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Schwarzenegger pushes bond issue bailout

Schwarzenegger: Bond proposal
Schwarzenegger: Bond proposal "will save our state from bankruptcy."

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Gov. Arnold Schwarzenegger urges Californians to embrace radical spending cuts and a record $15 billion bond issue. CNN's Rusty Dornin reports (January 7)
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Arnold Schwarzenegger

SACRAMENTO, California (Reuters) -- Gov. Arnold Schwarzenegger urged Californians to embrace radical spending cuts and a record $15 billion bond to keep the nation's richest state from bankruptcy by June.

The actor-turned-politician, swept into office last October vowing to fix the state's battered finances, used his first State of the State Address to warn voters to expect deep budget cuts.

But he ruled out raising taxes, saying that would be the "final nail in California's economic coffin."

In a speech interrupted 36 times by applause in the state assembly, the star of the "Terminator" films vowed to use his incredible salesmanship to help California emerge from rough economic waters.

"I am a salesman by nature. And now most of my energies will go to selling California," he said before an aside mentioning two of his least loved films.

"If I can sell tickets to 'Red Sonja' and 'The Last Action Hero,' I can sell almost anything."

The Austrian-born actor's sales pitch urged voters to back the $15 billion in bonds or face ruin.

California needs the money to pay the bills when $14 billion of short-term notes come due in June.

"Together, we put measures on the March ballot that, if passed by the people, will save our state from a June bankruptcy," he said.

"June is the month when billions of dollars in past loans come due and the financial house of cards built over the last half of the decade is set to collapse."

"A 'yes' vote on these measures on the March ballot is absolutely critical to our financial future."

Legislators agreed at a special session last month to put the $15 billion bond on the March ballot along with a spending cap.

California voters will decide whether to approve the measure on March 2, the same day they cast ballots in the presidential primary.

State Controller Steve Westly, who earlier in the day announced that California is taking in more tax revenue than originally expected, said Schwarzenegger was perhaps overselling the economic dangers.

"The use of the word 'bankruptcy' is probably not the right word, but we will run out of money unless we pass this initiative," he said.

"When people think of bankruptcy they think of companies that no longer have money coming in. In fact, there is always money coming in. This is one of the great economies of the world."

Current projections show the state has taken in $35.3 billion for the first six months this fiscal year, or $1.27 billion more than forecast due mainly to improved sales, corporate and personal income tax revenues, Westly said.

Schwarzenegger looks over some papers in his private office at the Capitol in Sacramento.
Schwarzenegger looks over some papers in his private office at the Capitol in Sacramento.

Westly said internal polls showed the public now leaning against the $15 billion bond, and an aide to the governor said he would have to campaign actively to win backing on the March 2 measure.

Schwarzenegger said Californians face "challenging" cuts expected to hit most state programs, and he repeated his vow to not increase taxes.

As he paved the way for the hard details of the 2004-5 budget to be unveiled Friday, Schwarzenegger also referred to his Hollywood past.

"OK, I changed my mind, I want to go back to acting," he said in the opening words of his speech that were not part of his prepared remarks.

Then saying he was joking, he returned to the speech's script: "I love working for the people of California. It is better than being a movie star."

The film star also spoke of dodging financial bullets, bleeding red ink, wanting to blow up organizational boxes, and seeking new ideas, the more radical the better.

And the man who has already held the titles of Mr. Universe and Last Action hero proclaimed himself California's Job Czar, vowing to travel the world to bring business to the state.

Republican Schwarzenegger faces a daunting task as he asks the Democrat-dominated legislature to back his vision of pared-back government amid a budget shortfall estimated as high as nearly $18 billion through fiscal 2005.

Aides have signaled that cuts to social and health programs are likely solutions, but such reductions will face strong opposition from Democrats, many of whom back tax hikes to maintain present levels of government programs.

Copyright 2004 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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