Mr Schwarzenegger is pinning his hopes on a $15bn bond

The $99bn budget is a key step in Mr Schwarzenegger's struggle to redeem his state's tattered finances.

Crucial to his scheme is a public vote in March on a $15bn bond issue to pay off state debt.

The bond is Mr Schwarzenegger's way of avoiding having to raise tax, something he has promised to voters.

Sceptics

"For the past five years, the politicians have made a mess of California's budget. Now it's time to clean it up," Mr Schwarzenegger said.

SCHWARZENEGGER'S FIRST BUDGET $4bn cut in spending Money taken from schools, health, transport programmes $3bn borrowing coming out of proposed $15bn bond issue Student fees rise 10-40%

The state's legislature, which is controlled by the Democrat party - in opposition to the Republican Mr Schwarzenegger - will now debate the budget, and is expected to offer fierce criticism.

The governor's plan cuts more than $4bn in spending, with nearly half of it coming from welfare programmes that benefit the state's neediest citizens, such as health services and transport projects.

Many opponents, including some within Mr Schwarzenegger's own party, are sceptical of his reliance on healthy growth projections to return California to fiscal health.

He is anticipating an estimated $2.9bn rise in income tax receipts to help reduce the state's massive deficit.

The bond idea has been criticised as fiscal sleight-of-hand, and many analysts expect the governor's no-tax pledge to be broken.

This uncertainty has seen the state's credit rating downgraded to the lowest level in the US.

Sweeping aside

Mr Schwarzenegger, for his part, argues that the problem has been California's history of uncontrolled spending.

His predecessors, he said earlier this week, had got California into a mess by simply shifting spending around, rather than taking the axe to agencies he said were failing to serve a purpose.

Mr Schwarzenegger has already abolished an unpopular state car tax, and has promised to sweep aside some of the more egregious areas of waste.