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Last Updated: Saturday, 13 December, 2003, 01:27 GMT
Arnie budget deal gets go-ahead
Schwarzenegger with a child during a four-day campaign for his budget plan
Schwarzenegger campaigned hard for the cut-and-borrow plan
California's Senate has voted to accept budget proposals put forward by Governor Arnold Schwarzenegger.

The vote followed approval by the California Assembly of the plan, which proposes to cap the state's spending and raise $15bn in fresh loans.

Mr Schwarzenegger is expected to sign the measure shortly, and the budget will be put to a referendum on 2 March.

The Democrat-dominated assembly rejected the governor's original plan last week.

Breakthrough

Their initial rejection of the rescue plan raised the prospect of a fresh financial crisis as California is due to repay $14bn in loans in June.

But Democrats backed the measure after the original stricter spending caps were eased.

"This is a good, common sense measure," said Democrat Assembly member Darrell Steinberg. "It does not solve our budget problems, but if we follow the process that led to this agreement, we will solve our problems."

"I commend them, Democrats and Republicans, for putting aside 'politics as usual' and working together with me to craft a plan that includes a balanced budget requirement to prevent us from facing such a disastrous fiscal crisis again," Mr Schwarzenegger said.

Credit risk

California faces a budget deficit of about $12bn for 2003 and up to $15bn for 2004.

This is state credit card that the politicians have - we throw it away into the garbage can
Arnold Schwarzenegger
Its credit rating is the worst among US states.

The deficit grew mainly because of the sharp economic downturn of the past two years and the unexpected cost of an energy crisis.

Mr Schwarzenegger - who has pledged not to raise taxes - wants to cut almost $3.8bn in spending.

But the centrepiece of his plan was a $15bn bond issue designed to help California meet the accumulated shortfalls, repayable over 30 years.

The governor had been campaigning in recent days to muster popular support for the plan.

Democratic members of the state legislature criticised the governor's fiscal plan, saying spending cuts would hurt the poor.

They were also uneasy about a huge, long-term bond issue.


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