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RENEE MONTAGNE, host:

Here in California, in a worst-case scenario, thousands of state prisoners could be released and a school year could end early now that voters have rejected a slate of ballot measures aimed at pulling California out of a sea of red ink.

Governor Arnold Schwarzenegger was handed a resounding defeat in yesterday's special election. And for more, we turn to John Myers, Sacramento bureau chief from member station KQED. Good morning, John.

JOHN MYERS: Good morning.

MONTAGNE: Now, California voters just rejected what was billed as a short-term solution to a really terrible economic mess. What happened?

MYERS: Well, it's hard to know for sure what happened and why it happened. I mean, this package accounted for about $6 billion of deficit solutions for California for the next year, billions more in the years after that. But there really were two big problems.

The first one: the measures were confusing. There were lots of long-term formulas. There was short-term borrowing. There was cuts. There were transfers - really, I think, a lot for voters to absorb in California on the ballot. There weren't a lot of voters that turned out. There's voter fatigue, I think, in California and some frustration, which I think leads to the second problem: People are angry.

They are angry at the large tax increase in this package. They were angry at its impact on them in these tough times. So that was really the sentiment we got on Tuesday night from one of Governor Schwarzenegger's closest allies, a gentleman named Bill Hauck of the California Business Roundtable.

Mr. BILL HAUCK (California Business Roundtable): We are in really difficult times. Unemployment here is higher than it is elsewhere. And I think it's just a case of a combination of things that have put people in a frame of mind that is very negative.

MYERS: That again was Bill Hauck of the California Business Roundtable, a close ally of Governor Schwarzenegger and one of the leaders of the campaign to pass the measures, which were all defeated.

MONTAGNE: Now, John, step back and put this in perspective for the rest of the country, and even for many here in California. What is the situation as regard the deficit here? How big is it?

MYERS: I think in short, Renee, it's a major mess. The governor and state legislators here in California now face a $21 billion deficit. That's after a $34 billion deficit just a few months ago they had to solve. So that's about $55 billion in red ink over the last year that they've had to resolve. That's larger than the budgets in a lot of states across the country.

Governor Schwarzenegger was in Washington, D.C. the past 24 hours, partly to ask for some special modifications for California in the rules governing economic stimulus money because California needs all of the help it can get. He's back in Sacramento this afternoon to meet with legislative leaders, and we're really expecting another bitter debate this summer, really largely over spending cuts.

MONTAGNE: What kinds of cuts would Californians looking at? I mean, schools? Will prisoners be released, as Governor Schwarzenegger has suggested? What's the implications of this?

MYERS: Well, I don't think it's too much hype to say that every option's on the table. Every person I talked to in California government says that - you eluded to some of them that Governor Schwarzenegger has put forward: less money for public schools, less money for higher education, social services cuts, yes, possibly releasing some state prisoners, about 5,000 jobs in state government eliminated.

This really is a problem of proportions that we've never seen in California. No state has ever seen it. And the state is going to be probably be asking the Fed, maybe even Wall Street, for some kind of loan later this summer. It's going to get bad.

MONTAGNE: So where does this leave California in terms of its budget? Where to from here?

MYERS: Well, I think it's going to be a long, complicated summer here at the state capitol in Sacramento. I mean, they've got to try to find some way to bridge what has been an ideological divide in years about the level of spending and the level of taxes. And Arnold Schwarzenegger's never been able to do that. And I do think that some voters are going to wonder if that's not the legacy issue for Arnold Schwarzenegger being elected in 2003, in part to clean up the problem. And the problem still persists in California and there's no end in sight.

MONTAGNE: John, thanks very much.

MYERS: You're welcome.

MONTAGNE: John Myers is the Sacramento bureau chief from member station KQED.

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