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Schwarzenegger To Veto Bills Until Budget Passed

SACRAMENTO (AP) ― A frustrated Gov. Arnold Schwarzenegger turned up the pressure on lawmakers Wednesday, saying he will veto any bills sent to him until they pass a state budget.

The governor called a mid-afternoon news conference to express his dismay that Democratic and Republican lawmakers have not yet compromised on a spending plan. They remain at odds over how to close the state's $15.2 billion deficit.

California is the only state with a fiscal year beginning July 1 that remains without a budget.

Schwarzenegger has warned that California faces a cash crisis and told reporters on Wednesday that passing a budget is the only issue the Legislature should focus on.

"Nothing in this building is more important than a responsible budget and to fix our broken budget system," he said. "We do not have the luxury of stretching out this process any longer."

It was unclear what practical effect Schwarzenegger's announcement would have. Democrats, who control both houses of the Legislature, have offered their own budget proposal, while members of the governor's own party have not. Most of the bills headed to the governor's desk are from Democrats.

Assembly Speaker Karen Bass, D-Los Angeles, said lawmakers already have given the overdue state budget "110 percent of our focus."

"The governor's action today is yet another distraction that won't have much impact other than the possible veto of public policy that moves our state forward," Bass said in a statement.

Last week, Schwarzenegger signed an executive order eliminating more than 10,000 temporary, part-time and contract positions and cutting pay for thousands of state workers to the federal minimum wage of $6.55 an hour.

His order is being challenged by the state controller and California's largest state employees union but illustrates the level of tension in Sacramento over the lack of a budget compromise.

The administration has warned that California will have to start borrowing money as soon as next week to pay its bills. That will force the state to pay hundreds of millions of dollars in fees and interest for those loans, in part because of the tight credit market.

State Controller John Chiang disagrees that the state is running low on cash. His office issued a statement Wednesday saying California's revenue actually improved in July and that the state has enough money to make its payments until sometime in October.

Nevertheless, Schwarzenegger is seeking to force lawmakers into intense negotiations by creating consequences for inaction -- both to state employees and now to lawmakers who want their legislation signed into law.

"We can solve this literally in one night," the governor said at the news conference. "As soon as there are consequences, people will sit down and not leave the table."

Both houses planned to hold regularly scheduled sessions Thursday, during which they were expected to take up dozens of bills. At least 65 bills up for consideration in the Assembly could pass and go to the governor, but Bass spokesman Steve Maviglio said leaders will hold off on sending them.

Until Aug. 18, bills that are not signed within 12 days of being received by the governor's office automatically become law. Because of that, Schwarzenegger said he would use his veto power.

"I will veto it to make sure it doesn't become law," he said.

After that date, Schwarzenegger has until Sept. 30 to take action.

Schwarzenegger said he would allow lawmakers to retract the 13 bills already on his desk awaiting his signature.

Senate Democrats would not respond to Schwarzenegger's veto threat, said Lynda Gledhill, a spokeswoman for Senate President Pro Tem Don Perata, D-Oakland.

Assembly Minority Leader Mike Villines issued a statement calling on Democrats to put their budget proposal to a vote. It calls for raising taxes on the wealthy and corporations by $8.2 billion and making some spending cuts.

Assembly Democrats said they were considering doing that.

Republicans oppose raising any taxes and have been seeking long-term reforms such as a spending cap and creating a rainy day fund the state could draw on during lean years. Some GOP lawmakers want a mandated state hiring freeze.

Amid those disagreements, lawmakers have failed to embrace the biggest ideas put forward by Schwarzenegger.

His revised budget from last May proposed raising $15 billion over three years by selling bonds to Wall Street investment firms based on the future value of a juiced-up state lottery. Lawmakers have said the lottery plan might be considered for future years but not to close the current deficit.

Over the weekend, Schwarzenegger floated a temporary, 1 percent sales tax increase that would be rolled back after three years. Republican lawmakers rejected it once it became public.

His frustration was evident on Wednesday, as he said everyone would have to be willing to compromise.

"Let's put everything on the table. Let's look at everything ... without the Kabuki and without the song and dance," he said.

Schwarzenegger also is eager to put the budget debate behind him so he can focus on other policy priorities, including a possible $9.3 billion water bond he would like on the November ballot.

And Wednesday's announcement could doom a bill he had requested. It would modify the language of Proposition 1, the $9.9 billion high-speed rail bond on the November ballot.

The bill by Assemblywoman Cathleen Galgiani, D-Tracy, would require the state's high-speed rail board to prepare a detailed funding plan before starting construction on each segment of the rail system, which would link California's largest cities.

The legislation is awaiting a vote in the Senate and needs to be enacted by Monday to alter the bond measure's language.

(© 2008 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)