California ballot wins help Schwarzenegger

LOS ANGELES -- Gov. Arnold Schwarzenegger took one big crushing weight off California by winning voter approval to borrow $15 billion, but he still has some heavy lifting to do.

To solve the state's financial crisis, Schwarzenegger has to bring down spending, sell the Democratic-controlled legislature on budget cuts and improve California's standing on Wall Street.

But the overwhelming vote may well have given him a huge infusion of clout among lawmakers and demonstrated that the former action hero and bodybuilder has the political muscle to get what he wants from voters.

"He's viewed by both parties as the most formidable politician we've seen in this state for many years," said Raphael Sonenshein, a political science professor at California State University, Fullerton.

The Proposition 57 bond measure -- the nation's largest ever to appear on a statewide ballot -- will be used to refinance California's debt and help close next year's budget gap.

A companion measure, Proposition 58, restricts borrowing in the future and creates a state reserve fund. Both had to pass Tuesday for either to take effect.

The bond proposal trailed badly in early polls, but Schwarzenegger barnstormed across the state and raised more than $10 million for TV ads in support of the bond measure. He also used a mixture of raw political power and Hollywood charisma to bring Democratic leaders on board.

The result was a rout at the polls: The measure won with 63 percent of the vote.

"When we started our work we were 17 points behind. And you know something, everyone wrote us off," Schwarzenegger said at a victory rally. "We knew better. We knew that we can work together."

Political observers say Schwarzenegger's reward is new leverage with lawmakers as he pushes his economic recovery plan and reform of the workers' compensation system. Having demonstrated his appeal to the voters, he can reward or punish lawmakers by campaigning for them or by withholding his support.

Nevertheless, the bond measure alone "doesn't solve the problem," said legislature Speaker Fabian Nunez, a Democrat from Los Angeles. "All this does is give us some breathing room so that we can sit down and work out a longer-term agreement that both Democrats and Republicans can live with."

The ballot measure was closely watched by Wall Street because California, the sixth-largest economy in the world, is an important figure in the bond market. Wall Street reacted positively to the news, with two leading rating agencies slightly improving their opinion of California's credit.

But the state's debt rating is still the lowest in the nation, and the bond money does nothing to stop spending. Tax revenue and spending have been out of line in California since the stock market bubble burst four years ago.

The governor's finance staff said it will immediately begin developing plans for issuing the bonds. The state needs the money before June 30, when short-term loans come due.