Schwarzenegger, Battling Deficit, Tries Again to Revamp Budget

(Bloomberg) -- California Governor Arnold Schwarzenegger is trying for a third time to overhaul state spending as he grapples with a growing deficit and resistance from Democrats who want higher taxes to fill the gap.

The governor, delivering his annual State of the State Address yesterday, called for a constitutional amendment requiring California to set aside a portion of surplus revenue during flush years to stabilize the budget in lean times. He said he will propose a spending plan tomorrow that cuts most programs in the state to eliminate a $14 billion shortfall in the coming fiscal year.

Schwarzenegger, a former bodybuilding champion and Hollywood actor, was swept into office in 2003, in part on voter angst over how his predecessor Gray Davis managed the most populous U.S. state's perennial budget problems. The state's finances are hamstrung by mandatory spending increases and a boom-and-bust cycle of revenue tied to income taxes.

 

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