Jan. 5 (Bloomberg) -- California Governor Arnold Schwarzenegger is entering his last year in office the way he began: presiding over a government in financial turmoil.
Schwarzenegger, 62, tomorrow is set to give his final State of the State speech, setting the stage for one more fight with the Legislature over a budget that will total $89 billion this year. With a $21 billion deficit forecast over the next 18 months, the governor of the most populous U.S. state has said he won’t boost taxes again, leaving him reliant on spending cuts and federal help to balance the books next fiscal year, which starts July 1.
The financial strains facing California show how local governments are still dealing with the recession that began in 2007 even as the national economy recovers from the worst slump since the 1930s. The latest struggle comes after legislators already erased $60 billion in gaps in the past two years by raising taxes, slashing school spending and borrowing, in a political battle that pushed the state close to insolvency.
“This is much worse than anyone thinks,” said Marilyn Cohen, president of Los Angeles-based Envision Capital Management Inc., which manages $250 million on behalf of wealthy individuals. She is moving clients out of California debt. “I have no confidence in the state Legislature.”
U.S. states and Puerto Rico expect to have $83 billion less than they will need to pay for their programs in the current and coming fiscal year, the National Conference of State Legislatures estimates. Illinois is borrowing $3.5 billion to make required pension payments. New Jersey