Governor's Remarks Announcing Executive Order Expected to Save California Additional $100 Million

GOVERNOR SCHWARZENEGGER: I'm very happy to say that today we completed the first out of three steps in order to fix our budget problem here in the state of California. And the first step is to make the mid-year cuts, and the other two steps are to fix the next fiscal year's budget problem, budget 2008-2009. And then the third step is to fix the budget system itself.

Now, I compare this to a triathlon, and the reason is because we want to move from one step to the next very quickly, without any rest whatsoever. In a triathlon, when you finish the swim, which is the first step, you immediately jump on a bike and you do your 200 plus miles, and then after that you immediately go and run the marathon. And the same I want to happen with this here. There should be not one single day's rest. The legislators need to go and take action immediately when it has to do with the budget of 2008-2009.

And the reason why it is so urgent and so important to work immediately on this problem is because to make cuts -- now, a lot of those cuts, it takes months to take effect. So that if they make a decision, let's say this coming month -- and I would say within a month they should really have a budget together for 2008-2009, because if they make a decision in March, it will not take effect until July, and that's when it needs to kick in. If they think, or do what normally is being done, and rightfully so, to make those decisions in July or in June, it will be too late, and the budget cuts will not take effect until October, November or December. And that means that therefore we will have to cut deeper into the budget and make more cuts.

So this is why I urge the legislators to get to work on that immediately. I have total confidence that they will, with the same spirit as we worked together on infrastructure or on the mid-year cuts that we have just done, or on environmental issues and so on. I think that we have a great team here in this Capitol. I have total confidence in them that they will go and act on that immediately.

And of course the third step is then, when we have done that, is to fix the budget system itself. And this is what I have talked about several times, which is the rainy day fund, to put a rainy day fund aside when we have a surge in revenues, and also to have a system in place where we pre-determine the kind of cuts that will be made if our revenues go down. If we would have had this in place 10 years ago we wouldn't have the mess that we're in today.

There is no reason whatsoever that we ever have to make cuts on any program, period, simply because our revenues consistently go up. When you look at the charts you will see, when you look 20 years back where they were, or when I came into office, they were 76 billion dollars; today they're 96 billion dollars. The revenues continuously go up, they never go down. They always go up. The only thing is that with our system, our budget system, there is an up and down, but it always goes up in the long run.

What we want to do is have a rainy day fund set aside so when they flatten out -- like this year, instead of the 6 percent increase in revenues we only have a 1 percent increase -- then to supplement it with the rainy day fund. That's what we want to accomplish here. And also, like I said, to predetermine the programs that will be cut. So those are the kinds of things that we want to accomplish.

I also want to mention that today I have signed an executive order to instruct all of our departments to look for more cuts. And they will look at that, and I think that we can get another 100 million dollars of cuts out of it when we go in that direction. So everyone is working together to make this happen. We want to make sure that comes July 1 that we are in good financial footing, and that we have the money, that we don't run out of cash and all of those kinds of things.

So with that, I want to open it up. And know also that the LAO is going to come out with a report tomorrow to what their opinion is, and I'm looking forward to that. And I will then, after that report, get together and hold a Big 5 Meeting to bring everyone together and to just have everyone march in the same direction. Thank you. Please.

QUESTIONS/ANSWERS:

QUESTION:                                                   Governor, last week the Assembly missed an opportunity to close a tax loophole, the so-called yacht tax, or the sloophole tax, 26 to 50 million they were saying. Republicans said they didn't support it; Democrats wanted it. Today they're going to take it up again. What are your hopes or expectations as to what Assembly Republicans should do?

GOVERNOR:                                                 I think that we can save 26 million dollars, and this is 26 million dollars that we could use for education or for other important programs. I think that we have proposed to get rid of that tax loophole for yacht owners, and I think that they should vote for it. Yes?

QUESTION:                                                   Governor, on prompt action on the budget, might the legislators want to wait until May, until they get the revised forecast on expenditures and revenue for the coming year before they act?

GOVERNOR:                                                 I'll tell you why I don't believe in waiting for the May revise, because everyone in this building knows the numbers. There's no secret. We don't have to wait. We know that every month our revenues are coming in short by around 500 to 600 million dollars. Nothing has changed; that has been consistent. The LAO is going to come out tomorrow with a report, so we again know the updated numbers. So everyone knows everything, so there's no surprise, or nothing that you have to wait for until May 14th. It's just for some people maybe a way of saying I can't deal with this right now, let's push it. I just want to remind the legislators that every day we wait we're going to have to make more cuts.

Now, there are some people in this building that think that if they can wait and wait, and push it to the end, that that will get us into bigger financial difficulties and challenges, that that will make us then raise taxes. But they're making a big mistake, I can tell you this right now. There will be no raising taxes, because we don't have a revenue problem, we have a spending problem and we have a budget system problem. As I said, revenues are always going up. So we must be fiscally responsible in this building, and we must make decisions now. Yes?

QUESTION:                                                   Governor, separate from the fact, as you've said, that there might be ways for the state to increase revenue, and one of those you proposed was privatizing the lottery, and you've used the number of up to 37 billion dollars. There are some reports that say that it might not be worth that much money; in fact, the falling stock market might make it worth even less. Do you still believe it's worth 37 billion dollars, and could be a benefit to the state?

GOVERNOR:                                                 That number was thrown around, and other numbers like that were thrown around about the lottery last summer when we talked about it, when we negotiated the budget. I don't know what the current value is. But one thing we know for sure, that we should be making much more money on the lottery than we are making right now, and I think that it would be foolish for us not to take advantage of that and not use some of that money for education and for health care and other things where we need the money. I think, why are we waiting? I think that we can use that money. And so I think it will be part of the budget negotiations down the line. I think Democrats and Republicans will be talking about all of those things, and maybe other ways of creating the extra revenues without raising taxes. Yes?

QUESTION:                                                   Senator Florez is introducing a bill today to have the state reimburse school districts that may have lost money from the recent beef recall. Do you think that's a good idea? Is that something you'd support?

GOVERNOR:                                                 Look, first of all let me just say about the beef recall, I think it is horrendous and outrageous, when you look at the footage on television of the way those animals were treated. I mean, this is animal cruelty, and I am absolutely against that. And I have already sent a letter to the federal government to tell them that we will do everything we can to work together with them, to prosecute those people, to investigate, and do everything we can to really get rid of this problem. This is really horrible, to see something like that.

But as soon as Senator Florez find the money, I'm more than happy to support his call for reimbursing the schools. Yes?

QUESTION:                                                   Governor, does your executive order apply to the Horseshoe and your operations? And in what way will that directly affect operations in the Horseshoe?

GOVERNOR:                                                 I think that Susan can give you more the details on that, because she runs the office. But I can guarantee you that we will have 10 percent cuts in our office, as we recommend for everyone else to do the same thing. Absolutely. Okay. Say again?

QUESTION:                                                   Will you personally limit travel? It says some of the travel could be eliminated under this 100 million dollars.

GOVERNOR:                                                 Some of it. For me personally, I pay a lot of my travel myself, so I don't have to worry about those things. Okay? Remember, I don't take a salary.