Schwarzenegger Calls for Deep Cuts

After two weeks of declining to say how he would confront California ‘s fiscal crisis, gubernatorial candidate Arnold Schwarzenegger on Wednesday sketched the outlines of a plan for billions of dollars in spending cuts with no new taxes.

But the Republican actor’s pledge to avoid tax increases was less than airtight. He said an earthquake or other disaster could strike California, so “you can never say never” to new taxes. He also refused to specify spending cuts, saying only that they would be extensive.

“Sometimes, as a surgeon would say, you have to cut to save the patient, and this is what the situation is here,” he said.

Overall, Schwarzenegger portrayed himself as an honest outsider well suited to challenge what he implied was a rotten Sacramento culture that had left the state’s finances a shambles.

“What the people want to hear is: Are you willing to make the changes?” Schwarzenegger said, in dismissing calls for specifics. “Are you tough enough to go in there and provide leadership? That’s what this is about. And I will be tough enough. And independent. I can go up there and really clean house.”

On another significant campaign issue, Schwarzenegger said he was leaning against Proposition 54, an initiative on the Oct. 7 ballot that would bar the state from tracking statistics by race.

“I’m looking at that right now, because I’m getting from both sides the input, and you know my indication is not to change the way things are,” he said. “But I want to hear, again, both sides.” The initiative is sponsored by UC Regent Ward Connerly and opposed by many leading Democrats.

Schwarzenegger’s remarks on the budget came under immediate fire from Democrats, including the man he hopes to replace, Gov. Gray Davis. Davis said the Republican hopeful should present a far more specific plan to voters.

The state projects a budget shortfall of more than $8 billion next year. In the opening days of his campaign, Schwarzenegger proposed building schools, hiring teachers and cutting vehicle license fees; those moves would widen that gap to more than $12 billion. On Wednesday, he vowed to spare public schools from budget cuts.

Schwarzenegger’s most extensive public remarks to date on the budget mess came at a news conference at a hotel near Los Angeles International Airport after he met there with 19 economic advisors. The group included economists, politicians and several executives from the high-technology and financial industries. At one point, Schwarzenegger was explicit about his strategy, saying that he is not eager to be pegged clearly as Republican or Democrat, liberal or conservative.

“It is not coincidental that Secretary Shultz is on my right and Warren Buffett is on my left,” he said, referring to his two leading economic advisors, George P. Shultz, the former secretary of State and secretary of the Treasury, and Buffett, the billionaire investment mogul.

The gathering showcased Schwarzenegger’s emphasis on the economy, but also illustrated the unusual nature of a superstar’s first campaign for public office: It drew a swarm of news and entertainment media from around the globe.

The economic advisors’ meeting was private, although afterward the candidate, along with Buffett and Shultz, met with reporters. Schwarzenegger took questions for 42 minutes; it was his longest encounter with journalists since the campaign began.

He also took time to issue a mock upbraiding of Buffett, who last week created a political headache for Schwarzenegger by suggesting that California homeowners pay too little in property taxes -- a situation brought about by Proposition 13, the 1978 ballot measure that capped increases in those levies.

“I told Warren, if he mentions Prop. 13 one more time, he has to do 500 sit-ups,” quipped the former champion bodybuilder, who reiterated his support for the politically sacrosanct initiative.

As for the upcoming budget, Schwarzenegger pledged to:

* Cap state spending, through an amendment to the California Constitution. He did not specify what the cap would be.

* Name “an outside auditing group free of political influence to examine the books and find out how bad the situation really is” with state finances. The review would take 60 days.

* Enact energy reforms to cut the power bills of businesses. He gave no indication what they would be.

* Call a special session of the Legislature to reform the state’s system for insuring workers injured on the job. The soaring cost of workers’ compensation premiums has put a huge burden on California businesses, but state lawmakers have been unable to agree on reforms.

* Name a working group to study restructuring of state debt.

“You know, Maria and I, we teach our kids basic principles,” he said, referring to his wife, Maria Shriver. “We teach them: Don’t spend more money than you have.... I promise you that’s what I would teach Sacramento.”

