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State Democrats Outline Budget Plan

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State Senate Democrats say they have a plan to balance the budget without raising taxes or eliminating welfare programs and grants to college students. But Governor Schwarzenegger says it won't work. Marianne Russ reports from Sacramento.

Democratic Senate Leader Darrell Steinberg rolled out a framework for addressing the state's multi-billion dollar deficit. It calls for cuts to every area of government, including schools and health and welfare programs.

But Steinberg says they won't go along with the Governor's plan to eliminate programs entirely. To avoid that, Steinberg says the state would spend most of a roughly $4.5 billion reserve built into the Governor's budget.

"The purpose of a rainy day fund is to provide reserves for a rainy day. It is thunder and lightning in California right now," he says.

Governor Schwarzenegger says it's wishful thinking that lawmakers can use the reserve fund to help balance the budget.

"Anyone that talks about in a hallucinatory way and thinks that we have a reserves of $4.5 billion is totally wrong, because we have no reserves, no rainy day fund," says Schwarzenegger.

Schwarzenegger says it's important to have some money in reserve because California often taps that to help pay for fire-fighting efforts.