Thursday, 07/02/2009 Print Version |

Governor Holds Press Conference in Los Angeles to Discuss State Budget Crisis

GOVERNOR SCHWARZENEGGER: Good morning, everybody. Today I would like to update you on our financial crisis and on our budget crisis.

Four weeks ago I addressed a joint session of the legislature and I warned that swift and serious action is absolutely necessary in order to address our $24 billion problem, or otherwise we will run out of cash by the end of July.

I presented my proposal and asked the legislature to make the tough decisions that are necessary and to make the real tough and deep cuts. I also asked them to use this crisis as an opportunity, as an opportunity to get rid of government waste and to make Sacramento run more efficiently.

In four weeks, in the last four weeks, instead of negotiating and coming to a budget agreement, they decided to debate and to debate and to have hearings and more debates and more hearings and finger-pointing and assigning blame. At the end of the day, they haven't accomplished anything. As a matter of fact, what they have accomplished was partial solutions that lack both the necessary cuts and the long-term reforms.

So I sent the budget back, doing it forcefully and without any hesitation. Their response was not a solution to California's budget problem but an invitation to a bigger financial crisis. They refused to streamline government, they refused to consolidate agencies, they refused to cut unnecessary boards and commissions and they basically also refused to deal with the entire $24 billion deficit.

They also refused to undertake reforms to root out our massive waste, fraud and abuse in some of our largest programs. Nearly 80 percent of California's welfare recipients aren't meeting our simple work requirements, yet year after year they're getting their paychecks and they're getting their benefits. All we want to do is just root out that fraud and abuse and I proposed simple reforms to curb this abuse but the legislature rejected it.

Our in-home support services program is also riddled with fraud, yet the legislature rejected simple safeguards which are necessary to root out these problems, like fingerprinting, background checks and so on, to prevent people from getting benefits in multiple counties or under multiple identities. They refused again. They even refused minor changes to pensions for new employees, changes that would save us billions of dollars, money that can be used for education, for health care and for law enforcement.

The legislators' failure to act on these proposals sends a message to Californians that you, the California people, make all the sacrifices but we don't want to make any sacrifices in Sacramento. So protecting the special interests who benefit from the dysfunctional system was more important than solving our deficit and finally living within our means.

Back in 1967 Governor Ronal Reagan said, "The time has come to match outgo with income, not the other way around." Well, you know something? It's really interesting that now, 42 years later, Sacramento still hasn't learned how to do that. For decades Sacramento has pushed its financial problems down the road, kicking that can down the alley. (Baby crying) That sounds like me when I was a baby but anyway --

But I will not be part of pushing the current fiscal crisis down the road. I think it is very important for us to be responsible and to address the entire $24 billion -- which now, by the way, because we have not met the deadline, is up to $26.3 billion.

The road stops here now. Yesterday I issued an executive order imposing a third day of furloughs for our state employees. I also called the legislature into a Proposition 58 special session so that we can get back to work immediately. (Baby crying) No problem. We all had babies.

So anyway, I also called the legislature into a Proposition 58 special session so we can get back to work immediately on our budget. And, until we get the job done, I will not sign any legislation unrelated to the budget that is not urgent or absolutely necessary.

Now, the reason why we did that was very simply because yesterday, in the middle of the biggest financial crisis that we've had in the history of California, they started debating over cow tails. Not that I'm not sensitive about animals and want to make sure that animals are all protected but this is definitely the wrong time to talk about cow tails. In fact, the legislators will have a tough time explaining to the people why they would do that at a kind of strange time now in this crisis.

So the bottom line is to the legislators I say let's focus all of our energy on getting the budget done. Let us work together and let's do everything that we can so we produce a really good budget and deal with the entire $27 billion.

And to the people I say you are the true authority in this state. I ask you to stand with me and to really make sure that we all work together here and to support me on this action. If we stand together I think that we have a good chance to come out really ahead on this whole thing and I think that we will be a better, we will be a more honest and we will be a much more civic-minded state.

So with that, I just want to ask if you have any questions that I can answer here about the budget.

QUESTION/ANSWER:

QUESTION:              Governor, what's the purpose of the linkage with the reforms and the budget? Is it a sense that without this budget crisis the reforms would never even be discussed, or even contemplated by the legislature?

GOVERNOR:           Whenever you do a budget you have to think about the immediate budget, which is this fiscal year but you also have to think about the out-years. And when you're looking at the out-years you have a huge deficit, a structural deficit and the way you can cut that down is by dealing with the reforms.

