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Arnold Declares Fiscal Crisis

Saying he has no choice but to invoke emergency powers, Gov. Arnold Schwarzenegger declared Thursday the state faces a fiscal crisis and ordered payments to cities and counties without legislative approval.

The move comes as local governments up and down the state edged closer to fiscal meltdown over the loss of millions of dollars a day in revenue caused by Schwarzenegger's elimination of an increase in the car tax last month.

"I had to do this," Schwarzenegger said at a press conference Thursday.

Schwarzenegger could make the payments because he imposed $150 million in unilateral budget cuts — also imposed without legislative approval.

Democrats spent Thursday morning meeting behind closed doors to consider their response.

"My reaction, like a lot of my colleagues, was one of surprise," said Assemblyman Joe Nation, D-San Rafael. "I think a lot of us are worried about where he's going to get the money from. I've said it before, I don't think you get yourself out of a hole by digging deeper — his action just means that there will be more devastating cuts down the road."

Since Schwarzenegger cut the car tax, cities and counties have lost more than $300 million collectively. That money pays for a variety of services but especially for police and fire services.

To make the move without the Legislature, Schwarzenegger is relying on new powers granted the governor in this year's budget — an agreement struck between lawmakers and former Gov. Gray Davis.

Although some Democratic leaders have questioned the legality of Schwarzenegger's move, state Controller Steve Westly — who will be the one to issue the checks to local officials — said he supports the idea and believes it is legal.

"Our police officers and firefighters must not be held hostage," Westly said. "This is an appropriate but temporary solution. The governor and the Legislature now have six months to cut waste and solve California's fiscal crisis."

While the new governor had the authority to repeal the higher tax, he cut it without a plan in place for replacing the funds. Schwarzenegger has sponsored legislation to repay cities and counties with reserve funds, but Democrats — who form the majority in both houses — say the state can't afford the expense without imposing deep cuts that they won't do.

The governor's move Thursday comes only a week after a much celebrated bipartisan agreement struck last week between the new Republican governor and Democrats to place a $15 billion bond and new spending limits on the March ballot. Expectations are that the move will cause him some trouble among Democrats.

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