“Sacramento has overspent, overtaxed and over-regulated our businesses,” he said.

The candidate did not mention Davis by name, but he criticized “Sacramento” for borrowing billions of dollars to keep the government afloat. While brushing aside questions on specific cuts he would make, he promised to attack the budget problems “head-on.”

“Now, does this mean that we’re going to make cuts? Yes,” he said. “Does this mean education’s on the table? No. Does this mean I am willing to raise taxes? No. Additional taxes are the last burden that we need to put on the backs of the citizens and businesses of California.”

Pressed on how unequivocal the no-new-taxes pledge might be, Schwarzenegger responded: “You can’t ever say never, because we could have next year an earthquake. We could have a natural disaster. We could have a terrorist attack, or something like that. So you can never say, ‘Never, never.’ ”

At a joint appearance in Santa Monica with Sen. Barbara Boxer, Davis criticized Schwarzenegger for providing few details in his economic program.

“Anyone who wants to take my job ought to have specific plans,” he said. “What are they going to do on electricity? What are they going to do on the budget? What are they going to do on water to make sure we have enough water up and down the state? Not just sound bites, or rehashed phrases from old movies, but specific, concrete plans.”

State Senate President Pro Tem John Burton (D-San Francisco) said Schwarzenegger could not realistically avoid raising taxes, given California’s dire fiscal condition.

“He doesn’t know anything about the budget; that’s the problem,” Burton said. “He could take probably up to $70 a month from the blind, aged and disabled; eliminate programs for the developmentally disabled and the mentally ill; eliminate aid to local law enforcement; and shut down a couple of state universities and some in the UC system, and that might balance the budget.”

State Sen. Richard Ackerman (R-Irvine) applauded Schwarzenegger’s plans, especially his call for outside auditors. But he questioned whether it was possible to balance the budget without cutting money for schools.

“Everyone starts out saying they don’t want to cut education, but if he has an audit, he might discover there are areas” outside the classroom where cuts are possible, Ackerman said.

Aside from the budget, Schwarzenegger voiced support for two labor-backed measures signed into law by Davis, one that gave paid leave to employees caring for sick family members and another that restored mandatory overtime for workers who exceed an eight-hour workday.

But Schwarzenegger, sticking to his broader message that California must be friendlier to businesses, added: “It’s very important that we don’t continue going down that road.”

“Before you promise anything to anyone right now, I think stop,” he said. “Stop, stop, stop with the spending.”

Schwarzenegger also spoke briefly on the issue of immigration, invoking his Austrian birth and upbringing as a bridge to Latinos and other California minorities. He recalled that he supported Proposition 187, the 1994 ballot measure that sought to deny education and most other public services to illegal immigrants. He pledged to press the Bush administration to cover California’s costs for the undocumented. He also recalled that he had “done four of my movies down in Mexico.”

Schwarzenegger spokesman Sean Walsh said later that the candidate opposes legislation that would grant driver’s licenses to illegal immigrants. Davis, who has appealed aggressively to Latino voters, has promised to sign the bill.

On ethics, Schwarzenegger promised to challenge “special interests” in the state Capitol, but offered no details of political reforms he might favor.

“I have the advantage that I’m going to Sacramento without any baggage,” he said. “I haven’t made any deals with anyone. I haven’t sold out to any special interest groups. I am not taking any money from anyone.”

Still, he said that he would take campaign money from, at the very least, supporters in Hollywood. He said executives at Creative Artists, his talent agency, would “have celebrities going out to fund-raisers for me.”

An “Entertainment Tonight” correspondent asked him about actor Rob Lowe and “other big Hollywood stars” who back his candidacy. Schwarzenegger called it “a very good question,” but said reports of Lowe’s role in his campaign were exaggerated; the former “West Wing” cast member, he said, had simply offered to raise money for him.

“Rob Lowe is not a senior advisor, nor is he an advisor,” the candidate said, while expressing gratitude for Lowe’s support. “But you know how it is in Hollywood with the publicity agents and all of those things.”

Staff writers Miguel Bustillo, Virginia Ellis, Jessica Garrison and Joe Mathews contributed to this report.