SACRAMENTO, California (Reuters) – California Governor Jerry Brown on Monday unveiled a budget that includes $12.5 billion in what he called “painful” cuts to state worker pay, healthcare, welfare and higher education to help close the state’s $25.4 billion budget deficit over the next 18 months.

The cuts are California’s response to a steep dive in state coffers due to a crippling housing market crash, recession, financial market turmoil and double-digit unemployment that has hammered revenue from personal income taxes.

“These cuts will be painful, requiring sacrifice from every sector of the state, but we have no choice,” Brown said in a statement posted on his Web site. He is due to present the budget to lawmakers on Monday.

California’s budget development is closely watched by the $2.8 trillion U.S. municipal bond market. California is the most populous state and the market’s biggest debt issuer. It currently shares Moody’s Investor Service’s lowest state credit rating, along with Illinois.

The budget plan includes a June special election to extend temporary tax increases for five years. For that plan to proceed, lawmakers must support the budget plan by March.

But Brown, a Democrat, is likely to face difficulties convincing the state’s Democratic-controlled legislature to sign on to such deep cuts to the state’s social safety net.

Under the proposed budget, state workers not covered by collective bargaining agreements will see pay cuts of 8 to 10 percent. In addition, the budget proposal includes $1.7 billion in cuts to the state’s health program and $1.5 billion in spending reductions for its welfare-to-work program.

SAN FRANCISCO, Jan 9 (Reuters) – California Governor Jerry Brown will urge lawmakers to support cuts to welfare, health and higher education spending and call on them to back his plan to ask voters to raise taxes to close a state budget gap that may reach $28 billion, according to media accounts on Sunday.

A spokesman for Brown declined to confirm details of the state budget plan the governor will unveil on Monday. But details attributed to sources familiar with plan are in line with public statements by Brown on the need to embrace austerity to tackle the state’s massive budget gap.

During his Jan. 3 inaugural speech, the 72-year-old Democrat said he planned a “tough budget for tough times.”

Brown must close a $6 billion gap for the current fiscal year and an estimated $19 billion shortfall for the fiscal year beginning in July. Tax moves by the U.S. Congress could widen the deficit by another $3 billion.

His budget plan will be closely watched by the $2.8 trillion U.S. municipal bond market. California, the most populous state, is the market’s biggest issuer of debt and currently shares with Illinois Moody’s Investor Service’s lowest state general obligation credit rating of A1.

According to media accounts, Brown’s plan will be thick with spending cuts, not unlike budget proposals in recent years by his predecessor, Republican Governor Arnold Schwarzenegger.

The cuts have come in response to the steep dive in the state’s revenue caused by California’s housing market crash, recession, financial market turmoil and widespread job losses that slashed key revenue from personal income taxes.

SAN FRANCISCO (Reuters) – A prominent Washington activist is calling on Republican lawmakers in California to stick to an anti-tax pledge, a risk to a special election for raising revenue that Governor Jerry Brown is widely expected to ask the legislature to support.

The pressure came in the form of a letter sent on Thursday by Grover Norquist, head of Americans for Tax Reform, a heavyweight conservative advocacy group. In it he told Republicans that “Voting to send tax increases to the ballot would violate the Taxpayer Protection Pledge, a written commitment that you made to your constituents to ‘oppose any and all efforts to raise taxes’.”

“I urge you to stand up for California taxpayers by opposing Governor Brown’s efforts to refer higher taxes to the ballot, and in doing so, uphold your central campaign commitment to oppose any and all efforts to raise taxes in the already over-taxed Golden State,” Norquist added.

Patrick Gleason, state affairs director at Americans for Tax Reform, said the letter marks the start of a broader campaign against efforts to raise taxes in California.

“This is the opening salvo,” Gleason said.

Brown, a Democrat, would need votes from Republicans in the legislature’s minority to be able to put a tax measure to a statewide vote. Brown spokesman Even Westrup declined to comment on Norquist’s letter, noting the governor’s initial budget plan is tentatively slated to be released on Monday.

“It’s premature to get into those issues,” Westrup said.

SAN FRANCISCO (Reuters) – A day of reckoning is coming for California’s perpetually wobbly finances in the form of another lean budget plan next week, says Governor Jerry Brown — and analysts expect moments of political hysteria along the way will create opportunities to buy the state’s debt.

