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Schwarzenegger calls on chamber

Governor uses San Diego visit to discuss budget

California Gov. Arnold Schwarzenegger was in San Diego Thursday to provide an update on the state budget, which he presented to members of the San Diego Regional Chamber of Commerce in a roundtable discussion.

Schwarzenegger said a budget is on the table but there is disagreement between Republican legislators and Democrats, who feel there are too many cuts in it.

"But we have been talking and both of the parties have come together, and we have started negotiating the budget, and there has been a good spirit and willingness on both sides to get this budget done as quickly as possible," said Schwarzenegger, adding that state Democrats have not come up with a budget of their own.

"We need to understand that the world has less value," he said. "Everything has less value. There is less money around. So we cannot continue with business as usual."

California has an approximately $20 billion budget gap and Schwarzenegger said cuts need to be made or the state faces raising taxes and/or borrowing money, something Schwarzenegger does not want to do because he feels it is just a short-term solution that puts the state worse off in the following years.

"We need to cut down the structural deficit," he said. "I want to hand over a decent situation to the next governor, so this is why I made it very clear that I will not sign a budget if we go and just rely on taxes and more and more (borrowing). We've got to make those painful cuts."

The governor added that he doesn't expect the budget to pass until at least a few more weeks at the earliest.

Schwarzenegger's ideas to improve California's budget include a "rainy day" fund, where a certain percentage of each year's budget would go to an account that would only be used in certain deficit years like the current one.

He also proposes reforming the tax system to prevent residents from leaving California due to high state income taxes. Also, Schwarzenegger wants to end the state's reliance on 50 percent of its total revenues just from income taxes and capital gains taxes.

"It is a very volatile tax system, so again, there is something we can do about that," said Schwarzenegger.

The governor added that more state furlough days are likely to continue and that reducing state workers' pay to minimum wage is still a possibility if California legislators can't agree on a budget soon.

"I don't like to make cuts and lay off state workers, but we have to," he said. "I don't like to reduce workers' pay or have to take furlough days, but we need to make the necessary cuts to balance the budget."

Schwarzenegger said if a budget is not passed by the end of August or early September, the state will run out of money and IOUs will have to be given out again.

Schwarzenegger blamed the lack of a budget due to California legislators not coming to the table sooner and waiting until the final hour to balance the budget for the next fiscal year.

"Legislators always start negotiating on July 1, which is the deadline and when the new fiscal year begins," he said. "The governor has always handed in his budget on time, and also this time."


* Gov. Schwarzenegger in San Diego

* Ruben Barrales on Schwarzenegger's budget speech

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