Reporting from Sacramento—Gov. Arnold Schwarzenegger vetoed hundreds of millions of dollars in state spending this morning as he signed a budget package aimed at bringing California's deficit-riddled books into balance.
"This has been a very tough budget, probably the toughest since I have been in office here in Sacramento," the governor said.
Schwarzenegger said his vetoes would affect parks, child welfare services, and AIDS prevention and treatment.
State lawmakers passed the spending package after an all-night session last week. They made deep cuts across all state services, especially in the biggest areas -- education, healthcare, prisons -- and also relied on billions of dollars in accounting maneuvers and borrowing.
But the plan fell short by at least $1.1 billion, after the state Assembly blocked a raid on local transportation funds and new oil drilling off the coast of Santa Barbara.
"That effectively wiped out the state's reserve," said Schwarzenegger spokesman Aaron McLear. He said the new cuts would partially rebuild the state's reserve fund.
Further cuts to education funding threaten to run afoul of federal guidelines and state law. Deeper prison reductions are politically unpalatable.
Anthony Wright, executive director of Health Access, an advocacy group, lamented that the budget plan, even before the newly announced cuts, was already "the biggest rollback of coverage in state budget history."
McLear said Schwarzenegger could not veto enough spending to reach the full $1.1 billion.
"There are few choices left," McLear said. "Obviously the cuts are going to be very difficult."
Since July 2, California has issued 201,783 IOUs worth $1.07 billion instead of paying some bills, according to Garin Casaleggio in the state controller's office.
California finance officials now must sell the proposal to Wall Street to begin the flow of routine borrowing and stop issuing IOUs. That process will take at least a week, the controller's office estimates.