Arnold lays out budget plans

California Governor Arnold Schwarzenegger yesterday painted a sobering picture of the state's finances, saying there was a spending crisis, but promised not to make matters worse by trying to tax their way out of it.

Whilst being watched by television cameras, he made the first major speech of his seven-week-old mandate, addressing the state's assembly in Sacramento. "We have a spending crisis. We can't tax our way out of this problem...I will not make matters worse by doing this. A tax will be the final nail in California's financial coffin."

Schwarzenegger said he wanted instead to blow up useless state agencies in order to balance the bleeding budget of California.

Speaking defiantly to a Democrat dominated assembly, the Governor demanded that lawmakers, to whom he is to present his fiscal 2004-2005 budget on Friday, bring him radical and logical ideas for cutting back state expenditures.

The budget has a projected shortfall of 12-14 billion dollars.

"We do not have a budget crisis, we have a spending crisis," said Schwarzenegger.

Democrats say he cannot cover the deficit with only spending cuts, but must find new revenues
instead.

Sticking to the promises he made that got him elected with a popular mandate in October, Arnold stiffly rejected the idea of increasing taxes, promising instead to slash the state's bureaucracy by eliminating useless and redundant agencies.

"Every governor wants to move boxes around to reorganize. I don't want to move boxes around, I want to blow them up."

He also pledged to travel the world to sell California as a leading business centre, jokingly saying, "If I can sell tickets to my movies like Red Sonja and Last Action Hero' you know I can sell anything", referring to two of his less critically-acclaimed films.

Arnold's 'State of the State' address was widely anticipated as a test to see if he had altered from being a Hollywood megastar to a capable and adept politician.

Former governor Jerry Brown said after the speech that Arnold had already made a substantial transition. "He passed the key test. He looks like a governor and sounds like a governor," said
Brown.

The former Hollywood heavyweight is under intense pressure to balance the budget while sticking to his election campaign promises of not to reduce crucial services like education or raise taxes.

The Democrat-dominated assembly have so far reluctantly supported his moves, however with the state's credit rating the lowest in the whole country, the Democrats say that there is little choice but to raise taxes.

"In order for cities and counties to provide the resources we all depend on, new revenue sources
must be found," said Wilma Chan, a member of the state assembly's budget committee.

Chan proposed higher taxes on wealthy Californians and a review of property tax laws, which freeze tax assessment levels at comparably low rates.

Arnold must now face Californian lawmakers this Friday, to present his 2004-2005 budget.