With time and money running out for California, Gov. Arnold Schwarzenegger declared a fiscal emergency Monday and called legislators into a new special session that won`t end until they agree on a way to trim the state`s $11.2 billion budget deficit.

"Without immediate action, our state is headed for a fiscal disaster" in which California could run out of money to pay its bills by late February, the governor said in a news conference in Los Angeles.

He compared the growing deficit, which could reach $28 billion by 2010, to an avalanche gaining momentum, and he slammed the Legislature, Democrats and Republicans, for not coming up with solutions during a special session that ended Nov. 25.

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"Unfortunately for California, the legislators did not seem to appreciate the severity of our crisis," Schwarzenegger said. "In an emergency like this, we have to take quick action to avoid even worse problems, even if they include decisions we don`t like."

Trapped in town

The governor can declare a fiscal emergency if he determines that revenue won`t meet budget estimates. Lawmakers then have 45 days to pass legislation dealing with the deficit and send it to the governor. If that Jan. 15 deadline is missed, then the Legislature has to stay in session, without considering other bills, until an agreement is reached.

"The advantage of the fiscal emergency declaration is that it puts a clock on the negotiations," said Aaron McLear, a spokesman for Schwarzenegger. The governor called the first fiscal emergency in the state`s history last January, and the Legislature reached the needed agreements before the deadline.

But the new Legislature sworn in Monday faces the same grievances and partisan divisions that hamstrung negotiations during the November special session, when Democrats objected to deep cuts and Republicans complained about higher taxes. And the governor is proposing the same list of budget cuts, tax increases and economic stimulus efforts that was torpedoed in that round of talks.

Same faces

"Some of the personnel has changed, but not enough to make any difference in the final vote," said Jon Coupal of the Howard Jarvis Taxpayers Association, which opposes Schwarzenegger`s call for a temporary 1 1/2-cent boost in the state sales tax. "The governor is from Hollywood, so he should know that some sequels aren`t worth doing."

When Democrats put together their own plan to close the budget gap, they weren`t able to find enough Republican support to get the two-thirds majority needed for approval - especially when they proposed restoring the $4.3 billion-a-year increase in the vehicle registration fee that Schwarzenegger axed the day he took office in 2003.

But the governor`s plan also calls for a GOP-friendly economic stimulus plan that would "get rid of some of these tough regulations that ... make it hard for businesses to do business in California," Schwarzenegger said. These include rule changes that would limit overtime pay and relax requirements for lunch breaks, measures that Democrats, who rely on support from labor unions, would be hard-pressed to approve.

Those type of partisan arguments can`t be allowed to stall the new budget negotiations, Schwarzenegger said.

"I want people to let the legislators know that they were sent to Sacramento to step up, compromise, get off their rigid ideologies and to solve the problems," he said.

Leaders noncommittal

Legislative leaders agreed on the need for quick action but declined to say whether they would back the governor`s plan.

"We face the challenge of putting our ideology aside and doing what we need to do for the state of California," Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), said in a speech on the Assembly floor. She added later that, "If we put the people first, we owe it to them to keep the state running and to get California`s economic engine back in gear to lead the national recovery. And we don`t have a lot of time."

But things have to change, said Senate President Pro Tem Darrell Steinberg, D-Sacramento, who described last month`s negotiations with GOP leaders as a "nonconversation conversation."

He called for putting pressure on Republicans to state what compromises they would make to pass a budget, something he said he has yet to hear.

"We need clear articulation in the public setting of their bottom line," he said. "Now, their bottom line might not be satisfactory to us, but that`s how a real negotiation begins."

Republican belief

Fresno Assemblyman Mike Villines, the GOP minority leader, again argued that instead of talking about tax increases, new budget discussions should focus on cutting wasteful spending, enacting a strict spending limit and lowering business costs.

"This is not blind ideology on the part of Republicans, but our sincere belief that higher taxes will hurt the economy and lead to more uncontrolled spending," he said in a statement.

Although Schwarzenegger will go to Philadelphia today with most of the country`s other governors to meet with President-elect Barack Obama about states` financial problems, California lawmakers shouldn`t look for help from Washington, the governor said.

"We are right now spending money we don`t have," Schwarzenegger said. "The federal government shouldn`t give us a penny until we straighten out our mess and we can live within our means."

Schwarzenegger isn`t waiting for action from the Legislature to make budget cuts.

When he gets back from Philadelphia, the governor said, there`s going to be a meeting "about how many people we need now to lay off in order to make ends meet."

State`s budget crisis - what happens now

Now that the governor has declared a fiscal emergency, a 2004 law requires the state to enact a balanced budget and bans most borrowing to cover deficits.

Deadline: The Legislature has until Jan. 15 to agree on a plan to close the state`s $11.2 billion budget gap.

Overtime: If lawmakers don`t meet the deadline, they have to stay in session, dealing only with the budget deficit, until an agreement is sent to the governor.

Joint session: Within the next week or two, Assembly Speaker Karen Bass, D-Baldwin Vista, plans to call a joint session of the Legislature with the state treasurer, state controller and state Department of Finance to publicly air the state`s financial situation.

Task force: Legislative leaders will establish a California Economic Recovery Task Force to propose ways to stimulate the economy.

Chronicle Sacramento Bureau