DEMS SLAM ARNOLD GOVERNOR'S END RUN TO FUND CITIES, COUNTIES DRAWS WRATH OF LEGISLATORS.

Byline: David M. Drucker and Harrison Sheppard Sacramento Bureau

SACRAMENTO - Gov. Arnold Schwarzenegger's unilateral move to provide a down payment on the $2.6 billion he promised local government brought down the wrath Thursday of several leading Democrats, who accused him of jeopardizing the state's financial health and robbing the poor to help the rich.

While Controller Steve Westly backed the governor and other Democrats hedged their positions, Treasurer Phil Angelides and Senate President Pro Tem John Burton, D-San Francisco, went on the offensive against Schwarzenegger's decision to start cutting health and welfare programs to help fully fund local governments that lost revenue when he rolled back the tripled car tax.

Angelides called Schwarzenegger's move another step in the wrong direction, saying he will balloon the 2004-05 shortfall, already pegged as high as $29 billion, with legally questionable actions that do not address the budget crisis comprehensively.

``This is akin to the arsonist calling the fire department and saying we've got an emergency here,'' Angelides said.

Burton was just as hostile, saying: ``My mother didn't raise me to take money from poor women and children and give it to people who own five or six BMWs or Mercedes.''

But they stopped short of threatening to block Schwarzenegger, who formally announced his new strategy Thursday just as the state's credit rating was taking another beating.

The governor's move, in part based on new authority created by the Legislature during former Gov. Gray Davis' tenure, was a response to legislative inaction on his plan to reimburse cities and counties the money they were receiving before he rolled back the car tax. The first checks, for $40 million, will go out on Dec. 26.

``I've asked (the Democratic leadership) over and over again to join me and give back to the local governments the money that we owe them; and even though time is running out for (them) and they're stranded with no money, our legislators have left town,'' Schwarzenegger said during a Capitol news conference surrounded by dozens of local officials.

``Since the leadership has not acted, I will act without them.''

He ordered $150 million in cuts to current spending to begin addressing an existing deficit exacerbated by his action.

Westly joined the governor to applaud his efforts, while Assembly Speaker Herb J. Wesson, D-Los Angeles, released a prepared statement neither overtly supportive or critical.

Burton said the problem was one for cities and counties to resolve on their own because the state was dealing with its own financial crisis.

He said if the local communities truly believe they are facing disaster, they should use their new authority granted them by the Legislature to place on local ballots a half-cent sales tax, pointedly noting the pressure brought on the Legislature by Los Angeles Mayor James Hahn and county Sheriff Lee Baca.

``We have heard their cries, like little babies they cry,'' Burton said. ``Mayor Hahn of L.A. - six times a week and twice on Sundays. Lee Baca, sheriff of L.A. - on the phone constantly.''

``Yeah, they cry; who doesn't want money? How many of you have kids? It's like Santa Claus - give me something for Christmas.''

Tax revenues from the vehicle license fee until 1998 flowed almost entirely into municipal coffers. But after a 68 percent lowering of the tax spearheaded by Sen. Tom McClintock, R-Thousand Oaks, the state agreed to reimburse cities and counties for the money they would have otherwise lost because of the reduction.

Davis, facing last year's $30 billion shortfall, raised the car tax rather than eliminate the reimbursement, known as the ``VLF backfill,'' but the unpopular increase contributed to his recall and was repealed by Schwarzenegger on his first day in office.

Schwarzenegger, who promised to restore local government funding, bypassed the Legislature after they failed for a month to act on his call to make budget cuts. Under the authority invoked by the governor, the Legislature is supposed to make an additional $2.5 billion in budget cuts to help keep the state's books balanced,

Local officials - even prominent Democrats who support funding for social services - responded with nothing but praise for Schwarzenegger. More than 40 sheriffs, police chiefs and mayors joined him onstage to thank him.

``We haven't seen this kind of bold leadership in Sacramento for a long, long time, and we are really grateful for it,'' Hahn said.

Los Angeles and a number of other cities were preparing to file a lawsuit against the state to force payment of the vehicle license fee funds, but Hahn said such a move now appears unlikely - unless the Legislature comes up with a way to block the governor.

Because leadership in the Democrat-controlled legislature refused to cut health and welfare or any other programs in the recent special session, the governor chose to exercise his authority to reduce spending midyear on any line item in the budget by up to 5 percent. He also can appropriate money for a specific purpose by declaring it an ``emergency expenditure.''

Baca said that if the governor had not used what is called his ``Section 27 authority,'' Los Angeles County would have had to lay off 1,500 deputies on top of 1,000 lost in past budgets. The Sheriff's Department was already $166 million down and would have lost another $175 million. The department had already been shortening jail sentences and closing jails.

``The quality of life in Los Angeles is not being guaranteed, because people who are arrested and convicted in court are not serving time in jail,'' Baca said.

``And when you pull front-line cops off the street as I had to do through the current recession problem, you're losing on both ends.''

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Gov. Arnold Schwarzenegger, joined by law enforcement and government officials, speaks at a press conference Thursday.

Steve Yeater/Associated Press