Democrats -- who form the majority in both houses -- say the state can't afford the expense without imposing deep cuts that they won't do.

The administration has said that cuts to cover the lost revenue from the car tax probably will come from social service programs.

A few weeks ago, Schwarzenegger had proposed suspending a civil rights law known as the Lanterman Act, a measure that guarantees care for the disabled, but administration officials said the governor has changed his mind about cutting millions in services for the developmentally disabled.

Another key issue in the recall of Davis and election of Schwarzenegger was Davis' handling of the state's multibillion-dollar budget deficit. Last week, he a reached a bipartisan agreement with Democrats to place a $15 billion bond and new spending limits on the March ballot.

A Wall Street rating agency, Fitch Ratings, lowered the state's bond rating Thursday to just above junk-bond status. Moody's Investors Service made a similar move Dec. 9.

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