SACRAMENTO, Calif. -- Republican Gov. Arnold Schwarzenegger asked for $6.9 billion in federal funds in his state-budget proposal Friday and warned that state health and welfare programs would be threatened without the emergency help.
Mr. Schwarzenegger's proposed $82.9 billion general-fund budget for the 2010-11 fiscal year would close a $19.9 billion gap over 18 months. In addition to the federal aid, he called for $8.5 billion in cuts and $4.5 billion in alternative funding to balance the budget.
"It's time to enact long-term reforms that will change the way the most populous state and the federal government work together," Mr. Schwarzenegger said. He and state legislative leaders plan to visit Washington to lobby for bailout money. White House budget officials weren't available for comment on the governor's request.
Mr. Schwarzenegger said that without the federal aid, he would propose cutting $4.6 billion from state assistance programs and raise another $2.4 billion, largely by extending the suspension of tax breaks.
The governor said California deserved the federal help because the state sends far more tax money to Washington than it receives in return. Federal mandates, he added, "force us to spend money that we do not have."
The budget proposal said the federal government should reimburse California $2.8 billion for costs related to the state's Medicaid program, as well as more than $1 billion for special-education spending and $2.1 billion in federal-stimulus money.
Mr. Schwarzenegger called the state legislature into a special budget session. He proposed cutting $2.4 billion from health and welfare spending and $1.2 billion from prison spending. He also called for cuts in salaries and pensions for state workers.
Republicans praised the plan. "It's a good first step," said Bob Dutton, vice chairman of the state Senate's budget committee.
State Senate President Darrell Steinberg, a Democrat, said: "I have one reaction: You've got to be kidding me." He and other legislative leaders said they opposed any more cuts to welfare and health programs. Instead, they said they preferred federal help or taxes on, for example, oil drilling and tobacco sales.
"These cuts would come at a bad time because there is growing demand from families who are struggling to make ends meet," said Jean Ross, executive director of the nonprofit California Budget Project, which studies policy impacts on the poor.
Mr. Schwarzenegger has been mired in a budget crisis for much of the past two years. California revenues have plunged amid double-digit unemployment and high foreclosure rates. The state has delayed billions of dollars of payments and issued IOUs to keep the government from defaulting.
The return of partisan statehouse clashes over the budget is likely to revive worries on Wall Street over the state's ability to resolve its fiscal troubles. "My concern at this point is that the negotiations could go on longer than the amount of cash the state has on hand," said Gabriel Petek, analyst at Standard & Poor's Corp., which has California on a negative ratings outlook.
A deeply divided legislature finally closed a cumulative $60 billion shortfall last year -- long after its budget deadline.
There are signs California is beginning to slowly emerge from recession. Housing sales have been growing for several months, and state Controller John Chiang on Thursday released his December cash report that showed the month's receipts rose above estimates by $481 million, or 5.7%.
"December receipts showed signs of improvement, but the state continues to face tremendous fiscal challenges," Mr. Chiang said. "At best, this is the beginning of a long and gradual recovery."
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