Arnold Schwarzenegger Plans to Veto California Budget Deal

California governor Arnold Schwarzenegger risked further political isolation yesterday when he announced that he would veto a budget deal reached by Republicans and Democrats in the state legislature.

The deal aimed to put an end to an 80-day impasse over the state's $15.2bn (£8.4bn) budget gap. But Schwarzenegger rejected the compromise dubbing it a "tax increase with a smoke screen on it", and saying that it would push the problems into next year.

"It kicks that can down the alley," Schwarzenegger told a press conference in Sacramento. "I say enough is enough. Californians have been through this roller-coaster ride too many times and so this is why, when they send me a budget, I will veto it."

But legislators from both parties promised to oppose a veto and immediately return the budget to the governor's desk. Assembly leaders professed confidence that they could muster the two-thirds majority necessary to challenge the governor.

In turn Schwarzenegger said he would respond by sending "the hundreds of bills that sit on my desk back to legislators with my veto".Senate leader Don Perata, a veteran Democrat who has been both ally and foe of Schwarzenegger, described the governor as "a leader with no followers".

"I do the best I can in the Senate to develop compromise. It's the art of doing what's possible. The governor takes a position that it's going to be his way or no way, and he looks for somebody to blame if he doesn't get his way," Perata said.

With Schwarzenegger recording an approval rating of just 38% in a poll released this week he plans to reprise a tactic he used earlier in his administration by going on the road to raise popular opposition to the solution proposed by the legislators.

The governor's staff is reported to be organizing rallies for the end of the week, as well as meetings with newspaper editorial boards to push his opposition to the compromise.

Schwarzenegger had called for a 1% sales tax increase, but legislators chose instead to propose a temporary increase in income tax coupled with earlier payments, which would boost the state's coffers. Income tax over payments by individuals and businesses would subsequently be paid back.

Schwarzenegger also objected to the absence of more stringent controls on access to the state's rainy day fund in the proposal.

"We've got to look forward and say, 'How do we fix this system once and for all?' " he said.

"I will not sign a 'get-out-of-town budget' that punishes taxpayers, pushes the problem into the next year and includes fake budget reform."