Schwarzenegger offers another budget compromise

Good afternoon, everybody. I hope you all had lunch, because I didn't. (Laughter) I'm losing weight. I'm telling you, very soon I'm going to have abs like you, Dan.

But anyway, as you know, the constitutional deadline for a new budget was more than two months ago and the legislature still hasn't passed a budget. This is shameful and it has already imposed very difficult hardships on Californians across out state. Many Medi-Cal hospitals are not getting paid. Neither are nursing homes and childcare centers. We had to lay off thousands of state workers to prepare for the looming cash crisis.

The pain will become even worse and more severe if the legislature drags this out any longer. This is precisely why I've pushed for budget reform since I have come into office so that we could avoid putting the people of California through this kind of madness every time there is an economic slowdown.

This year Republicans and Democrats have talked a lot about reforming the system and fixing the system. But I think it's time for the dialogue to stop and to create some action and it is time for everyone to compromise and to get this done once and for all. Republicans must step out of their ideological corner on the right and Democrats must step out of their ideological corner on the left. We must meet in the middle. We must compromise so that we can move on with vital businesses besides the budget such as the water, court and prison crises that we're in.

That's why we're here today to announce a compromised budget proposal that addresses the $15.2 billion deficit and makes additional spending cuts, increases revenues and, most importantly, reforms our broken budget system.

All of us have been sent to Sacramento to find common ground here and to get results and to move California forward. My compromised budget does exactly that.

-- It includes an additional $2 billion in spending cuts above what the conference committee has agreed to.

-- It sets up the strongest rainy day fund in the nation, so that we could be required to put money aside in the good years and stabilize revenues in the tough years.

-- It gives future governors the power to make mid-year spending cuts so that when they see a deficit coming they can make those cuts immediately.

-- And it includes also an economic stimulus package to put people back to work and help revive our economy.

These are groundbreaking reforms that will end our feast or famine budgeting and help restore the public's faith in state government.

But in exchange for permanent reform and a budget system that really will work, I am willing to compromise on the temporary one-cent increase in the state's sales tax followed by a permanent cut, which means then it will go after three years below the level where it is now by .25 cents.

This budget does not borrow or steal money from local governments, nor from transportation. It is not a get-out-of-town budget. It does not kick the can down the road and let someone else then worry about it later on. It is fiscally responsible, it's a fiscally responsible compromise with reforms that fix our system once and for all. This compromised budget proposal puts our state on the road to fiscal sanity and will give California a budget system that works, which means we will pay off our debt and also we will be living within our means.

Thank you very much. And now, if you have any questions, please feel free to ask.

QUESTION/ANSWER:

QUESTION: Governor, you said it's a compromise. Have you got anybody on board with this, Democrat, Republican leadership?

GOVERNOR: Well, as I said, there are still -- you know, the right is on the right and the left is on the left and they are pulling that rubber band as close as possible to the middle but they are not there yet. So this is basically saying here is an idea of how we can solve this where everyone gives -- because it's the only way that you can solve this budget crisis, is by everyone, the Democrats giving and the Republicans giving.

And that's why I say they have to step out of their ideological corners of the right and the left and come in the middle, because that's basically what the people expect us to do. They send us to Sacramento to fix the problems and not just to get stuck in our ideology and become party servants but to become public servants and that's what we're here for in Sacramento.

And this is what this proposal says. And it's for me to show, look, I've been against certain things but I'm stepping over the line here and I am doing things in order to get it done. It's a way of compromising. And I have explained it to each one of the leaders. This budget will not get done by taking it easy or doing easy things. This budget only will get done if we all make tough choices that we maybe thought we would have never make.

Yes?

QUESTION: You talked about you were unhappy with the notion of borrowing (Inaudible) talked about in Big Fives and other discussions. But to clarify, does that mean you don't want to do but you will? Or you absolutely won't agree to it?

GOVERNOR: We are right now still paying off the debt of the ERP. We have not paid it off, we are still paying off debt and therefore it will be unwise to go and create more debt and borrow again before we have paid off the debt.

So I think we have to recognize that we need more revenues. I think that by borrowing and taking money from local government and taking money from transportation and kicking that can down the alley when we know that that means that next year we will have the same problem, we will be in the same crisis and we will then have to raise taxes next year.

I think it would be irresponsible. I think we should do it this year, we should fix it, we should fix the budget system and create the extra revenues and then move forward in a sane way, rather than going now through another year of the same fights and not getting anything done.

QUESTION: So is that a no, I won't do it, I won't agree to it?

