Arnold Schwarzenegger to call lawmakers into budget session

SAN FRANCISCO (Reuters) - California Governor Arnold Schwarzenegger said on Thursday he will call a special session of the state legislature on December 6 to tackle the budget deficit, newly estimated at more than $25 billion through the next fiscal year.

Schwarzenegger said he would offer a plan including budget cuts, but Assembly Speaker John Perez rebuffed Republican Schwarzenegger and said he prefers to work on budget matters with incoming Governor Jerry Brown, a fellow Democrat who takes office in January.

California's revenues have plunged in recent years because of the housing slump, mortgage crisis, turmoil in financial markets and a double-digit state unemployment rate, and analysts believe the most populous U.S. state faces a long recovery that will lag the national recovery.

The special session will be the eighth focusing on the state's budget that Schwarzenegger, the outgoing governor, has called in the seven years since he took office. Schwarzenegger was barred by term limits from seeking reelection.

California's Legislative Analyst's Office on Wednesday said Brown and lawmakers must tackle a projected deficit of more than $6 billion in the current fiscal year and a shortfall of $19 billion in the following next fiscal year.

"The LAO's estimate is a sobering reminder that California's economy is still struggling," Schwarzenegger said in a statement.

"I have spoken to all four legislative leaders and they know what we are up against. They know it won't be easy, but they also know they cannot wait to take action," he said.

Brown will present a budget plan to balance the state's books after taking office in January.

"I have had several productive conversations with Governor-Elect Brown on the budget," Perez said in a statement. "Assembly Democrats believe working with the new Governor offers the best path to responsible deficit reduction and, more important, to a budget that saves and creates the jobs California needs."

A spokeswoman for State Senate President Darrell Steinberg said in a statement that senators would work with Schwarzenegger and Brown: "We will begin to work right away with the Governor and Governor elect."

After a record stalemate, Schwarzenegger and lawmakers last month agreed to and enacted a budget, which required closing a $19 billion shortfall, for the current fiscal year that began on July 1.

Critics of the spending plan said it had too many accounting gimmicks and was overly optimistic in assuming funds from Washington.

(Reporting by Jim Christie; Additional reporting by Peter Henderson; Editing by Gary Hill)