Schwarzenegger issues dire budget warning

SACRAMENTO, May 11 (UPI) -- California Gov. Arnold Schwarzenegger Monday warned the state will face "a very serious cash crisis" if voters reject ballot initiatives next week.

Schwarzenegger told legislative leaders in a letter rejection of the ballot initiatives in the May 19 election, combined with plummeting state income tax revenues, could drive California's budget gap to $21.3 billion, the Los Angeles Times reported Monday.

Polls suggest California voters will handily reject the ballot initiatives, which are intended to help the state fill a budget shortfall.

Schwarzenegger said Monday he will make an announcement Thursday intended to give voters an idea of the negative consequences of rejecting the initiatives -- including drastic cuts in spending on fire operations, the prison system and education. Even if the measures pass, the Times said, California will still be confronted with a $15.4 billion gap between revenues and obligations.

California is experiencing an annual falloff in personal income tax collections for the first time in in 70 years, Schwarzenegger told legislative leaders, and the state could be unable to pay its bills if the budget gap isn't fixed by early July.

"Absent swift action, the state will be facing a very serious cash crisis," Schwarzenegger wrote.

Jon Coupal, president of the anti-tax Howard Jarvis Taxpayers Association, told the Times it looks like Schwarzenegger is trying to politicize California's budget process.

"It strikes me that the timing certainly raises the appearance of being wholly politically driven," Coupal said.