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Partial Transcript of Gov. Schwarzenegger Speaking: at League of California Cities Annual Conference

Time:11 a.m.

Date:Thursday, September 25, 2008

Event:Remarks, League of California Cities 2008 AnnualConference, Grand Ballroom, Long Beach Convention Center, 300 East Ocean Boulevard, Long Beach, CA

GOVERNOR SCHWARZENEGGER:

Thank you very much. Thank you for the wonderful introduction and thank you all for the wonderful reception. This is really great. First of all, let me just say right off the top that there a lot of people in here. (Laughter) A lot of people in here. And I ask myself, now where were you when I came out with Hercules in New York? (Laughter) That movie went right in the toilet. You were not there, now you’re here — I mean, what’s going on here?

No, this is really great to be here with all of you. And I, of course, don’t have really a prepared speech, because I did not know that I was going to talk to you today until just six months ago. (Laughter)

But anyway, I want to say thank you, of course, for the great job that the outgoing president, San Diego Councilman Jim Madaffer has been doing. And, of course, he has been a great, great supporter. And San Diego — of course, I don’t know if you know but in the recall election I got 80 percent of the votes — 80 percent of the votes, exactly. The other 20 percent just never forgave me for my movie Last Action Hero. (Laughter) So I totally understand that, totally understand that, so we will do better the next time when I get back into the movie business. But — I’m not. Maybe I am, who knows? (Laughter) I’m not getting paid for this job, so I’ll have to make up with something, that I know for sure.

But anyway, I also want to say thank you very much to the incoming president, Sacramento Mayor Heather Fargo, who has been a terrific mayor. Where is she? Where is Heather Fargo? Oh, right here. Give her a big hand for her terrific job in Sacramento; really an extraordinary leader. (Applause) And she’s going to become the incoming president of the League of Cities.

And I also want to say thank you very much to the mayor that is hosting us here, Mayor Bob Foster, who is right here in the front. Come on, get up. Thank you also for the great job. (Applause)

I’m here today — you know, I just came by because I wanted to go and just talk to you briefly a little bit about the budget. I heard that you have this meeting here and I think that it was very clear that we had a great relationship again, working together in protecting the cities.

And, as you know, that this goes way back. It was actually Tom McEnery who was the mayor in San Jose. When I was campaigning in 2003 Tom McEnery came to me and he said, “I’m a Democrat and I would like to endorse you but you have to promise me one thing.”

And I said, “What?” I said, “I’d like to get Democratic endorsements because so far the only one I have is my wife.” And I said, “But I need more, I need more.”

So he said, “Well, if you promise me that when you become governor that you will never take advantage of the cities,” he said. “If you promise me that I will endorse you and I will travel up and down the state and I will help you with your campaign.”

And I asked him why and he said, “Because they ripped us off in 2003. When they were in financial trouble they started taking money from transportation, they started taking money from local governments, they started taking money everywhere.” And he said, “And we’re helpless.

You’ve got to help us. We’ve got to come up with a proposition later on. You’ve got to protect us.”

So anyway, this is what happened. We campaigned, of course I won and the next thing was we got together with the mayors of this state and we started working on an initiative, Proposition 1A, to follow through. (Applause)

And, of course, there was a huge war. You can imagine now Sacramento — that loves to spend money, money that is not theirs, they love to go to you and to grab your money. So when we said no, we’re going to create a proposition with the mayors, it was war up there. They held back the budget and they said, “Well, we cannot do the budget if you attach this to the budget.”

I said, “Well, then we’re going to hold up the budget.” And we held it up and we held it up and we held it up and finally they caved. And we put Proposition 1A on the ballot, they all went for it. And I traveled around from city to city to city and all of you did an extraordinary job, with great enthusiasm you were out there campaigning. And, you know, it won by more than 80 percent of the votes, to protect the cities of California. (Applause) And we did the same thing for Proposition 42, to protect transportation, because that also needed to be protected.

So of course now — dial forward from 2003 to 2008 — we have another economic crisis, we have another crisis in this state where we don’t have enough money and where we have a structural deficit. And now, of course, there is the debate. You know, I proposed in January that we should go and live within our means and that there is a hole. “Yes, we understand that,” I said, “but we’ve got to make cuts.” Then, when it comes to the May Revise, it became very clear that it was spreading and the deficit got bigger and bigger and bigger.

Then I realized that we can’t do all that with cuts, that we have to create extra revenues. So we came up with this brilliant idea of the lottery, to take an existing asset that we have and to expand on it, to modernize the lottery and there we can get an extra $5 billion out a year in advance, money we don’t have to pay back. It’s not like we’re borrowing it; it’s new money.

So, of course, the Democrats immediately attacked it and my Republican colleagues immediately attacked it, like they had a better idea. (Laughter) Sure. Then, all of a sudden, we started with the budget negotiations and I made it very clear that we’ve got to have the $5 billion of extra revenues. They agreed that “We need the $5 billion but we’ll come up with another way.” Democrats said we should raise taxes. Republicans said let’s make extra cuts and all of those things.

