Blaming both sides, Gov. Arnold Schwarzenegger released a "compromise" state budget Wednesday – anchored by a temporary tax increase – that got a cold reception from Democrats and Republicans.

Schwarzenegger's move, designed to jump-start passage of a budget that is nearly two months overdue, sparked little visible support.

"I think it takes us backward because it creates the impression that taxes are acceptable – they're not – and that there are votes for it, which there aren't," said Assembly GOP leader Mike Villines of Clovis.

Schwarzenegger called the 52-day budget standoff shameful Wednesday.

"Republicans must step out of their ideological corner on the right, and Democrats must step out of their ideological corner on the left," he said. "We must meet in the middle."

Schwarzenegger's proposal calls for a three-year, 1-cent increase in the state's sales tax, after which the rate would drop by 1.25 cents.

Californians currently pay state and local sales taxes of at least 7.25 cents per $1 spent – even more in some counties.

Schwarzenegger touted his sales tax proposal as a long-term cut, with consumers ultimately recouping their losses and saving money. The temporary tax would not apply to gasoline, diesel and jet fuel.

Schwarzenegger's plan also calls for $2 billion more in spending reductions than supported by a joint legislative budget committee.

Most of the additional spending reductions would be in education, $1.1 billion, and in extending a 10 percent cut in Medi-Cal reimbursement rates, $505 million. The latter currently is the subject of a court fight.

Other key elements of Schwarzenegger's plan include:

• Beefing up the "rainy day" fund and requiring that it receive 3 percent of state general fund revenues until the total hits 12.5 percent. The money could be spent only for certain purposes and after a two-thirds vote by the Legislature.

• Giving the governor the authority to cut state operations budgets by up to 7 percent, including freezing cost-of-living pay increases, if the economy slumps midyear.

• Revamping the California Lottery and borrowing against future profits to raise $5 billion in 2009-2010.

• Providing an "economic stimulus" package that expedites spending billions in bond funds, provides tax credits for Hollywood's film industry, and allows employees to voluntarily work four 10-hour shifts per week without overtime pay.

Schwarzenegger also proposed a tax amnesty plan and a two-year suspension of the net operating loss deduction available to big business.

"It's a fiscally responsible compromise with reforms that fix our system once and for all," he said of his plan.

The spending reform and lottery elements of Schwarzenegger's plan would have to be approved by voters – and the deadline for making the Nov. 4 ballot is only days away.

Jon Coupal, president of the Howard Jarvis Taxpayers Association, countered that it makes no sense to raise taxes in hard times. "When somebody is drowning, you throw them a life preserver, not a cinder block," he said.

Once the sales tax rises, Coupal added, it's unlikely ever to fall.

Assembly Speaker Karen Bass applauded the governor for seeking to generate revenue, but her spokesman, Steve Maviglio, made it clear that Assembly Democrats are not dancing over other aspects.

"Two billion dollars more in cuts, slashing education spending and rolling back worker protections is not a compromise," Maviglio said.

Senate President Pro Tem Don Perata feels the plan is a temporary solution to a permanent revenue problem, spokeswoman Lynda Gledhill said.

Once the temporary tax expired, the state would lose about $6.5 billion in annual revenue, a hole it hopes to fill partly through economic growth.

Education officials say the governor's proposals would cost them $1 billion this year – and perhaps much more in the future because of the rainy day fund and midyear budget-cutting powers.

"Anything that makes billions in additional cuts to schools and students isn't a good compromise," said Robin Swanson of the Education Coalition, representing teacher, administrator and other school interests.

Angie Wei of the California Labor Federation said private-sector overtime and other employer concessions make the plan "something we will not stand for."

"The governor needs to stop trying to solve the budget crisis on the backs of workers," she said.

Sen. Roy Ashburn, R-Bakersfield, said he is willing to consider supporting the plan – but not if it is weakened in budget talks. "Democrats need to understand: It's as far as Republicans are willing to go," Ashburn said.

Call Jim Sanders, Bee Capitol Bureau, (916) 326-5538.