Due to legislative stalemate, the California budget for fiscal year 2007-08 (beginning July 1, 2007) was not passed and signed by Governor Schwarzenegger until late August 2007. At the time, as the first part of this clip shows, the budget was characterized as balanced and with a significant reserve. It was soon apparent - if not already apparent - that the budget was in fact in deficit. By the time the budget proposal for fiscal year 2008-09 was made on Jan. 10, 2007, the governor called for cuts in the current (2007-08) budget, cuts billed as 10% in 2008-09. The governor pledged no new taxes although his proposal called for an added "fee" on property insurance for fire safety. It also called for selling the remaining deficit bonds approved by the voters in 2004. He called for a constitutional amendment - a variant of one he proposed unsuccessfully in 2005 - that would limit spending and establish a "rainy day" fund. Despite the promise of no new taxes (apart from the insurance fee), there was some hint that a deal might be struck involving enactment of the constitutional amendment in exchange for a tax increase. In the second part of this clip, the governor appears to say that tax increases should not be considered unless there is structural reform, i.e., his budget amendment. Note: Both clips are edited.

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