arnie loses LA fiscal election

LOS ANGELES - AS a Hollywood action hero, Arnold Schwarzenegger forged a career playing tough guys used to prevailing against impossible odds.

LOS ANGELES - AS a Hollywood action hero, Arnold Schwarzenegger forged a career playing tough guys used to prevailing against impossible odds.

But Schwarzenegger, who was elected California governor in 2003 on a platform of fiscal reform, has failed to impose his will on the state's seemingly eternal budget problems.

The Republican governor suffered a crushing special election defeat this week over a package of measures he argued were essential to help plug a projected 21billion-dollar budget deficit.

Schwarzenegger said the result had left California facing "fiscal disaster" and the state - which would have the world's eighth largest economy if it were a country - is now preparing for severe spending cuts.

Former governor Gray Davis, ousted by Schwarzenegger in 2003's historic recall election, said his successor is discovering that Californians held unrealistic expectations of lower taxes and higher spending.

"We all want a free lunch, but unfortunately that does not exist," Davis told the Los Angeles Times, adding that Californians have been "papering over this fundamental reality that the state has been living beyond its means." Schwarzenegger responded to Tuesday's defeat by warning of a new austerity drive. He told reporters he was prepared to cut spending back to 1999 levels as the recession-hit economy sent revenues plunging.

"Our revenues now are back to the 1999 level so we have to do drastic measures," he said. "We have to dial back to what was happening in 1999, what kind of programmes were available and what kind of programmes were not available, and then eliminate all those programmes in order to make ends meet." Schwarzenegger's cuts include plans to lay off around 5000 state workers and to slash education spending by around five billion dollars. - Sapa-AFP

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