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Schwarzenegger signs US$105b California budget
Updated: 2004-08-01 09:56

A year after California's tumultuous gubernatorial recall brought on by its financial woes, Gov. Arnold Schwarzenegger on Saturday signed a budget that is balanced for the current year but relies on debt financing.

The US$105 billion spending package avoids new taxes -- a Schwarzenegger pledge -- but uses US$11.3 million borrowed through bond sales to help pay this year's bills as well as past years' debts.

Schwarzenegger had pledged to stop deficit spending in the state, whose economy is among the five or six biggest in the world.

"When I first presented my budget last January I said that we have to have a responsible budget so we can take California out of the poor house and make it again a powerhouse," the Hollywood star turned politician said at the state capitol before signing the budget.

The Republican governor said the budget achieved all that he had promised -- it was balanced, it made cuts but protected essential services and it did not raise taxes.

But shortly after he signed the document, Democratic critics argued that Schwarzenegger had broken his campaign promises.

"With his signature on this budget, Gov. Schwarzenegger has broken his word to the people of California to end deficit spending," said state treasurer Phil Angelides.

He estimated the state would use US$7 billion in debt financing to balance this year's budget.

In March, the governor asked Californians to pass a $15 billion bond measure to be used largely to finance prior years' debts with a small amount to be used in the new budget.

Lt. Gov. Cruz Bustamante -- Schwarzenegger's most ardent rival in last year's gubernatorial campaign -- said "the governor applauds himself on signing a budget that violates his own budget principals."

The 2004-2005 budget cuts some spending on education, transport, health care for the indigent and financial support for counties and municipalities. But it does not dig as deeply into these programs as once proposed.

County and municipal governments won a guarantee that their future sales tax revenues were protected from the state's reach and any reallocation of property taxes would require a two-thirds legislative vote.

Los Angeles Mayor Jim Hahn, who was a negotiator on the municipal finance portion of the budget, said: "Having the governor with us, on the ground, allowed us to reach a deal that was good for local government and will ensure our viability in the future."

State Assembly Republican leader Keven McCarthy said, "It took us five years to get into this mess and in nine short months he is moving us in the right direction."

The budget, a compromise between Schwarzenegger and the Democratic-controlled legislature, was signed after weeks of bitter wrangling in the state capitol and a month past the legislation's deadline.

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