Cool reception to governor's budget plans

Faced with a deepening fiscal crisis, Gov. Arnold Schwarzenegger revealed plans Tuesday for a massive budget overhaul and a reform effort relying on spending caps, rather than tax increases, to reduce California's long-term financial woes. Harrison Sheppard in the Daily News.

In his fifth State of the State address, Schwarzenegger proposed a constitutional amendment that would smooth out state spending growth to match 10-year averages in an effort to avoid the volatility that has characterized the state budget in the last eight years.

"For several years, we took actions that balanced the budget as long as the economy was booming," Schwarzenegger said. "For several years, we kept the budget wolf from the door. But the wolf is back."

Under the governor's plan, any time revenues grew faster than the 10-year-average growth rate, the excess would be put into a rainy-day fund. When revenue growth dips below average, the rainy-day fund could be used.

The measure also gives the governor and his finance director greater authority to make cuts midway through the fiscal year - without legislative approval - if the budget picture worsens.

But the governor's proposed constitutional amendment is likely to falter in the state Legislature, where Democratic leaders have resisted past efforts to cap spending and said Tuesday they would rather close tax loopholes and boost tax rates.

Schwarzenegger tried spendi