Whether lawmakers will back Brown’s plan is uncertain. Democrats control the legislature and he is one of the state’s most famous Democrats, but that does not guarantee the legislative and executive branches will agree on how to plug a budget gap that may near $28 billion through mid-2012.

Sara Craven, a senior portfolio manager at Sand Hill Global Advisors Llc in Palo Alto, California, expects Brown to wrangle with lawmakers over the budget, fueling needless worries and more overheated talk of a financial collapse in store for California, the biggest issuer of U.S. municipal debt.

“It will take considerable time to produce a balanced budget, and that creates headline volatility,” Craven said.

Bud Byrnes of RH Investment Corp in Encino, California, sees market jitters rising from any budget fracas as opportunities to buy California general obligation debt, or GOs, because paying it off is a top priority required by the state Constitution.

State Treasurer Bill Lockyer has been driving that guarantee home to investors, helping him sell $10.5 billion of municipal bonds last year, the most of any U.S. state, according to Thomson Reuters data.

“The pros are already stepping in,” Byrnes said. “I know some asset managers who are specifically buying Cal GOs and nothing else within the state because Cal GOs have been too beat up by politics and negative press.”

SACRAMENTO, California (Reuters) – Jerry Brown was sworn in as California’s governor on Monday, returning to a job he held nearly three decades ago, and pledged a “tough budget” to turn around one of the most financially strapped U.S. states.

In keeping with his message of austerity and painful choices, the veteran Democrat, who was the state’s governor for two terms from 1975 to 1983, served hot dogs at his inaugural lunch after taking over from Republican Arnold Schwarzenegger.

Inheriting a budget gap estimated at nearly $28 billion through mid-2012, Brown has called for more spending cuts to balance the books in California, the state with the largest population and worst credit rating.

He is also widely expected to push for a special election that would ask voters to extend temporary tax increases to help balance the state’s books.

Brown must present the Democratic-controlled state legislature with a budget plan for the fiscal year beginning in July within a week. He said the plan he would present would be painful.

“At this stage in my life, I have not come here to embrace delay and denial,” Brown told an audience in Sacramento, the state capital, after taking the oath of office.

Brown also pledged to make environmental issues a top priority and said he intended to meet his goal of bringing 20,000 megawatts of energy from renewable sources online by 2020.

SACRAMENTO, California (Reuters) – Jerry Brown was sworn in as California’s governor on Monday, returning to a job he held nearly three decades ago, and pledged a “tough budget” to turn around one of the most financially strapped U.S. states.

In keeping with his message of austerity and painful choices, the veteran Democrat, who was the state’s governor for two terms from 1975 to 1983, served hot dogs at his inaugural lunch after taking over from Republican Arnold Schwarzenegger.

Inheriting a budget gap estimated at nearly $28 billion through mid-2012, Brown has called for more spending cuts to balance the books in California, the state with the largest population and worst credit rating.

He is also widely expected to push for a special election that would ask voters to extend temporary tax increases to help balance the state’s books.

Brown must present the Democratic-controlled state legislature with a budget plan for the fiscal year beginning in July within a week. He said the plan he would present would be painful.

“At this stage in my life, I have not come here to embrace delay and denial,” Brown told an audience in Sacramento, the state capital, after taking the oath of office.

Brown also pledged to make environmental issues a top priority and said he intended to meet his goal of bringing 20,000 megawatts of energy from renewable sources online by 2020.

SAN FRANCISCO (Reuters) – Arnold Schwarzenegger became governor of California with a bang, toppling Governor Gray Davis in 2003 in a historic recall election seizing on voter anger over the state government’s finances.

Now the Hollywood icon and former body builder is preparing to leave office bruised and battered by the state government’s ongoing financial woes and warfare with lawmakers he bashed with gusto and famously called “girlie men.”

But they’re getting the last laugh.

Lawmakers may be unpopular with voters but they have focused their disappointment on Schwarzenegger, a cautionary tale for incoming Governor Jerry Brown, a Democrat elected last month over Republican and former eBay Inc Chief Executive Meg Whitman. Schwarzenegger could not run again for governor due to term limits.

