SACRAMENTO, Calif. (AP) — Gov. Arnold Schwarzenegger on Thursday proposed $4.4 billion in new taxes and a similar amount in spending cuts to deal with California's worsening fiscal crisis, saying, "We must stop the bleeding."

Much of the new revenue would come from a 1.5-percentage-point increase in the sales tax; the Republican governor described the hike as temporary but did not say how long it would last.

The governor often has characterized California's budget problems as being caused by runaway spending, rather than a lack of tax revenue, but he said Thursday that the severe financial crisis has flipped that.

"It is now a revenue problem rather than a spending problem," Schwarzenegger said.

Schwarzenegger's proposed $4.4 billion in tax increases includes higher sales taxes. He also alluded to bringing in more money through other "revenue generators." That might include boosting the registration fee for vehicles by $12 and taxing companies that extract oil from California, which he said would generate $528 million this year.

GOV. Schwarzenegger On the record from the 2006 election

The following are quotes illustrating Gov. Schwarzenegger's opposition to tax increases:

Gov. Schwarzenegger Declared He "Will Not Raise Taxes" In A Second Term." Gov. Arnold Schwarzenegger declared Thursday he will not raise taxes if re-elected as governor, establishing a fundamental contrast in his November race against Democrat Phil Angelides, who wants to boost taxes on the state's highest earners and corporations to balance the budget." (Kevin Yamamura, "Governor Rules Out Tax Hikes: Schwarzenegger Draws Clear Line In Race With Angelides," Sacramento Bee, 7/7/06)

Gov. Schwarzenegger: "I Will Not Raise Taxes." "'I totally rule it out,' Schwarzenegger said. 'I will not raise taxes.'" (Kevin Yamamura, "Governor Rules Out Tax Hikes: Schwarzenegger Draws Clear Line In Race With Angelides," Sacramento Bee, 7/7/06)

Gov. Schwarzenegger Blasts His Opponent's History Of Support For Higher Taxes. "'Our opponent has never met a tax he doesn't like, or a tax he won't hike,' Schwarzenegger said to laughs. 'His message to us is more taxes. Well, here's our message to him,' leading the group in chants of 'no.'" (Carla Marinucci and Tom Chorneau, "Governor Speaks To GOP Right; At Party Convention He Uses Immigration To Attack Angelides And Appeal To Conservatives," San Francisco Chronicle, 8/20/06)

Gov. Schwarzenegger Believes Holding The Line On Taxes Has Been Key To California's Economic Resurgence. "The governor said his opposition to tax hikes has enabled the economy to grow and returned more money to the state through the existing tax structure. 'The key thing is to work and make sure that we keep our economy stimulated,' Schwarzenegger said. 'I mean, this is the very thing that has bailed us out so far. If you increase taxes, that would be the worst thing to do.'"(Kevin Yamamura, "Governor Rules Out Tax Hikes: Schwarzenegger Draws Clear Line In Race With Angelides," Sacramento Bee, 7/7/06)

CFS Press Secretary Julie Soderlund: "The Governor Opposes Tax Increases." (Bill Ainsworth, "Governor Talks Health Care; Critics Call It 'Too Little, Late,' San Diego Union-Tribune, 7/23/06)

Spending is out of control

Our budget has doubled in the last decade. Governor Schwarzenegger has already committed California to pay back billions of dollars in bonds to pay for our current wasteful spending. Now the Governor and the legislature want to put us into deeper debt with massive bonds that could bring California's bond rating to junk bond status.

For the 2006-2007 fiscal year, the Governor is proposing a budget that is 35% larger than the one that got Governor Davis recalled just three years ago. The two old parties have proven that they cannot stop their disastrous spending habits. California needs a proven tax fighter like Art Olivier to bring back fiscal responsibility to our state.

Can California run deficits forever?

No! The governor's own rosy figures show that if his budget is passed, California will run deficits of $6.4 to $9.7 billion every year for the next four years. If he is successful in recruiting 400,000 more children into the Healthy Families program and the $42.6 billion in bonds pass, the deficits will be much higher. And if the current economic expansion that has been fueled by the real estate boom quits expanding, we could have $20-$30 billion dollar deficits. Since the Governor advocates big government programs, we will most likely have massive tax increases in 2007.

Spending cuts must be made. California's employee pension system must be reformed. Workers should have a defined contribution plans opposed to the existing defined benefit plans. The University of California administrators should not get $870 million a year in perks. We should not spend $4.5 billion more on education than Prop 98 requires and the Governor should not micro-manage K-12 education. The voters must reject all of the bond proposals. With just a few common sense adjustments, we could avoid these massive, unsustainable deficits.

"All of this spending is contingent on the economic expansion continuing, and these things just don't go on forever. These expansions are cyclical. And they never seem to last longer than an ice cube on a hot sidewalk."
--Ted Gibson, former chief economist for California in reference to Schwarzenegger's 2006-07 budget.