Schwarzenegger launches TV ad in budget fight

SAN FRANCISCO Tue Jul 14, 2009 9:20pm EDT

California governor Arnold Schwarzenegger is shown in this frame grab from a TV commercial as he appears in a 60-second spot which began airing July 14, 2009, stating he is in no mood to compromise on the state budget crisis. The commercial is from the group Stand for California. REUTERS/Stand for California/Handout

California governor Arnold Schwarzenegger is shown in this frame grab from a TV commercial as he appears in a 60-second spot which began airing July 14, 2009, stating he is in no mood to compromise on the state budget crisis. The commercial is from the group Stand for California.

Credit: Reuters/Stand for California/Handout

SAN FRANCISCO (Reuters) - As California Governor Arnold Schwarzenegger and lawmakers were set to resume talks on Tuesday to arrive at a state budget agreement, the Hollywood icon turned politician hit the airwaves with a television commercial underscoring he is no mood to compromise.

Whether dispirited Californians will respond, however, is uncertain, analysts said.

The Republican governor said in the 60-second spot that he would not sign a budget that plugs a $26.3 billion deficit if it includes higher taxes and excludes changes in state government he has said will prevent welfare fraud.

"And I will not sign a budget that pushes our financial problems down the road, because the road stops here," Schwarzenegger said in the commercial, which aired amid growing concerns on Wall Street about the state's finances, especially its cash account.

The state government started its fiscal year on July 1, and without a balanced budget agreement it is quickly burning through its cash.

That has forced finance officials, grappling with declining revenues because of the recession and rising unemployment, to issue IOUs in order to conserve cash, promising payment to taxpayers owed refunds and vendors owed money for goods and services for only the second time since the Great Depression.

BROADCAST BUDGET BATTLE

Schwarzenegger's TV commercial came amid hope in the state capital of Sacramento that budget talks are nearing a successful conclusion after fits and starts in recent weeks.

The governor and top lawmakers of the state's Democrat-led Legislature have essentially agreed they will balance the state's books with deep spending cuts.

Democrats have conceded state revenues have plunged so dramatically that spending levels must drop as well. They have also backed away from attempts to raise taxes, opposed by Schwarzenegger and the Legislature's Republican minority.

Democrats do not have sufficient votes to pass budgets and tax increases on their own, giving Republicans, if they remain united against taxes, an effective veto on spending plans.

Where Schwarzenegger and top Democrats differ most now is on the politically sensitive issue of education spending. He has proposed suspending a two-decade-old voter-approved measure that locks in funding levels for public schools, in order to pare education spending.

The idea has rattled Democrats as it has riled the California Teachers Association, the state's powerful teachers union. The union, an ally of Democratic lawmakers, began airing its own budget commercial last week that sharply criticizes Schwarzenegger and urges: "Protect our schools and put our kids first."

Ramon Cortines, head of the Los Angeles Unified School District, on Monday slammed Schwarzenegger's school funding proposal. It "would open a door to additional and continued cuts throughout the year as the state's deficit grows," Cortines said, adding his district, the nation's second-largest school district, has already made deep cuts in its budget.

Sacramento, California-based political consultant Wayne Johnson expects voters to tune out both commercials. He said they are in an increasingly sour mood because state leaders have responded with several drawn-out debates over balancing the state's books since 2007.

Voters now expect delay in budget talks and largely assume dysfunction in the state capital of Sacramento, Johnson said.

"It seems like a tough sell either way," Johnson said. "While the budget is important, it's hard to say something new and it's increasingly difficult to say something believable. People's level of skepticism is sky-high right now ... The public has lost patience with the entire political class."

Schwarzenegger spokesman Aaron McLear at a press conference in Sacramento said the governor's commercial is also aimed at lobbyists: "You see some ads going up from different special interests here in town talking about the need to raise taxes . ... He will continue to stand firm on solving the entire budget without raising taxes."

(Additional reporting by Steve Gorman in Los Angeles and Marianne Russ in Sacramento, California; Editing by Leslie Adler)

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