Runaway public spending, plunging home values and a general economic slowdown have pulled the California state budget into an $11.2 billion deficit. Yesterday, California Governor Arnold Schwarzenegger (R) vetoed the state legislature's first response to the crisis which included massive new taxes on motorists.

"This proposal that they have sent down and this package that they are sending down does really only one thing and this is punish the people of California," Schwarzenegger said. "And so I cannot sign this."

The legislature's plan would have raised an extra $9.3 billion in new revenue from an assortment of sources. Because the state Constitution requires a two-thirds vote of the legislature to pass any legislation that increases taxes, the majority party re-labeled these taxes as "fees" and adopted the budget measure with a simple majority vote.

"The Democrats' plan eliminates gasoline sales and excise taxes used for transportation purposes," the California Senate Majority Caucus explained. "To replace the transportation dollars, the Democratic plan institutes a 'user fee' of 39 cents for gasoline consumption in California. The new fee would increase the amount of funds for the state highway account by $500 million annually and for local streets and roads by $643 million annually. In addition, the fee will be indexed to adjust with inflation."

Motorists would have paid an extra $1.1 billion a year at the pump from the 13 cents per gallon in gasoline "fees" added to the existing tax. California's drivers already pay the nation's highest gasoline tax rate of 63.9 cents per gallon, including all federal, state, county and local levies. Drivers would also have been hit by a $12 increase in vehicle licensing fees. A total of $39.3 million of this fee revenue would be used to hire police to issue more traffic citations.

Schwarzenegger made it clear that his favored solution for the fiscal imbalance was the public-private partnership model found in toll road projects. These deals allow state and local governments to outsource toll hikes to private companies that are not answerable to the people. The governor also insisted that the legislature stay in session to come up with a new proposal before the new year.

"Maybe they have done everything they could, but I think that they should stay here, work some more on this budget," Schwarzenegger said. "I'm willing to stay here and I don't think that anyone should go and celebrate Christmas, none of the legislators and have people out there suffering. I think that the legislature owes it to the people of California to solve this problem before Christmas, so I will urge them to stay here."