Schwarzenegger Presents Vision for California

A 60-day review of the state budget by an independent auditing group will be Arnold Schwarzenegger's (search) first step toward creating a plan for getting rid of California's "irresponsible operating deficit," he said Wednesday.

If elected governor, Schwarzenegger said conducting a thorough audit of the state's finances would be the first action he takes toward getting rid of the state's massive debt. But the film star turned political candidate, who is seeking to replace Democratic Gov. Gray Davis (search) in an Oct. 7 recall election, said he would not raise taxes to do it.

"Additional taxes are the last thing we need on the backs of the businesses and citizens of California," Schwarzenegger said in an attempt to dispel suspicions among conservative Republicans that he would consider raising property taxes.

Several have expressed concern that Schwarzenegger would repeal Proposition 13 (search), a law passed in 1978 that caps property tax increases to 2 percent a year. The issue turned red hot last week when Schwarzenegger's newly-appointed economic adviser Warren Buffett (search) said he thinks Californians pay too little in property taxes.

During a light-hearted moment that was rare on Wednesday, the usually gregarious Schwarzenegger said he wanted to put voters' concerns to rest once and for all.

"Like I told Warren, if he mentions Prop 13 one more time, he has to do 500 sit-ups," he said.

Late Wednesday, Davis, who is on a campaign swing through the state, told 50 people attending a town hall meeting in Hollywood that Schwarzenegger can say "no new taxes" all the wants, but he better explain how he plans to balance the budget without them.

"It's fine for Arnold to say no new taxes. You just ask him, 'Where are the cuts, Arnold?"' said Davis, who has scheduled more meetings for Thursday and Friday. Schwarzenegger has no public schedule for Thursday.

A new Public Policy Institute of California poll on Thursday showed that 58 percent of likely voters would recall Davis if the vote were held today. The top replacement vote-getter would be Schwarzenegger, according to the poll, who would receive 23 percent of the vote compared to Democratic Lt. Gov. Cruz Bustamante, who garnered 18 percent. None of the other 133 candidates topped 5 percent.

Schwarzenegger, who appeared Wednesday following a meeting of his 20-member, newly-created California Economic Recovery Council (search), said that after taking the reins of the statehouse, he would also call a special session of the Legislature to enact reforms of the system "that imposes unaffordable costs on our employers while denying decent benefits" to employees.

The action hero, who appeared in a suit and a buttoned-up shirt and tie, said that when his council sat down and looked at the state budget, they were floored by what they saw.

"No one ... could figure out or make heads or tails of the state budget. We don't know what is being spent and we don't know where. One thing I have learned in business is you can't make sound decisions with faulty information."

Speaking in depth for the first time about specific plans that he would implement as governor, the political newcomer said that exactly what California doesn't need are new taxes. Many businesses have left the state for fear that they will be taxed out of existence, and that has left Californians without jobs.

"Our elected officials have failed the people. They have overburdened our businesses, which are downsizing and leaving and the jobs are leaving with them," he said.

Instead, Schwarzenegger, who did not promise never to raise taxes, said he wants to come up with savings in the existing budget. He said he wants a constitutional spending cap and pledged that as soon as he is in office, he will appoint Hoover Institution scholar John Kogan to lead the working group that would be charged with "restructuring the inherited debt."

"Needless, to say the elephant in the room in California's economy is the irresponsible operating deficit and the massive debt that this government has allowed California to incur," he said, adding that cuts to educational spending would not be on the table.

He said that he would not sign a budget without worker compensation reform. And he would address education and regulatory reform, the unemployment insurance fund crisis and energy shortages.

"Without needed energy reform, California will continue to suffer the highest commercial energy costs in the nation," he said.

Schwarzenegger warned that corrections will not happen overnight.

"Before the carping begins about the need for the 25-point plan on each one of these items, let me make clear that these problems that I just mentioned were not created in two weeks, nor will we be able to solve them in two weeks. And anybody that is out there telling the people of California otherwise are just a typical politician," he said.

Included in the council meeting were billionaire investor Buffett and former Secretary of State George Schultz (search), both of whom spoke after Schwarzenegger and expressed their confidence in him.

"Change is going to require someone determined, who is credible to the investment world, to present a plan for a balanced budget," Buffett said. "After looking at the situation, I thought new leadership could get that job done and take care of those 35 million people, and that's why I am out here with Arnold Schwarzenegger."

Schwarzenegger said he hoped that it didn't go unnoticed by reporters that Buffett, a Democrat, was standing on his left and Schultz, a Republican, was flanking him on the right.

"That was intentional," he said.

Having a Democrat on his side may be an attempt to appeal to voters in the state, which has 1 million more registered Democrats than Republicans. Asked whether he can work with a Democratic-majority in the Legislature, Schwarzenegger said he had no doubt he would be successful.

"I am trained to get along with Democrats," Schwarzenegger said, referring to his wife Maria Shriver, who is a member of the Kennedy dynasty.

The actor-turned-candidate also launched his first television ad on Wednesday, a 60-second piece that harkens back to another actor who had a very successful political career, former President Ronald Reagan.

"This historic election has come about because there is a tremendous disconnect between the people of California and the leaders of California," Schwarzenegger says in the opening segment of the ad.

GOP sources told Fox News that Schwarzenegger could spend as much as $2 million per week on campaign spots on TV and radio until the recall election. If a federal judge has his way, that will be on Oct. 7 and no later.

On Wednesday, Judge Stephen Wilson rejected a bid by American Civil Liberties Union (search) to delay the vote from Oct. 7 to March because six counties still have punch-card voting machines, notorious for leaving the same hanging chads that placed so prominently in the 2000 presidential vote count in Florida.

More Recall Activity

Schwarzenegger wasn't the only candidate campaigning on Wednesday.

Former baseball commissioner Peter Ueberroth (search) also kicked off his campaign Wednesday with a press conference in Los Angeles and his proposal for fixing the state's $38 billion budget deficit.

Ueberroth offered a one-time tax amnesty that he said will raise up to $6 billion of the $8 billion needed to cover the expected shortfall in the state's budget. He also suggested freezing government hires, reviewing state employee salaries, cutting spending, renegotiating state labor contracts and cracking down on fraud in the state's Medicare system.

Ueberroth said he has no intention of toying with Proposition 13.

In Washington, Democratic Party leaders are paying close attention to the polls measuring the current governor's performance.

A senior party official, speaking on condition of anonymity, said Davis has until shortly after Labor Day to shore up his support. Otherwise, Democratic leaders will begin signaling their support for Bustamante, who has set himself up as the Democratic alternative to Davis.

Democrats are united against the recall election but split on whether to back Bustamante, who recent polls show neck-and-neck with Schwarzenegger as the leading replacement candidates.

Democratic Party chairman Terry McAuliffe is sending former Clinton White House spokeswoman Ann Lewis to California this week to head up the party's communications strategy for the recall.

The Associated Pres contributed to this report.