GOVERNOR: As I said, it is not a wise idea and I will not do that, no.

QUESTION: Governor, how does this announcement today advance the situation? Haven't these proposals essentially been on the table for several weeks?

GOVERNOR: We have been discussing, I think the last two months, various different ideas and proposals. And this is just basically to come out officially and to say here is officially my proposal and take this seriously because this is where I'm willing to go. And this is not part of a Kabuki or anything like that, this is really trying to move things forward, because we are running out of time.

And I think it is so important for Democrats and Republicans to seize this opportunity and to say we can make this work, we can come to an agreement. We all have to go and do things that we normally would not do but it's the only way we get this done. And in return, we maybe also get done the water, we can go and make a commitment to build more courthouses and work on health care and all the important issues that are facing us. I think it is key for us that we finish this year with victories and not another year where nothing gets done just because everyone is stuck in their ideology.

QUESTION: Do you have a different strategy to sell this now? I mean, you've had the leaders in, you've talked to the leaders individually, as I understand it. Are you going to start bringing down more members or go to the caucuses? How are you going to push this forward?

GOVERNOR: I always try to respect the leaders. They are the leaders, they are chosen by their caucuses to be the leaders and so I will work through them. But I also am always talking to members individually, just to explain why this is the right way to go. Yes, of course.

But strategy-wise, not much has changed. I keep hammering away to them, every time I talk to them, that let us get together and let us work this out. And don't come to the table with the same stubborn position. You've got to be able to be flexible. Because that's what happened yesterday when we had the Big Five Meeting; the Republicans came in again with the mantra, no taxes, no taxes, no taxes and then the Democrats came in and say no cuts, not cuts. So you can't continue this way, because otherwise we're going to sit here six months from now.

And I made it very clear to all of them that this is a year where it is clearly coming out that our budget reform that we have attempted in 2004 with Propositions 57 and 58, does not work, that it was too soft, that we have to make it a tougher budget reform, something that really works, where we're putting together a certain amount of money. And this is why our budget proposal and reform says that we should put 12.5 percent of our revenues into a budget stabilization fund and that should be the limit. So that would mean the most amount of money of any state in the union, to have that kind of stabilization fund.

And also to make mid-year cuts, up to $3 billion, so that when you have a situation like last year where you saw that in August there were $200 million less coming in than anticipated -- and then you see by September/October it's $300 to $400 million and by December it was $600 million -- that I, as governor, can go in already in September and start making the cuts and say okay, we're going to cut the programs so that we don't have this kind of a situation. And then we would have only had a $4 billion problem rather than last year the $7 billion problem because we didn't have a chance to do the mid-year cuts.

So those are the kind of changes that we want to make. We have to learn from the past. I think that everyone had to recognize that we spent more money than we have taken in and we all have to recognize that. But we also have to recognize that the only way to fix it is by creating extra revenues. But at the same time, as a compromise for that, in return to go and say let us create a system now that this will never, ever happen again, so we have to ever go back to the taxpayers and say we need to raise temporarily the taxes.

Okay. Last question, please.

QUESTION: (Inaudible)

GOVERNOR: Say again?

QUESTION: The State Controller today --

GOVERNOR: Yes?

QUESTION: -- said he's going to go forward with the paychecks, issuing regular paychecks on Friday, sending them to the state printers. What do you think about that?

GOVERNOR: I am upset about it and I'm upset that he's not a team player. And I think that our state can only function if we all are part of one team. It's like a basketball team, it's like a sports team. And I think if we all go off and make our maneuvers in a political way rather than what is best for the state, I think that it hurts the state. But I will continue using my executive power and I will continue making sure that we have enough cash so that as we go on here that we can make our payments. I think this is very important, it's my responsibility.

Thank you very much for you time, appreciate it very much.

QUESTION: How can you be at the convention? You told everybody not to --

GOVERNOR: No convention if we don't have a budget.

QUESTION: But you're on the list. They just released the list. You're on the first night.

GOVERNOR: (Inaudible)

QUESTION: Thank you.

GOVERNOR: It's a very good question. Sorry, I think that ought to be addressed. And I made it very clear to Senator McCain when I spoke to him yesterday and I made it very clear to his people, that I am honored to be asked to speak at the convention, the Republican Convention and that I would be honored to do anything to help him win the presidency. But that the state of California and the budget is the most important thing, so that if I don't have a budget I cannot speak at the convention. I will be here. So I think this is very important, so I think everyone knows that.

Thank you very much. Thank you.