[Jerrek]

Arnold Schwarzenegger is working as governor of California for free of charge. Not bad.

http://www.reuters.com/newsArticle.j...toryID=3847340

SACRAMENTO, Calif. (Reuters) - Gov. Arnold Schwarzenegger, saying he had "strong resolve" to cure California's fiscal woes, on Tuesday proposed a record bond issue of up to $15 billion to fund the state's ballooning budget deficit.

To set an example of new austerity, the multimillionaire actor said he would forgo a salary in his new job as governor of the nation's richest state and would impose a freeze on hiring, travel and upgrading expenses.

"I inherited a huge debt," Schwarzenegger told his first news conference after his Monday inauguration. "It is not my doing. So now we have to figure out how to work with it."

"I'm asking voters to approve up to a $15 billion bond to consolidate the debt accrued by the reckless spending in recent years. It will allow us to move forward to recovery without cutting the schools."

The proposal was unusual not only in its massive size but in its focus. Voters are usually asked to support bonds for specific future spending projects such as schools or roads, rather than to cover past deficits.

Schwarzenegger, speaking to reporters just before a special session of the state legislature convenes late on Tuesday, also said the massive borrowing program would have to be paired with a constitutional cap on state spending.

He called for $2 billion in cuts from the state's roughly $77 general fund budget, but said he was putting together the details in the coming days with Democrats and Republicans in the legislature.

"Absolutely there will be budget cuts," he said. "I'm not going to take a salary ... which is $175,000."

Both the bond issue and the spending cap would go to California voters on a March ballot if cleared by the legislature as the new governor urged.

BILLIONS IN THE HOLE

In his first official act on taking office on Monday, Schwarzenegger rescinded an unpopular increase in the car tax that added another estimated $4.3 billion to the budget shortfall, which could bring the deficit to $17.8 billion next year, the nonpartisan Legislative Analyst's Office says.

California has seen its budget deficit grow dramatically as tax revenues from dot-com boom era capital gains and incomes collapsed. Expanded programs have also left the state with much higher expenses.
To put the bond measure on the ballot when Californians vote in the March presidential primary, the legislature must act by Dec. 5. Past delays in resolving the budget woes have already prompted Wall Street ratings agencies to rank the state's bond rating as the lowest in the United States.

David Hitchcock, a director at Standard & Poor's, said his credit rating agency would have preferred to see California deal with its structural budget problems now rather than look to debt to erase the current deficit.

"Fifteen billion is better than $20 billion," said Hitchcock. "The key point is whether they are going to make any progress on the structural deficit." (Additional reporting by Michael Kahn)

Reuters/VNU