Plunging into his next political trial, California Gov. Arnold Schwarzenegger (R) proposed a budget for the financially beleaguered state Thursday that lawmakers regard as either daring or delusional: He wants to close a projected $15 billion deficit without raising taxes.
Schwarzenegger has racked up a series of political victories since taking office last fall, and polls show that most voters approve of his governing style. But persuading a legislature firmly controlled by liberal Democrats to solve California's fiscal crisis almost strictly with budget cuts and borrowing -- and not new taxes on the rich -- looms as his biggest test yet.
"If we don't get our fiscal house in order, we threaten every program for years to come," Schwarzenegger said as he announced his first budget plan, adding that he is "all pumped up" for a summer showdown with the legislature.
To erase the budget shortfall, which has pushed the nation's most populous state to the brink of financial ruin, Schwarzenegger wants to curtail billions of dollars in aid to schools, colleges and local governments over the next year, reduce spending on some social programs for the poor and collect more revenue from casinos run by Indian tribes in the state. He also wants to borrow about $2 billion.
He and the legislature have until June 30 to reach a deal, but that could prove difficult. Even before Schwarzenegger unveiled his budget Thursday, some state leaders and lawmakers were complaining that he is relying on the same kind of quick fixes he criticized as a candidate for governor in California's recall election. Others contend that Schwarzenegger is trying to shut the legislature out of the budget debate entirely.
Twice this week, he has announced secretly brokered budget agreements with influential constituencies whose backing could defuse opposition in the legislature to his spending cuts.
Both deals reflect Schwarzenegger's emerging political pragmatism and his penchant for using unconventional tactics to win support for his agenda.
First, he stood with California's university leaders and said that they had agreed to support his plans to raise tuition and fees later this year in exchange for his promise to increase campus funding in the future and to ease the restrictions on enrollment that he had earlier proposed. Robert Dynes, the president of the University of California system, told reporters that he agreed to the unusual deal because it will give campuses that have suffered from budget uncertainty in recent years "renewed fiscal stability."
A day later, Schwarzenegger stood with local government leaders from around the state who had denounced some of his preliminary budget proposals and said that they had struck a similar deal. They agreed not to fight $1.3 billion in cuts to local governments this year and next in exchange for long-term financial protections from state raids on their treasuries.
But skeptics in state government say that those promises may be hard for Schwarzenegger to keep -- and that he is resorting to the same kind of wishful budget thinking of his predecessor, Gray Davis (D).
"We're concerned that if the governor's proposal relies too much on an economic rebound, there's no way we can handle these balloon payments and all these expenditures in such a short time," state Sen. Tom Torlakson (D) said.
State Treasurer Phil Angelides, a Democrat who might run for governor in 2006, called Schwarzenegger's budget "politics as usual" that does little to address the structural taxing and spending problems that keep California swerving from economic boom to bust.
"His deal-by-deal approach has done nothing to close our budget deficit," Angelides said. "He's done more gimmicks and more deferrals than we've ever seen in our state."
Some lawmakers are vowing to fight the governor's cuts to higher education even though campus leaders have agreed to them. But others say that Schwarzenegger already may have won enough public support to get his budget passed in time for the July 1 start of the next fiscal year, which would be a rare political feat in California.
Schwarzenegger is proposing his budget at a time of economic uncertainty in California, which is home to one of the world's largest economies. Schwarzenegger and his financial team say they are confident that the state, which has been battered by the tech bust in Silicon Valley and an ongoing exodus of businesses to Nevada and Arizona, is on the road to recovery. State revenue estimates this year have not fallen far below projections, as they often did last year, but job growth remains anemic.
Many Democratic leaders say the fastest route to restoring California's financial health would be to impose at least a temporary tax on the state's wealthiest residents, which they contend would inflict little pain inasmuch as the federal government has cut taxes in recent years.
But so far, Schwarzenegger has refused to budge on his opposition to any tax increases, which he has said would be the "final nail" in California's coffin. He repeated that vow as he unveiled his budget Thursday. "No state can tax its way to prosperity or financial health," Schwarzenegger said.
Special correspondent Kimberly Edds contributed to this report.