So the debate began.

Well, even though I warned them in January that they should start with the negotiations early, guess when they started with the budget negotiations, finally? Three weeks past the deadline, the Constitutional deadline. It was after July 4th they finally came together and they started talking casually, as if there was no emergency or there was really no deadline.

And they started negotiating and talking and then, of course, I came out and I said I think we have to raise the sales tax, that’s the only way we can get any additional money, because by that time it was now to late to go after the lottery money. So it went back and forth and all of those things.

But, of course, at that time again they said, “Ah, we have the answer. We don’t have to raise any taxes, we don’t have to do this, we don’t have to do that. We have money lying there.”

I said, “Where? I don’t see it. Maybe I’m blind.”

They said, “Local government. We can borrow from local government,” they said. “We can grab their money under Proposition 1A. Oh, man, that was done so well. We can borrow money twice in 10 years and we have to pay it back in three years, yeah, we understand that. And then we can take money from transportation.”

So I said, “Guys, you did that in 2003. I mean, Einstein said that insanity is if you’re doing the same thing over and over again and try to get different results. You’re not going to get different results.

This is not the right way to go.” (Applause)

So, of course, I pushed back. And again I was calling all of you, to let our network work and I went around from city to city quickly with the mayors and with the county officials and everyone. And we pushed back and we pushed back and we pushed back and all of a sudden the next week the Republicans said, “Okay, that’s off the table. We don’t want to take local money. We would never do that.” (Laughter) “I mean, are you out of your mind? That’s off the table. And transportation, by the way, we go the message, that’s off the table too.”

So that’s how we pushed back. Of course then they came in and they wanted to grab quickly at the last minute some of your paycheck. That was my favorite. They wanted to hide it and put a smokescreen around it. It was not a tax increase; we are borrowing from the people.

I said, “Sure, Sacramento borrows and never pays back. That’s their definition of borrowing.” So I said no to that, too.

So we pushed back and pushed back on all of those things, including then budget reform. I mean, think about it. The reason why we are in this trouble and the reason why they wanted to go after your money is because we don’t have a rainy day fund. All of you have a rainy day fund. All of you do the mid-year cuts if you can’t make ends meet. You do the responsible thing fiscally but the state doesn’t.

So this is why I said this time I will not sign a budget until we have true budget reform, which means a 12.5 percent rainy day fund and that every year we put $3 billion aside. And the important thing — and that’s where it really fell apart, was when I said “And here’s the only way you can draw down from the rainy day fund, which is when we have less revenues coming in than anticipated.”

They said, “No, we cannot sign that. We want to grab that rainy day money any time we want and use it for anything we want, as long as we get two-thirds of the votes.”

I said, “Oh, no.” I said, “When you guys get together, Democrats and Republicans, sometimes you cause a lot of damage. So let’s not do that,” I said. “Let’s not do that. And here’s the definition of how you can draw down.”

And so it got stuck and I said we would not do it. Then they passed the budget and they didn’t put that provision in there, which, of course, makes the whole rainy day fund irrelevant, because if you take it for anything you want then you don’t have a rainy day fund. That’s what we have done up until now, used it like a slush fund or like a reserve.

So, of course, there was a big war. I said, “I’m going to veto the budget,” and it was a big confrontation until they finally realized that there was a revolt in this state, that this was the worst budget and all of this, they were accused of all of those things.

And then they came to me and they said “Okay, we are ready to settle this.”

And I said, “Okay, go and put this provision in. Let’s make the rainy day fund exactly the way we wrote the language. And let’s make sure to not have this other thing in there where you take money out of people’s paychecks under the auspices of borrowing money or early kind of withholdings and stuff like that. Let’s take that out, too.”

So that’s exactly what they did. We signed the budget and we moved on. But it was all because of the kind of teamwork that we have done, the team effort. (Applause)

And so I think that the most important thing now for us is that we work this year with the legislators on provisions of what happens when they’re late with the budget, because it’s inexcusable for them to have a budget that is three months late. It’s irresponsible to have a budget that is three months late. (Applause) And this is why we have to look into it and I’m going to sit down with the legislators and talk about the issues of consequences, what are the consequences.

I believe very strongly they shouldn’t get paid. But not only get not paid — (Applause) I don’t like when they don’t get paid but as soon as the budget is done they get paid back. That’s what’s happening right now. No, not getting paid is the answer. Not receiving your per diem money tax-free, $170 to $190 a day. That is the answer. (Applause) And then, not let them work on any other bill until the budget is signed is also the answer. (Applause)

So we have to come up with a list of consequences of what happens really up there when they are past that June 15th deadline, because right now there are absolutely no consequences. This budget could have dragged on for another six months. The only one that had the consequences to pay were the people out there, local government and all the people that receive those great services and none to the legislators. I think this is not fair to the people of California and I think the people of California deserve much better. (Applause)

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