With California rapidly running out of money, Senate Democrats cut to the chase Tuesday, saying they will not accept decimating the state's safety net and unveiling the skeleton of their own budget-balancing proposal.

Senate President Pro Tem Darrell Steinberg pushed for raiding much of the state's proposed $4.5 billion budget reserve next year to bankroll key health, welfare and college aid programs.

"The purpose of a rainy-day fund is to provide funds for a rainy day," he said. "It's thunder and lightning in California right now."

Steinberg's proposal puts Senate Democrats at odds with Gov. Arnold Schwarzenegger as the state rushes to mend a gaping $24.3 billion budget hole before it runs out of cash within weeks.

Schwarzenegger is wary that lawmakers would rather "kick the can down the road" and hope for rosier-than-anticipated revenues instead of making cuts deep enough to sustain the state in the fiscal year that begins July 1.

"This budget ought to be solved in one chunk, at one time – and let's do it quickly," Schwarzenegger told reporters.

The governor said it is "wishful thinking" or "hallucinatory" to believe that the state's proposed $4.5 billion reserve fund next year is ripe for raiding by lawmakers.

Schwarzenegger contends that the rocky economy will necessitate use of the reserve funds in the coming fiscal year, so that shelving the money is prudent but creates a reserve in name only.

Schwarzenegger said that spending such funds also could create problems for fighting wildfires, which often requires dipping into reserves.

"We need to have money set aside for those emergencies," he said. "This is why it's absolutely critical that we have some rainy-day fund, some reserves set aside."

Steinberg proposed using reserves as an alternative to Schwarzenegger's plans to eliminate:

• CalWORKs, an acronym for California Work Opportunity and Responsibility to Kids Program, which is the state's primary welfare program. Nearly 1.3 million Californians received CalWORKs payments in February, almost 1 million of whom were children.

• Healthy Families, which finances health care for uninsured children. More than 900,000 low-income children would lose medical coverage if the program shut down.

• Future awards under the state's Cal Grants program, which provides aid to low- and moderate-income college students to help pay for tuition, fees, books, supplies and other college expenses.

Senate Democrats also are determined to retain potential life-or-death services, such as HIV/AIDS programs and in-home support services, helping the frail elderly remain independent rather than in nursing homes.

Steinberg said Democrats are willing to trim such essential programs but not decimate them.

"It's a matter of degree," he said. "But degree matters."

Schwarzenegger's budget-balancing plan, released last month, calls for about $3 billion more in cuts than the framework that Steinberg unveiled.

The governor's plan also would borrow nearly $2 billion from local government coffers, while Steinberg's proposal would not.

To help make up the difference, Steinberg would tap $3.5 billion to $4 billion of a proposed $4.5 billion reserve.

If bolstering the reserve fund is necessary, Steinberg suggested revoking various corporate tax breaks approved in past budget negotiations, which would produce only modest state revenue next year.

Senate Republican leader Dennis Hollingsworth of Murrieta said he could not accept killing tax breaks designed to stimulate the economy.

"When you pull tax credits that are targeted toward creating jobs, it doesn't result in more revenue – it results in less jobs," Hollingsworth said.

Steinberg said the Senate is committed to striking a deal by July 1.

For any pact to take effect immediately, which is vital, it would need supermajority approval in both legislative houses – thus, at least four GOP votes in the Assembly and two in the Senate.

Steinberg discussed his caucus's bottom line Tuesday but did not release any written proposal. Key elements remain under negotiation.

Steinberg was unable to say, for example, whether reserve funds could stretch far enough to eliminate Schwarzenegger's proposal to close 220 state parks or to impose a 5 percent pay cut on state workers who already are taking twice-a-month unpaid furloughs.

The Senate Democrats' budget proposal, like that of Schwarzenegger, calls for deep cuts to public education, higher education, corrections, health, human services and other programs.

Specifics of the cuts are not identical in the two plans, however. Steinberg said details will emerge in coming days at hearings of the Legislature's joint budget conference committee.

Cuts to public education next year largely would be backfilled by federal stimulus funds, Steinberg said.

Assembly Speaker Karen Bass, in a written statement, stressed the need to preserve a safety net and said the projected shortfall should be cured with a "balanced approach" that includes "revenues and reforms as well as cuts."

"The bottom line for Assembly Democrats is that we are committed to ensuring that the state's fiscal emergency isn't allowed to be misused to eliminate the safety net in California or to eviscerate our public education system," she said.

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