STEVE INSKEEP, host:
A weakening economy means a lot less tax revenue for services in California. The state faces a $14 billion budget deficit, and Governor Arnold Schwarzenegger is trying to fix that without raising taxes. Yesterday the governor laid out some of his plans during a state of the state address to lawmakers, and we have more from NPR's Richard Gonzales.
RICHARD GONZALES: Governor Schwarzenegger was uncharacteristically somber as he described a California that is pretty much in the same shape as when he took over five years ago from a Democratic governor who was forced out by angry voters.
Governor ARNOLD SCHWARZENEGGER (Republican, California): I said it back during the recall and I'll say it again. We do not have a revenue problem, we have a spending problem.
(Soundbite of applause)
GONZALES: Schwarzenegger insisted that California economy remains strong. The problem, he says, is that revenues are flat, but state spending increases are written into the law.
Gov. SCHWARZENEGGER: So for several years we took actions to balance the budget, as long as the economy was booming. For several years, we kept that budget wolf from the door. But the wolf is back.
GONZALES: The answer, says the governor, is an approach he's already tried, a constitutional amendment to tie state spending to revenues.
Gov. SCHWARZENEGGER: When revenues spike upwards, the amendment that I propose would not let us spend all of the money that rushes in when the economy is good. Instead, we would set some of the good year money aside for bad years.
GONZALES: Schwarzenegger acknowledged that in his first year as governor he failed to get the Democratic-controlled legislature to pass a similar constitutional amendment. And three years ago, voters in a special election rejected another proposal to control the budget.
Schwarzenegger says he knows budget cuts will be painful, but he said fiscal responsibility is a way of being compassionate towards the poor and elderly.
Gov. SCHWARZENEGGER: We cannot continue to put people through that binge and purge of our budget process. It is not fair. It is not reasonable. It's not in the best interest of anyone.
GONZALES: Details of the governor's proposed spending cuts will be officially unveiled Thursday, but he made it clear that he won't seek a tax hike. And that was exactly what Republican lawmakers wanted to hear.
Michael Villines is the assembly Republican minority leader.
Mr. MICHAEL VILLINES (Republican Minority Leader in the Assembly): Nobody is going knocking on California's door and saying, hey, we hear you're having a hard time, let us give you more money. So the state of California and the politicians can't turn around and say we need you to give us taxes or help us. We have to live within our means.
GONZALES: But Democratic lawmakers say spending cuts alone won't balance California's budget. Senate President Pro Tem Don Perata says the governor also has to consider raising taxes.
Senator DON PERATA (Senate President Pro Tem): I didn't come up here to decimate the things that have made California great: education, care for the elderly, care for our children. We will have none of that. Can't cut $14 billion out of the budget and survive. We just can't.
GONZALES: Schwarzenegger still hopes to hold onto some of his big ideas, such as expanding health care coverage for millions of uninsured Californians. But he may have to take drastic steps to save money, like ordering early release for 22,000 low-risk prison inmates. The stage is set for some tough political bargaining this year, and with Democrats and Republicans dug in on opposite sides, Schwarzenegger will have to be the peacemaker.
Richard Gonzales, NPR News, Sacramento.