February 21, 2009 / 12:32 AM / 11 years ago

Long awaited California budget signed into law

SAN FRANCISCO, Feb 20 (Reuters) - California Gov. Arnold Schwarzenegger signed a package of bills on Friday to close a $42 billion state budget gap, clearing the way for his campaign to rally voters to endorse ballot measures needed to further bolster the state’s finances.

Schwarzenegger said the state government could resume, with a budget signed into law, funding public works projects that had been halted because it was running out of cash.

“This will save hundreds of thousands of jobs,” the celebrity governor of the most populous U.S. state said at a signing event at the state capital of Sacramento. “We can continue more than $5 billion worth of construction work now and then we can go out and sell the bonds again, to continue rebuilding California. That’s the important thing.”

Noting that California had not sold general obligation debt for eight months in part because of its financial woes, State Treasurer Bill Lockyer said the budget “paves a major segment of the state’s road back into the bond market.”

“To thaw the freeze on financing for bond-funded infrastructure projects, my office needed a credible budget fix,” Lockyer said. “We’re still assessing all the short-term and longer-term ramifications of the final product, but I believe investors will conclude this plan passes the credibility test.”

NEED FOR SACRIFICES, BONDS

Schwarzenegger acknowledged the budget, passed after an impasse in the legislature of more than 100 days, is a lean plan as it slashes spending. It also requires substantial tax increases to keep the state’s books balanced through July 2010.

“It’s a budget where everyone will have to make certain sacrifices,” the Republican governor said.

Schwarzenegger noted he would veto about $1 billion of items from the budget: “We need to do those things in order to be fiscally responsible, because government has to live within its means; that’s the important message of this budget.”

Included in the budget package are bills requiring a number of ballot measures, including ones Democrats who control the legislature agreed to put to voters to secure the single Republican vote needed to put the package to Schwarzenegger.

Budget-related ballot measures will ask voters to support a state spending cap, a state rainy day fund, shifting money from certain programs and allowing the state to sell bonds backed by state lottery revenues.

Schwarzenegger said on Thursday he would begin campaigning for the measures on the May ballot immediately.

Another measure would freeze lawmakers’ pay when the state budget is in deficit and a measure for the June 2010 ballot would create an open-primary election system, which may help moderates win elections and recast the state’s politics, now riven by highly liberal and conservative office holders.

While tacking on the measures to the package locked in the golden Republican vote so Schwarzenegger had a spending plan to sign, it left many lawmakers from both parties frustrated.

State Sen. Leland Yee, a Democrat, said the measures were “raw politics” and outside the scope of budget matters. “We’ve opened a wide door when it comes to budgets, we can open them to any negotiations,” Yee told Reuters.

The lottery bond measure also raised concerns as voters could reject it and roil the state’s finances. “We may be out of these woods, but into another set of woods,” said James Hawley, co-director of the Elfenworks Center for the Study of Fiduciary Capitalism at Saint Mary’s College of California. (Editing by Christian Wiessner)

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