Arnold Schwarzenegger warns California is almost broke
Pastor Dale Morgan
Arnold Schwarzenegger warns California is almost broke*
California could become the first state in the American union to go
broke after Governor Arnold Schwarzenegger warned it is heading for a
"fiscal disaster" as a result of the global financial crisis.
By James Quinn Wall Street Correspondent
Last Updated: 11:56PM GMT 01 Dec 2008
Mr Schwarzenegger has declared California to be in a fiscal emergency
and called for the state's politicians to work together in a special
legislative session to reduce its growing $11bn (£7.4bn) deficit.
That deficit is projected to grow to $28bn over the next 18 months, and
the Republican Governor wants politicians from all sides of the divide
to work together in order to ensure the state does not run out of cash.
The state of California is reeling not only from fall in investments
made in the equity markets, but also from declines in tax revenues and
capital gains as a result of the downturn in the business and property
markets, not to mention an inability to tap the debt markets for funding.
"Without immediate action, our state is heading for fiscal disaster," Mr
Schwarzenegger said in Los Angeles.
"I've had to make tough choices that I wish I didn't have to make, and I
know this is a terrible time to raise taxes, but it's also a terrible
time to make cuts to very important programmes. But in an emergency like
this, we have to take quick action to avoid even worse problems, even if
they include decisions that we don't like."
By declaring a fiscal emergency, Mr Schwarzenegger has bought himself a
45-day window in which politicians must work together to find a solution
to reduce the deficit. If they fail to do so within that time, all other
legislative work must be put on hold until they do so.
His plan to reduce the deficit is do so by cutting spending and raising
taxes, measures which he realises are unpopular with Californians, but
which he feels are the only options given the dire health of its finances.
"I compare the situation we are in right now to that of finding an
accident victim on the side of the road bleeding to death," Mr
Schwarzenegger added. "We wouldn't spend hours debating over which
ambulance to use or which hospital to send him to; we would first stop
the bleeding, and that's exactly what we have to do here."
Mr Schwarzenegger's stark comments came after a three-day emergency
session to discuss his package ended in acrimony. He and the Democratic
leadership in the state legislature are still six votes shy of the
two-thirds majority needed to approve his tax increases, which
Republican politicians remain largely opposed to.
He was last night(MON) travelling to a meeting of the National
Governor's Association in Philadelphia, at which President-elect Barack
Obama was due to present.
The former actor, most famous for his leading role in the Terminator
series of films, said he would not ask the President-elect for a federal
bail-out "until we straighten out our own mess."