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Schwarzenegger may withdraw plan to take money from local governments [Updated]

June 12, 2009 |  2:07 pm

Gov. Arnold Schwarzenegger said today that he was withdrawing his plan to raid local governments for $1.9 billion to help balance the state’s books.

In a question-and-answer session after a budget speech in Escondido, Schwarzenegger reasoned that both Democrats and Republican lawmakers seemed dead-set against his proposed move on local coffers.

“If both parties don’t want to borrow from local government, then of course we won’t borrow from local government,” the governor said. “I’m not stuck with any of those ideas. What’s important is that we solve the $24-billion deficit.”

Schwarzenegger said his finance department was already busy trying to find cuts to compensate for what he had proposed borrowing from municipalities.

Earlier today, lawmakers on the joint budget committee had criticized the idea of such borrowing, saying it would only exacerbate the state’s financial problems in the long term. The $1.9 billion would have had to be repaid -- with interest -- within three years.

[Updated at 4 p.m.: The governor’s office later said that Schwarzenegger would be willing to scrap plans to borrow from local government only if lawmakers agreed to other cuts to bridge the budget deficit.]

-- Shane Goldmacher and Eric Bailey in Sacramento