Calif. OKs Arnold's Budget Plan

Voters put their trust in Gov. Arnold Schwarzenegger's plan to salvage the state's finances, agreeing to borrow billions of dollars in a win that rewrote California political history.

Tasting victory again just five months after a recall election brought him to power, the Republican governor said the borrowing plan would make California, the world's sixth largest economy, "the golden state that it once was."

"I love it when the people go to the polls and they flex their muscles and they let their voices be heard," Schwarzenegger said at a rally Tuesday, a month after public opinion polls had all but declared his $15 billion proposition dead.

With a majority of ballots counted, Proposition 57 was passing with nearly two-thirds of the vote. It marked the first time in California history that voters agreed to use bond financing to slash state debt.

Until now, bonds had only been used to construct roads, build schools or make other improvements.

Voters also resoundingly endorsed Proposition 58, a companion measure Schwarzenegger says will balance future state budgets, while rejecting Proposition 56, a proposal the governor didn't favor. The failed measure would have cut the number of legislators needed to pass the annual budget from two-thirds to 55 percent.

Another huge borrowing measure, Proposition 55, which would sell $12.3 billion in bonds to improve school facilities, was narrowly ahead.

Facing the first test of his political clout since taking office five months ago, Schwarzenegger campaigned heavily for Propositions 57 and 58; both measures had to pass in order for either to be enacted.

Analysts say the former body builder and Hollywood icon is flexing political muscles not seen for years in California.

"We are talking political steroids," said Jack Pitney, a government professor at Claremont McKenna College. "He can claim credit for turning around public opinion."

Schwarzenegger had warned of "Armageddon cuts" if the borrowing plan failed, a message that seemed to resonate with voters.

"I think the propositions are flawed, but it's better than doing nothing. We're already in debt, so what's $15 billion more?" said Los Angeles resident Andre Fonseca, 25.

During the height of last year's recall effort, the state's budget deficit was projected to climb as high as $38 billion. A series of budget cuts and increased fees at parks, community colleges and universities have helped narrow the gap between spending and revenue.

Proposition 57 will allow the state to borrow up to $15 billion in bonds to refinance the state's existing $9 billion deficit and close future budget shortfalls.

Schwarzenegger's reward, political observers say, is new leverage with lawmakers and the perception that he can influence any contest.

"He's viewed by both parties as the most formidable politician we've seen in this state for many years," said Raphael Sonenshein, a political science professor at California State University, Fullerton.

Even with the $15 billion in borrowing, the state faces a major budget problem next year and it's not certain Democrats will approve any of Schwarzenegger's proposals.