And the way you cut down is, for instance, if we can save the billions of dollars on the abuse and fraud that is going on in some of those programs, this will have a tremendous effect in the out-years. Not right now but in the out-years it will have a huge affect.

We have seen, as I said earlier, with the in-home services, there is an endless amount of money, there is 50 percent fraud there. Why shouldn’t we go and fix that? Why shouldn't we make those savings and then use that money that we save for other programs, for education, for childcare and for those kinds of things? The same is also with other programs; we see that left and right.

But the legislature wants to protect those programs because they want to protect the people that provide the services rather than the people that receive the services. So that's the conflict that we have right now and those are the discussions that we have in Sacramento.

QUESTION:              The Speaker, though -- as a follow up -- she says that there's plenty of time to debate those reforms after you've settled the budget issue and that it's actually an impediment to getting a solution on the table on the budget.

GOVERNOR:           Do you believe that? Trust me, I know that the legislature historically has kicked that can down the alley. Historically, the legislators over the last few decades have always said, "Why don't we deal with that the next time around? Why don’t we deal with that in a month from now or in two months from now? Right now we don't have the time." I have heard this for five years. For five years we have made those proposals.

And now I said to them, I said, "Look. We have no money. We don't have the luxury to protect all of those employees. We don't have the luxury to go and continue with this abuse of the system." I said, "We don't have the luxury." I said, "The people don’t understand. They're upset about it, they're angry about it, that we are wasting money in Sacramento and we are not getting rid of this waste and abuse and fraud. We've got to do that."

So this is what this is about. So I don't want to kick that can down the alley anymore. I've given them enough chances and now I said, "Let's fix this problem. The whole budget is linked together. It is because it is all number related. We've got to cut down and we've got to cut down the spending and live within our means." That's the key thing.

QUESTION:              Governor, tens of thousands of people who have nothing to do with the budget are now getting IOUs, starting this afternoon. What do you say to them today?

GOVERNOR:           We don't have the money to pay our bills. And we don't have the money because the legislature has decided it is more important to protect state employees and to protect all of the different people and labor and special interests, rather than protecting those people and protecting the people of California, the taxpayers.

You know, it's a sad story, that they have known for a month now that the deadline is June 30th. As a matter of fact, I told them in my joint session, when I addressed the joint session, that the deadline is June 15th, which is really the constitutional deadline. And they have totally disregarded that, went right by that and continued having their debates. And now we have to deal with the consequences and so now we have a bigger budget deficit than we had before.

But I think that the bottom line is not to look back. What is important now is I urge the legislators to come to the table, to negotiate, to recognize that we have to get rid of the waste that is going on in government and also go and live within our means. We cannot promise anymore people things that we can't deliver.

And this is not just about this particular budget or about education and health care and those kinds of programs. We have a huge problem in this state with unfunded liabilities. For decades now the legislators have promised people things we can't deliver.

I mean, look at pensions. We have to go and have pension reform or the state of California has to literally pay in a minimum of $12 to $14 billion a year in order to meet our goal in the pensions, which is $600 billion. I mean, where does that money come from? Right now we have only 300 billion but we need 600 billion. Somehow we have to pay for those things. Or for the unfunded liabilities in health care for our state employees, $118 billion unfunded. No one knows how to get that money. Where do we get this money from?

So it's easy for the politicians to keep promising things but they can't deliver it. They live way, way beyond their means and that's what we have to change.

QUESTION:              You mentioned waste. Do you believe that the cuts are only on waste in programs, or do they cut below the waste?

GOVERNOR:           No, no. These are cuts that have to occur anyway. And then we have to, at the same time, say well, while we are cutting let's not just think about cuts. Let's make sure that we also look at the fraud and the waste and the abuse that's going on within government. It's a good time to do it. And may I remind you, to look at waste, fraud and abuse is always good to do but it is even more important than ever at a time when you run out of money.

And that's why I don’t understand the legislature. Why wouldn't you go there? Why wouldn't you want to go and make sure that we fingerprint those that get in-home services? They said that this is an insult. I say why is that an insult, when you get fingerprinted? I've just been fingerprinted, with my notary public coming to me with a book and saying, "Governor, let me take your thumb," and they fingerprinted me and put it next to the signature. I didn't feel insulted. I'm the governor of the state of California; I didn't feel insulted.

When you get a teaching job you get fingerprinted. I mean, when you get a loan for your house you get fingerprinted. You get fingerprinted for a lot of things. Why is it all of a sudden an insult when you go to an in-home patient and you ask them to be fingerprinted to make sure we get rid of the fraud and abuse?

