Arnie Budget Moves Blocked

In a setback for Gov. Arnold Schwarzenegger, the Legislature rejected his proposed spending cap and $15 billion bond measure late Friday. Democratic alternatives also failed to pass.

The Legislature's failure to come up with two-thirds majorities for either proposal by the midnight deadline means the plans won't be on the spring primary ballot as Schwarzenegger had desired.

Schwarzenegger must now seek an alternative to the large bond issue and spending cap proposal he hoped voters would ratify March 2.

Republicans said Schwarzenegger's proposals were reasonable and warned they would try to put an even tougher spending limit plan on the November ballot if the attempt to put a spring ballot plan together failed.

Democrats said the governor's spending limit would strangle education and other state programs and his bond measure would burden state budgets for years.

"When you are bleeding you apply a tourniquet, not a noose," said Assemblyman Lloyd Levine.

Democrats proposed a bond measure that would be paid off over seven years instead of 15 and a spending cap that was less restrictive than Schwarzenegger's, but failed to get the necessary two-thirds majorities.

Senators voted 34-0 against the governor's plan to cap spending. The governor's bond measure also lost, with only five lawmakers, all Democrats, voting for it and 14 lawmakers voting no. The Assembly also failed to approve any proposal and adjurned minutes before is midnight Friday deadline.

Earlier Friday, Gov. Arnold Schwarzenegger quietly gave the green light to a plan to borrow $10.7 billion without voter approval - a plan he had previously criticized.

The plan was authorized by the Legislature last summer as part of the budget agreement signed by former Gov. Gray Davis.

Schwarzenegger said shortly after being elected in the Oct. 7 recall election that voters should approve the bonds - and has said for weeks there would be no alternative to his proposal to put a $15 billion bond measure on the spring ballot.

But Friday, members of the California Fiscal Recovery Financing Authority voted to move forward with the $10.7 billion bond sale. The governor controls five of the seven members of the board.

Taxpayer groups and many Republican lawmakers had criticized the Davis bond deal, arguing that voters should approve borrowing of that magnitude.