Schwarzenegger told the audience that pension reform and tax cuts for businesses are critical to balance the state's budget.Many business leaders had submitted questions to be asked of the governor during this discussion on the state of the budget.
Topics ranged from job creation to education and one of the hottest topics was pension reform.
In everything, Schwarzenegger said to the San Jose-Silicon Valley Chamber of Commerce, the point he kept returning to is that reform is needed.
He said it would be economic suicide to continue down the path of borrowing and increasing taxes to deal with the $19 billion shortfall.
Schwarzenegger said one of the biggest problem areas is that the state needs to revamp is the pension system.
While state revenues have grown 28 percent over the last 10 years, pension payments have skyrocketed.
Schwarzenegger said he's not going to sign a budget unless the legislature agrees on pension reform, which could save billions of dollars to go elsewhere.
"I would have $3.7 billion more in other programs. I would give some money for in-home support services, I would give some money for higher education, community colleges, I would have more money for K-12, childcare, and the list goes on and on and on. Now I have to make cuts because the pension is crowding it out," he said.
They also touched on legislative budget and tax reform, like keeping tax incentives for businesses to grow and hire more people.
Schwarzenegger commended Silicon Valley for its green tech growth, which he says has created 10-times more jobs than any other sector in California over the last 10 years.
Another issue Schwarzenegger emphasized was the creation of a "rainy day" fund to deal with future budget crunches.