Gov. Arnold Schwarzenegger, meeting Thursday to discuss the state budget with legislative leaders, abandoned a proposal to borrow money from the California Public Employees' Retirement System to balance the spending plan.
"The governor told the leaders that we're not going to do that," said Schwarzenegger spokesman Aaron McLear. "It's just not the responsible thing to do."
Schwarzenegger officials floated the idea last month of borrowing $2 billion in the current fiscal year from the pension fund as an advance against future savings from pension reductions he's seeking.
But CalPERS officials expressed significant concerns about such a maneuver. California's largest public employees' union also weighed in against it.
Randall Cheek, legislative advocate at Local 1000 of the Service Employees International Union, told the CalPERS governing board Wednesday that the loan was "more of a $2 billion theft."
The governor and Democratic and Republican legislative leaders huddled for about three hours Thursday in an effort to hammer out a long-delayed budget deal and bridge a $19 billion deficit. They plan to meet again today.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, expressed some optimism that legislators could quickly reach a deal by as early as today.
"We're hopeful to be done (by Friday) or the weekend," Steinberg said.
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