Schwarzenegger used his line-item veto authority to save an additional $656 million that will let the state restore a reserve fund he said is needed for tough times.

Democrats immediately protested the social spending reductions and threatened to block his political agenda during his final months in office.

"This kind of game playing by the governor doesn't bode well for success in terms of water, corrections, pensions or any of the other items the he is looking to in order to build some kind of real legacy," Assembly Speaker Karen Bass said.

The new budget should help the stat