SACRAMENTO – Gov. Arnold Schwarzenegger says he will declare a “fiscal emergency” in January to give him and the Legislature more power to deal with the state’s growing deficit. Schwarzenegger made the announcement Friday after meeting with lawmakers and interest groups this week to tell them California’s budget deficit is far worse than economists predicted just a few weeks ago. The shortfall is no longer expected to be $10billion, but more than $14billion – a 40percent jump that would put it in orbit with some of the state’s worst fiscal crises, those who have met with him said. Schwarzenegger said Friday that the state could be “anywhere between $10(billion) and $14billion in the hole.” AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREWhicker: Clemson demonstrates that it’s tough to knock out the champThe low end of that estimate represents a gap larger than California’s entire budget for its 172,000-inmate prison system. The high end is equivalent to what the state spends on both prisons and all the state’s University of California campuses in one year. Declaring a fiscal emergency would trigger a special session and force lawmakers and the governor to begin addressing the shortfall within 45 days. “What we have to do is fix the budget system. The system itself needs to be fixed, and I think that this is a good year, this coming year, to fix it,” Schwarzenegger said in Long Beach, where he was promoting his plan for health-care reform. California is struggling with shrinking state tax revenue from the meltdown of the subprime-mortgage market and the credit crunch on Wall Street. State spending also has increased by more than 40percent since Schwarzenegger took office after the 2003 recall of then-Gov. Gray Davis. Schwarzenegger in August signed a $145.5billion budget that increased spending 11percent due largely to the increased cost of bond repayments and special funds. General fund spending for day-to-day operations increased less than 1percent, from $101.7billion to $102.3billion for the budget year that began July 1. In August, Schwarzenegger’s office projected that the state would end its current budget year with a $4.1billion reserve. Last month, the state’s nonpartisan legislative analyst reported that the state would instead end the year in the red, and was on pace to rack up a staggering $10billion deficit over the next 18 months. Schwarzenegger and his top aides this week have privately told lawmakers and interest groups that the gap could top $14billion and warned cities, counties and health and welfare agencies to expect cuts. The governor already has ordered agency leaders to draft plans for an across-the-board cut as high as 10percent. Schwarzenegger would make the declaration under Proposition 58, the 2004 ballot measure he successfully campaigned for to restrict state borrowing and create a reserve fund. The measure contained a little-known provision authorizing the governor to declare a fiscal emergency if revenue and expenditures fall substantially out of line. The declaration triggers a constitutional mandate to reopen the current budget and begin cutting costs or finding ways to increase revenue to close the gap. Democratic and Republican leaders said an emergency declaration would be a serious step, but apparently a necessary one, given the state’s growing fiscal problem. “We gave the governor the authority to do that when we wrote the measure and we will take it seriously and respond to it when it happens,” said Alicia Trost, a spokeswoman for Senate President Pro Tem Don Perata, D-Oakland. Perata said Thursday that the deficit had overtaken lawmakers’ ambitions to pass a universal health care deal. He said he would not ask fellow senators to vote on a health deal until he knows the extent of Schwarzenegger’s plans to cut the budget. But Schwarzenegger, a Republican, and Democratic Assembly Speaker Fabian Nu ez remained optimistic Friday about reaching a deal to expand health-care coverage before the end of the year. The Assembly is expected to vote on a health-care bill Monday. Assemblyman Roger Niello, R-Sacramento, vice chairman of the Assembly Budget Committee, said the planned health-care vote was foolhardy given the state’s deficit. “As the old saying goes, the first thing you should do when you find yourself in a hole is stop digging,” Niello said in a statement. “Our state simply cannot afford the massive government-run health-care program that will be voted upon next week.” If Schwarzenegger declares a fiscal emergency in January, he’s required under the law to introduce a plan to correct the problem and to call the Legislature into special session to act on his recommendations. If legislators don’t pass a budget bill within 45 days, lawmakers would be prohibited from acting on any other legislation or adjourning until they reach agreement. A special session also could allow the Legislature’s Democratic majority to make most decisions about where to make spending cuts. Unlike the state’s normal budget bill, which requires a two-thirds majority to pass, only a majority vote is needed to enact cuts within 90 days. A tax increase would still need a two-thirds majority, which would require Republican support.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!
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