Brown takes office on January 3 and already is busy addressing the ugly state fiscal situation that helped slash Schwarzenegger’s standing with voters to about the same dismal level as that of Davis before they gave him his pink slip.

It’s a sharp contrast with the goodwill Schwarzenegger had when he strutted into the state capital in Sacramento vowing to take down its special interests and blow up its bureaucracies.

A Republican who had never held public office before becoming governor of the most populous U.S. state, Schwarzenegger also pressed for the state government to rein in spending, putting the Democrat-led legislature on its heels.

SACRAMENTO, California (Reuters) – Outgoing California Governor Arnold Schwarzenegger declared a fiscal emergency on Monday, unveiling a package of proposals of mostly spending cuts aimed at closing the state’s current-year shortfall of $6 billion.

The Republican governor also called lawmakers into a special session on the budget, but Democrats who control the Legislature have signaled they are likely to ignore his plan, as Democratic Governor-elect Jerry Brown will assume office next month and present his own budget.

Brown plans to meet with lawmakers and state finance officials on Wednesday to discuss the budget situation.

Schwarzenegger’s package includes proposals for $9.9 billion of budget-gap solutions, including $7.4 billion in spending cuts and $1.6 billion of funding shifts and miscellaneous revenue.

“If there is one thing we have learned over these past few years, it is that the longer we wait to tackle the problem, the larger and more difficult it is to solve,” he said in a statement. “That is why I have called a special session today, so the legislature can get a head start on the problem.”

Schwarzenegger then told a news conference that most of the cuts would come from health and human services, adding: “I always said that I would go and charge through the finish line.”

After taking office, Brown must also deal with a projected $19.3 billion shortfall for the next fiscal year beginning in July, the same size deficit that Schwarzenegger and lawmakers closed in October after a record impasse over a spending plan.

, Dec 6 (Reuters) – Outgoing California Governor Arnold Schwarzenegger declared a fiscal emergency on Monday, unveiling a package of proposals of mostly spending cuts aimed at closing the state’s current-year shortfall of $6 billion.

The Republican governor also called lawmakers into a special session on the budget, but Democrats who control the Legislature have signaled they are likely to ignore his plan, as Democratic Governor-elect Jerry Brown will assume office next month and present his own budget.

Brown plans to meet with lawmakers and state finance officials on Wednesday to discuss the budget situation.

Schwarzenegger’s package includes proposals for $9.9 billion of budget-gap solutions, including $7.4 billion in spending cuts and $1.6 billion of funding shifts and miscellaneous revenue.

“If there is one thing we have learned over these past few years, it is that the longer we wait to tackle the problem, the larger and more difficult it is to solve,” he said in a statement. “That is why I have called a special session today, so the legislature can get a head start on the problem.”

Schwarzenegger then told a news conference that most of the cuts would come from health and human services, adding: “I always said that I would go and charge through the finish line.”

After taking office, Brown must also deal with a projected $19.3 billion shortfall for the next fiscal year beginning in July, the same size deficit that Schwarzenegger and lawmakers closed in October after a record impasse over a spending plan.

SAN FRANCISCO (Reuters) – San Diego Mayor Jerry Sanders is pouring fuel on the fire of pension politics in California.

The mayor of California’s second biggest city is proposing to do away with traditional pensions for most new city workers, an effort analysts say will be closely followed by other cash-strapped local governments in and beyond the most populous U.S. state. The proposal has outraged public employee unions.

A ballot measure asking San Diego voters to back the idea is in the works, Sanders told Reuters in an interview, adding that he aims for defined-contribution plans like 401(k)s common in the private sector to replace defined-benefit pensions.

San Diego can no longer afford its pension plan, Sanders said, adding it is not alone in California, where the recession, housing slump and double-digit unemployment have slashed property and sales tax revenue vital for local governments.

“It’s pretty unrealistic to think that we’re going to have defined-benefit plans, at least on a local level,” he said.

Sanders’ plan may be a trendsetter because pension costs threaten to push local governments toward bankruptcy if not contained soon, said former California lawmaker Joe Nation.

“I hate to use the ‘B-word,’” said Nation, now a public policy professor at Stanford University. “But the numbers are just staggering.”