Gov. Warns of ‘Armageddon Cuts’

Launching a bipartisan campaign for Propositions 57 and 58 with a town hall meeting at a ceramics packaging factory, Gov. Arnold Schwarzenegger warned of “Armageddon cuts” to the state budget if voters fail to pass the twin measures on the March ballot.

Proposition 57 provides for $15 billion in borrowing to cover the state’s existing deficit and refinance the state’s debt. Proposition 58 is a balanced-budget amendment to the state’s Constitution. The two are linked. If either one fails to win a majority on March 2, both fail.

If the bond passes, “we are then out of the hole. We are then on the way to recovery,” Schwarzenegger told an audience of 150 people inside the Duncan Ceramics plant. If it fails, “we will have to make drastic cuts, deep cuts. I call them Armageddon cuts. Cuts in services that we don’t want to make, that would be devastating.”

State Controller Steve Westly, a Democrat and Schwarzenegger’s co-chairman in the campaign, went even further in his warnings, suggesting that failure of the measures could trigger a worldwide recession.

“We are the world’s sixth-largest economy -- there is much more at stake here,” Westly said. “I just want you to remember: We’ve seen world recessions when relatively small countries like Argentina or Thailand have not managed their fiscal situation. March 2 is going to be the most important vote many of you cast in your lifetime.”

Schwarzenegger’s warnings received some backing from Wall Street on Tuesday. Standard & Poor’s said in a report that the state might not have enough money to pay its routine expenses in June if the $15-billion deficit bond did not pass and the state was unable to secure a backup bond that is on shaky legal ground.

Schwarzenegger has been publicly urging the passage of both measures since his Jan. 6 State of the State speech. But Tuesday represented the official kickoff of his campaign, “Californians for a Balanced Budget: Yes on 57 and 58.”

The measures do not yet face organized opposition. The governor, in a deal negotiated with Assembly Democrats in December, persuaded the state Legislature to place both measures on the ballot.

State Treasurer Phil Angelides, who has been critical of the bond, made a Tuesday afternoon appearance at Fresno State that aides said had been scheduled without knowledge of Schwarzenegger’s event.

At his event, Angelides said: “No one should be threatening the voters of this state with chaos or Armageddon.” Instead of borrowing, Angelides said, taxes should be raised. But when asked if he was planning to campaign against the bond measure, Angelides said no.

Other leading Democrats have backed the bond. “In the interest of the state, in the interest of trying to cut down the deficit, it makes sense for us to support the bond,” state Senate Democratic leader John Burton of San Francisco told a California Manufacturers and Technology Assn. conference Tuesday.

Over the weekend at its winter convention, the state Democratic Party declined to take a position on the bond.

Support from Democrats such as Burton and Westly is essential to the governor’s campaign, which is billed as a bipartisan effort. Aides said his Tuesday appearance offers a template for upcoming Proposition 57 and 58 events.

Schwarzenegger and Westly will spend much of the next month on the road campaigning for the plan. In the campaign’s final two weeks, plans call for Westly and Schwarzenegger to split up in order to cover more ground.

The next campaign event is scheduled to take place Thursday in the San Gabriel Valley. As the campaign goes on, other Democrats, including the outgoing Assembly speaker, Herb Wesson, and First Lady Maria Shriver are expected to make public appearances as well.

The campaign will probably launch TV advertisements in early February, an advisor said. Schwarzenegger spent much of his December fundraising time trying to retire debt from the recall campaign, so fundraising efforts for Proposition 57 and 58 have begun in earnest only within the last week. The governor has fundraising events scheduled for today in Sacramento and Thursday in Los Angeles.

Even though independent polls have shown Proposition 57 -- the bond measure -- with support from less than 40% of those surveyed, Schwarzenegger insisted that his private polling showed the measure with more backing. (Proposition 58 is ahead in the independent and private polls).

“I’m a positive guy,” he said. “I know we can turn this state around again.”

At least on Tuesday, however, the ballot measures inspired little of the excitement that Schwarzenegger triggered during the campaign.

While previous campaign appearances used classic rock music to score Schwarzenegger’s entrance and exit, Tuesday’s event offered no musical entry and provided elevator music for his exit. Fresno TV stations wanted to broadcast the event live, but Schwarzenegger aides asked them not to. They said they were concerned that in the factory, the noise of TV reporters talking would clash with Schwarzenegger’s speaking.

After four questions from the audience, the governor had to appeal for more queries. And three of the eight questions had nothing to do with Propositions 57 and 58. Members of the audience said they were convinced that passing the ballot measure was important given the consequences. But while many expressed enthusiasm for Schwarzenegger, few appeared excited by the measures.

“We got the message very clearly that there is no good alternative,” said Connie Conway, a Tulare County supervisor, who said she would probably support Proposition 57 and 58. “But what’s the argument beyond that? Look how much borrowing the state has done already. I like this governor, but I am hesitating.”

At the event, the governor and Westly stood on a stage on the factory floor, surrounded by an audience in seats in a setting reminiscent of the “Ask Arnold” town hall employed during the recall campaign. “We are back in the trenches now,” said Schwarzenegger, in an echo of his recall campaign, which he often compared to a war. “This is a campaign. We have to roll up our sleeves and get the message out to everyone.

“We got 70% of the vote” in Fresno, Schwarzenegger said of his showing during the recall. “The other 30% just never forgave me for the movie ‘Hercules in New York.’ ”

At another point, Schwarzenegger grabbed Westly and mugged for the cameras.

“Twins No. 2!” the governor said, offering a possible sequel to the comedy in which Schwarzenegger and Danny DeVito played twin brothers.

The audience consisted largely of factory workers, small-business owners, local elected officials, and teachers. A Fresno teacher introduced Schwarzenegger with what she claimed was the governor’s fifth-grade report card. (He received an A+ in most subjects, with the exception of English). The governor talked up a deal he had struck with education organizations to delay some education funding increases in order to balance the budget in the 2004-05 fiscal year.

Todd Harris, communications director for the 57-58 campaign and a vice president in the political consulting firm of Mike Murphy, Schwarzenegger’s chief strategist, said many of the campaign events will take place inside businesses and include teachers in the audience.

“You can expect to see the tie-in with business,” Harris said. “You’ll see teachers at all or more of these events.... And you can expect to see representatives of both parties united.”

The governor and controller tried to keep their explanations simple. Schwarzenegger described the complicated bond measure as if it were an individual person’s debt refinancing.

Refinancing debt (through the bond) and cutting up credit cards (through the Proposition 58 balanced budget amendment) “is exactly what a financial counselor would,” do if you go there and say, ‘I have a problem, I spend too much money, I spend more money than I make, and I can’t help myself. I’m a spending addict,’ ” he said.

“I think the voters are responding,” said Darry Sragow, a Democratic political consultant to the Proposition 57 and 58 campaign.

“The fundamental idea is that you have to get the budget balanced and keep it balanced. That moves voters.”

Times staff writers Evan Halper and Peter Nicholas contributed to this report.