Schwarzenegger to veto Democrats' budget plan

SACRAMENTO, Calif. (AP) - December 18, 2008 The Republican governor said lawmakers sent him a "terrible budget" that didn't make deep enough cuts or include the kind of economic stimulus he wanted to boost California's ailing economy. At a news conference shortly after the vote, he urged lawmakers to stay in Sacramento until they can work out a deal.

"I don't think anyone should go and celebrate Christmas - none of the legislators - and have people out there suffering. I think that the Legislature owes it to the people of California to solve this problem before Christmas," he said.

Both houses adjourned for the holidays after the vote.

Democrats and Republicans have been unable to compromise on a way to address a deficit that is expected to hit $42 billion in the next 18 months. Schwarzenegger first called the Legislature into a special session to tackle the problem Nov. 5.

The plan Democrats pushed through Thursday with a simple majority would have made more than $7 billion in cuts to education, health care and prisons, and increased taxes and fees by about $11 billion. Democrats claimed their complicated proposal avoided the need for a two-thirds majority vote typically needed for a tax increase.

"This proposal that they've sent and this package that they are sending down does really only do one thing, and this is punish the people of California," /*Schwarzenegger*/ said.

He has been at odds with fellow party members over their staunch opposition to tax increases. Republicans - a minority in both houses but essential for the two-thirds vote on taxes - also want deeper budget cuts than Democrats would support.

Republicans did vote for some of Thursday's bills that made sweeping cuts to /*California*/ programs.

In all, the Democratic plan addressed $18 billion of the state's shortfall over the next 18 months by cutting some taxes, raising others, imposing a new fee on gasoline and making major cuts to state programs.

Taxpayer groups threatened to sue if taxes were raised without a two-thirds majority.

"Ask yourself this: Is there any other credible, politically acceptable plan put forward by anyone to make an $18 billion-plus dent in California's budget deficit? I think the answer is no," Senate President Pro Tem Darrell Steinberg, D-Sacramento, said in introducing the package.

Republican lawmakers warned the plan would hit Californians hard during an already difficult recession.

"We're talking about substantially raising taxes on the people of this state," said Senate Minority Leader Dave Cogdill, R-Modesto. "This proposal before us today will raise the gas tax, it will raise the car tax, will raise the personal income tax, and it will raise the sales tax to the tune of about $1,000 a year for an average family making about $50,000."

In a sign that the impasse was taking a toll, a state panel on Wednesday voted to stop lending money for an estimated 2,000 infrastructure projects statewide through June, an unprecedented move that the board said was necessary because California can no longer afford the work.

California has not been able to borrow money for months and faces a cash shortage in February.

The package passed Thursday would have generated another $9.3 billion in general fund revenue by replacing gasoline taxes with a variety of fees.

It would have raised the taxes Californians pay on gas by about 13 cents, replacing an 18-cent-a-gallon excise tax and a fluctuating sales tax with a 39-cent-per-gallon fee; raised the state sales tax by ¾ of a cent; taxed oil produced in California; boosted personal income taxes by 2.5 percent; and collected taxes from independent contractors upfront.

The shortfall for the fiscal year that ends in June is nearly $14 billion, about 10 percent of the state's $144.5 billion budget. But that hole is expected to grow in the next fiscal year unless lawmakers cut spending, raise revenue or do a combination of the two.

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