California Gov Calls Special Budget Session

SACRAMENTO, Calif. -- Gov. Arnold Schwarzenegger on Thursday announced a special session of the Legislature to address a $6 billion deficit that emerged just weeks after he signed the state budget.

The announcement comes a day after the nonpartisan Legislative Analyst's Office said California's budget deficit has grown to $25.4 billion through June 2012. That includes the $6 billion shortfall in the current fiscal year's budget, which was signed Oct. 8 after the longest legislative impasse in state history.

Much of that gap in the 2010-11 spending plan was foreseeable when lawmakers approved the budget more than 100 days after the start of the fiscal year. The spending plan was filled with overly optimistic assumptions about revenue, cost shifts and about $3.5 billion in federal funding that the state's legislative analyst predicted would not materialize.

The state's unemployment rate has been stuck at 12 percent or higher since August 2009. The recession has led to a steep drop in tax revenue, with general fund spending about $16 billion less than it was just three years ago.

"I know this will be difficult, but as we know from experience, putting off the hard decisions to bring spending in line with our revenues only makes solving the problem more difficult," Schwarzenegger said in a statement. "Legislators will have to face the ugly truth that we can only spend the revenues we have."

The special session will start Dec. 6, when new lawmakers are sworn into office. It would be Schwarzenegger's 18th special session since taking office in 2003 -- more than any governor in the state's history.

Last week's Republican takeover of Congress will make it even harder to secure federal money, Schwarzenegger said.

He also cited voter approval of Proposition 22, which prohibits the state from borrowing money from local governments. The move further limits the steps lawmakers can take to close the deficit, and is forecast to cost the state $800 million next year.

Democratic lawmakers, who are looking ahead to Schwarzenegger's Democratic successor, Gov.-elect Jerry Brown, also could present a problem for the Republican governor. Assembly Speaker John Perez, D-Los Angeles, expressed skepticism about the need for a special session a month before Brown takes office.

He said Schwarzenegger's previous budget proposals "have not helped our economy, so I am not sure his calling a special session is a serious solution."

Brown's spokesman, Evan Westrup, said the governor-elect intends to work with the Schwarzenegger administration and the Legislature.

"While the governor-elect did not create this fiscal crisis, he and his transition team will continue the work they started after Election Day ... to address California's budget problems," Westrup said.

Schwarzenegger spokesman Aaron McLear said the governor reached Brown on vacation Thursday, and Brown "expressed support" for his decision to call a special session.

The December special session will take place just weeks before Brown is set to be sworn into office on Jan. 3. He faces a constitutional deadline to present a balanced budget plan for the 2011-12 fiscal year just a week later.

The state previously cut billions of dollars during a marathon series of special legislative sessions in 2009 to take up a $42 billion shortfall in California's budget at the time. That compromise included $12.8 billion in temporary tax hikes, $15.1 billion in cuts and billions in borrowing.

Legislative Analyst Mac Taylor pegged the deficit gap for the 2011-12 fiscal year, which starts July 1, at $19.3 billion, more than a fifth of the $86.6 billion general fund spending plan approved on Oct. 8.

Schwarzenegger called the estimate "a sobering reminder that California's economy is still struggling."

McLear said the state Department of Finance will draw up its own estimate of the 2010-11 budget gap and a plan to close it before Dec. 6. He said the governor also will have a package of bills ready to address the crisis.

Theoretically, the state Legislature should have an easier time approving budget fixes in the future. In November, voters approved a ballot initiative lowering the legislative threshold to pass a budget from a two-thirds vote to simple majority.

A two-thirds vote is still required to raise taxes and fees, however, potentially negating any advantage of the simple majority vote.