Yes?

QUESTION:              Are you telling the residents of California that if you were to somehow magically today end all the waste, fraud and abuse that occurs in the state's budget and get your fingerprinting proposals passed, that would close the budget and you would have a balanced budget now? Do you expect them to believe that?

GOVERNOR:           It will save billions of dollars out of the $26.3 billion. It will save billions of dollars. So what you do is, you add all of this up. Each one of those things can help us.

For instance, let me give you an example. If we can save $2, $3 billion with the wiping out of all the waste that's going on, that's now money that we can use for the Healthy Family program so that all children can be insured. That is money that can keep open all the state parks that everyone loves so much. This is money that we can use for crime fighting in our inner cities where there are gang problems, to have our gang squad out there and to have law enforcement get more money so they can fight those gangs and the violence that's going on there.

So all of those things. That's important money. People sometimes say, "But this only saves you a few million dollars." Even $1 million waste can be taken if you can find that and use it for some kids to get education. So the thing is, we don't want to have waste and abuse when we know where it is.

But they don’t want to pass a law to change it. So I say to myself there is something wrong with those legislators. Who are they protecting, the people that get the service or the people that provide the service? And that's why it's important. We've always got to go and focus on the people that get the service, that receive the service.

QUESTION:              Are there measures in place already to deal with the fraud, such as fraud investigations?

GOVERNOR:           Oh, yes. We have all the legislation written up in details, ready to go, for them to just look at it, read it -- I'm sure they have read it. But it steps on that turf of the people they want to protect. So eventually, somewhere there has to be judgment day, where they say, who do we choose, the people that get the service or the people that deliver the service?

QUESTION:              The fraud measures that exist are not good enough?

GOVERNOR:           Say again?

QUESTION:              So there are measures --

GOVERNOR:           No, the measures that we have proposed that will really weed out all of those problems, they have not accepted yet. And that will save billions of dollars down the line.

QUESTION:              But there are measures already on the books that exist?

GOVERNOR:           No, not much. Not much. Not to deal with those kinds of problems, no.

QUESTION:              Are there fraud investigators?

GOVERNOR:           They have with in-home services, I think, one or two and there are hundreds of thousands of cases of abuse. And it is written in a way so it gets abused so that the people don’t get busted. We are not allowed, there is no one yet allowed to go in periodically to those homes and double check if they get the right treatments and all of those things. So those are all the things that we will have proposed in our proposals and they are right now objecting.

But let me tell you, if those things are not done we will be a long time without a budget. So I mean, this is why I made it very clear to the Speaker. I said, "Don’t try to separate the budget from the reforms. They both belong together." Even though she's very upset about that but they both belong together. They knew for the last six weeks that they belong together. There's nothing new. I mentioned it in my joint session address.

So we are just basically waiting for them to come to a realization that this needs to be done, otherwise there will be no budget. And I also made it very clear there will be no tax increases.

QUESTION:              Mr. Governor, every Republican governor, back to Ronald Reagan, raised taxes in fiscal crises. Why won't you?

GOVERNOR:           Well, maybe you forgot.

QUESTION:              Reagan, Wilson, Deukmejian --

GOVERNOR:           Because in February we had the largest tax increase in the history of California. People sometimes forget that, when they cry out and they say, "Well, wait a minute. Why does the governor not want to raise taxes?"

I always remind them; just four months ago we had the biggest tax increase in the history of California. Let's not forget that. Always, when you write your stories in the paper and always when you report on television or on radio, make sure that you don't say the governor refused to raise taxes. Say it completely. Just say the governor refuses to increase taxes because we just had the biggest tax increase in the history of California. That's a complete story.

QUESTION:              Governor, when you say the impasse is going to go on a long time, how long are you prepared to hold out?

GOVERNOR:           Well, always I say I'm an optimistic man, right? So I say that we actually have a chance to do it within the next two or three days, that the legislators and I are working, we have had many meetings. We had meetings two days ago and yesterday we had meetings with the legislative leaders. We all are committed to get this done.

It's just a matter of finding that common ground. And I'm more than happy to compromise -- I always have been a man of compromise. But we've got to go and take care of the things so we don’t have bigger budget problems in the out-years and kick that can down the alley.

Thank you very much. Thank you.

QUESTION:              Who are your friends, Governor?

GOVERNOR:           Well, there are friends, as you can see, a very interesting group of people from different walks of life and backgrounds. And we love having them there, because the budget, having a budget on time, affects them also, so these are all supporters for a balanced budget.

Thank you very much. Thank you all.