Schwarzenegger Vetoes Bill to Shave $2 Billion From Budget Gap
The measure sought to trim Californias $20 billion deficit, mostly through reductions in spending on prisons. Schwarzenegger, a Republican, said the bill overstated how much could be saved, particularly by deporting illegal aliens now in jail, and urged the Legislature to take other steps to narrow the shortfall in the $87 billion annual budget.
“The longer the Legislature delays action on real reductions, the more difficult the choices become,” Schwarzenegger said yesterday in a letter to lawmakers.
Schwarzeneggers decision marks a setback to initial efforts to chip away at the deficit facing the state through June 2011. The vetoed measure contained the majority of the spending cuts passed by the Legislature during an emergency session Schwarzenegger called to address the imbalance in the state budget.
California has been among the states hardest hit by the recession, which reduced tax collections. The resulting strains left it with the lowest credit rating among U.S. states led investors to demand higher yields on California bonds than they do for other states.
Struggle for Agreement
Schwarzenegger and the Democrat-controlled Legislature have struggled to reach agreement on how to respond to the deficits, which are threatening to drain the state of its cash unless the budget is redrawn. Controller John Chiang, the elected Democrat who pays the states bills, has warned that California could be forced to issue IOUs to pay some of its expenses for a second year in a row unless steps are taken.
Schwarzenegger yesterday didnt take action on a separate bill allowing the deferral of up to $5 billion of payments, a step intended to avoid IOUs and bolster confidence of investors. Nor did he act on another to replace the states gasoline sales tax with an excise tax, which would redirect $1.1 billion to pare the deficit.
In his veto message, the governor urged lawmakers to implement the spending cuts he proposed last month.
“Delaying implementation of the spending reductions I proposed in January will require the Legislature to make even more difficult choices later this year,” he wrote in his letter.