Gov. Vetoes $175 Million in Services, Signs Budget

Gov. Arnold Schwarzenegger signed the state’s first on-time budget in six years Friday, after using his veto power to scale back the expansion of environmental enforcement and healthcare programs approved by the Legislature earlier this week.

The $131-billion spending plan signed by the governor will use a surge of unanticipated revenue that filled California’s coffers this year to pay back billions the state borrowed from schools in recent years as well as to accelerate repayment of other state debt.

The governor used his veto pencil to eliminate more than $175 million in spending that the Legislature had approved. He vetoed tens of millions of dollars from the budget that would have been used to reduce air pollution, expand hospital trauma care, provide interpreters to non-English speakers in civil court cases and make dental care available to more low-income children, among other services.

The vetoes drew a muted response, however. Most of the program expansions that Democrats had secured in the budget approved by the Legislature Tuesday night remained intact.

“This is a great budget,” Schwarzenegger said just before signing the document at a ceremony under the Capitol dome. Schwarzenegger said he and legislative leaders were able to meet the deadline for passing a budget for the first time since 2000 because “we put politics aside.”

“We were driven by one overwhelming desire: to do what is best for the people of California,” he said.

The budget does not solve the state’s financial problems. It relies on this year’s $7.5-billion windfall -- unanticipated tax revenue resulting from higher than expected capital gains, corporate profits and the hot housing market -- to expand programs and close a shortfall that had been projected for the fiscal year that begins today.

But the state is still projected to spend more than it brings in over the coming years. Lawmakers expect a deficit of at least $3.3 billion for the fiscal year that begins in July of 2007.

On Friday, Democratic gubernatorial nominee Phil Angelides warned that Schwarzenegger would deal with that deficit as he has dealt with past deficits, “by cutting school funding, raising tuition and fees and cutting healthcare.”

But Assembly Speaker Fabian Nunez (D-Los Angeles) had a different take.

He said the budget agreement shows “you can be fiscally conservative but at the same time be compassionate.”

By the time the budget was signed, the Legislature had adjourned for a monthlong break. Some lawmakers will stick around to draft legislation in line with the four-part plan the governor presented this week to address prison overcrowding. Schwarzenegger called a special session of the Legislature to deal with that issue, which will resume when lawmakers return Aug. 7.

The Assembly has already approved at least two prison reform proposals: a bill that would authorize the state to borrow for the construction of new prisons and another that would move nonviolent women offenders into local detention centers where they could get drug treatment, education and help finding jobs. Both are pending in the Senate.

Harsher penalties for repeat drug offenders, championed by the governor, became law when he signed the budget Friday. The new law changes voter-approved Proposition 36 by taking away the option of avoiding jail from thousands of drug offenders who seek addiction treatment more than once.

Now judges will be able to incarcerate offenders up to five days if they relapse. Treatment advocates call the new penalties illegal and say they will sue to block them.

The governor scaled back the expansion of efforts to fight air pollution by $35 million. The money would have been used to update heavily polluting construction, farming and transportation equipment and to bolster enforcement of the state’s clean air laws.

Regardless, environmentalists saw victory overall in the budget. They noted that it includes $50 million to replace decades-old school buses with clean-burning models, develop alternative fuels and promote zero-emissions cars and trucks.

“This budget certainly isn’t bad,” said Pete Price, an environmental lobbyist in Sacramento. “A lot of the environmental budget items were retained. I think generally you will find environmentalists not unhappy.”

There was also little criticism from healthcare advocates. The governor eliminated $10 million that would have gone to fund trauma centers in hospitals, scaled back a proposal to fight West Nile virus by $6 million -- or two-thirds of the proposed funding -- and eliminated $2 million that would have been used to provide preventive dental care to low-income children.

The governor also vetoed $10 million that civil courts could have used to hire interpreters for non-English speakers.

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Times staff writer Nancy Vogel contributed to this report.