Voters Reject Deficit Reducing Ballot Measures

The ballot measures were the result of a compromise Governor Arnold stemmed Schwarzenegger and legislative leaders hammered out in February to close a projected $42 billion budget shortfall through June 2010. The ballot measures were part of a solution that included $17 billion in budget cuts, $12 billion in temporary tax increases and billions in federal economic stimulus money.

With state revenues continuing to fall and the ballot measures trailing according to pollsters, Schwarzenegger tried to impart upon Californians the seriousness of the situation. In a public address last week he said the vote would decide "whether we continue tumbling down the path of financial ruin and despair or stand up, dust off and start a slow, steady march back to prosperity."

In a written statement Tuesday night after it was clear the measures would be defeated, Schwarzenegger was less dire. "Now we must move forward from this point to begin to address our fiscal crisis with constructive solutions," he said.

Prior to the vote Schwarzenegger produced announced 5,000 layoffs and two budget proposals, one if the measures passed and one if they did not. The best case scenario included $6.4 billion from education and $2 billion from health and human services, as well as the accelerated collection of $2.8 billion in fees and the borrowing of $7.5 billion from both local governments, which also need the money, and private investment markets. The governor also said he would seek approval to sell public assets such as the Los Angeles Coliseum, Cal Expo, the Cow Palace in San Francisco and the state prison at San Quentin, and would release up to 19,000 undocumented immigrants from state prisons, turning them over to federal authorities.

"This is the harsh reality of the crisis we face," Schwarzenegger told a Capitol news conference. "Sacramento is not Washington [DC]... we cannot print money."

The additional $5.9-billion gap is expected to be made up by cutting $3 billion more from education and health services, raising $1.7 billion through higher fees and borrowing an additional $1.4 billion. Neither plan includes tax increases because the governor and the legislature approved $12.8 billion in temporary tax increases in February.