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Jan 05, 2005 - 01:00 AM

by Jim Christie

Calif. Governor Calls for Reforms, Spending Cap

SACRAMENTO, Calif. (Reuters) - California Governor Arnold Schwarzenegger on Wednesday called for a special session of the legislature to consider controversial reform proposals, including a law that would trigger across-the-board spending cuts to close a widening budget gap.

Speaking in his second "State of the State" speech, Schwarzenegger called on the Democratic controlled legislature to pass reforms on education and pensions opposed by state teachers and powerful unions.

Democrats have called the plan to reform the powerful Calpers fund and other pensions a move to muzzle activists that would increase risks for retirees and vowed to fight the proposal.

Schwarzenegger also laid the grounds for ambitious spending caps a year after leading a political fight that succeeded in rallying voter approval for what he called a one-time bond to close the budget gap.

"Last year we stopped the bleeding. This year we must heal the patient," he said, calling for the law to trigger budget cuts when commitments rise above revenue.

"Last year, we had $78 billion in revenue coming in," he said. "The great news is that this year we have $83 billion coming in, over $5 billion more than last year. Now that is terrific. However, various budget formulas require us to spend over $10 billion more."

Schwarzenegger also promised a prescription drug plan for nearly 5 million Californians, which consumer advocacy group The Foundation for Taxpayer and Consumer Rights, immediately called a plan to put drug companies in charge of health.

Aiming to stop political redistricting that he said warped the democratic process, he proposed involving an independent panel of retired judges in drawing district lines.

And he said teachers should be paid based on results. "Teacher pay must be tied to merit, not to tenure... tied to performance, not just showing up."

The governor also said the state needed new power plants to ensure it would not repeat the energy crisis of a few years ago.

"Yes, we need conservation. Yes, we need renewable energy. But California also needs power plants and transmission lines," he said. "We cannot conserve our way out of our long-term energy crunch."

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