SACRAMENTO -- Governor Arnold Schwarzenegger and lawmakers from both parties were close to agreement yesterday on plans to borrow $15 billion and impose a state spending cap, legislators said.
The proposal appeared all but dead just days ago, in an early setback for the new governor.
The agreement would require the Legislature and the governor to adopt and stick to a balanced budget -- meaning spending would have to match revenue. It also calls for the creation of a reserve fund and prohibits future borrowing to pay for operating expenses.
If approved by the Legislature, the measures would be put before the state's voters on the March ballot.
The $15 billion bond issue would be used to help close a budget deficit of $10.7 billion. It was the state's fiscal crisis that helped bring down Democratic Governor Gray Davis and propel Schwarzenegger to office in a recall election in October.
Assembly Republican leaders were meeting at noon with the governor. Schwarzenegger's spokesman Rob Stutzman said the Republican governor was optimistic an agreement would be approved.
Legislative aides, speaking on condition of anonymity, said Schwarzenegger agreed to soften his position on a hard spending cap that would restrict the number of dollars that could be spent in any one year.
In exchange, the sources said, the governor got a stronger commitment from Democrats toward building a reserve fund as well as authority to call the Legislature back into session during a fiscal crisis.