Schwarzenegger Hints at Raising Taxes

Governor proposes drastic measures to get California in the black.

Gov. Schwarzenegger proposes to eliminate a $15.2 billion deficit by selling lottery bonds and cutting billions in state programs.

Gov. Schwarzenegger proposes to eliminate a $15.2 billion deficit by selling lottery bonds and cutting billions in state programs.

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Before voters here have their say, Schwarzenegger's proposal will have to fight its way out of Sacramento. When the first details of his plans were released, several Republican lawmakers said the threatened tax hike was something they would never support. Democrats, meanwhile, who control both houses of the state legislature, are also skeptical of the governor's solution. "It sounds risky, almost like a Rubik's cube budget, not a long-term, structurally balanced budget," says Karen Bass, the new speaker of the State Assembly, who was sworn in yesterday. "We're going to put this under a microscope and make sure we protect education and the most needy Californians."

While the Schwarzenegger plan gets its legislative shakedown, lawmakers in other states are watching their own budgetary options shrink. Even though he's quick to emphasize the lottery proposal's innovations in borrowing, not its tax increase, the new plan seems to come with a warning: If the Governator is willing to raise taxes, what choice do the rest of us mere mortals have?