SACRAMENTO (AP) – Gov. Arnold Schwarzenegger proposed a $141 billion state budget Thursday that would cut nearly 10 percent of the funding for public education and grant early release to 22,000 prison inmates as part of a plan to erase a $14.5 billion revenue shortfall over the next 18 months.

The spending plan also would close nearly one in five state parks and make it much tougher to return thousands of parole violators to prison.

The cuts would result in an overall 3 percent reduction in spending from the $145.5 billion budget the Republican governor signed last summer.

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“This is a budget that doesn’t please everybody, I know that for sure,” Schwarzenegger said in releasing his annual spending plan. “But the bottom line is I think this is the fairest way to go.”

Schwarzenegger simultaneously declared a fiscal emergency Thursday, a move designed to force lawmakers to impose many of the cuts within 45 days, instead of waiting until the new budget year begins July 1.

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California faces a $3.3 billion deficit in its current year. The balance of the $14.5 billion deficit is projected for the 2008-09 budget year.

The governor asked the Legislature to cut $400 million from schools immediately and take away $4 billion beginning in July. That would require lawmakers to suspend provisions of Proposition 98, the voter-approved initiative that guarantees a minimum funding level for schools.

That proposal drew immediate criticism from Democrats and educators. A group of parents also demonstrated outside the governor’s news conference, holding signs and chanting that the state must protect its children.

“The governor’s budget takes a giant step backwards,” state Superintendent of Public Instruction Jack O’Connell said in a statement. “It will not help us close the achievement gap that threatens the futures of our students and our state. It will not help us effectively prepare the well-skilled work force our state desperately needs to remain competitive.

“Our state shouldn’t punish our children for its grownups’ mistakes.”

Schwarzenegger also asked for the early release of 22,000 state prison inmates over the next two years. Inmates with less than 20 months remaining on their sentences would be released if they are determined to be “low risk.”

Only prisoners serving sentences on nonviolent, non-sex offender crimes would be eligible for early release.

He also proposed eliminating active supervision of 18,522 parolees and making it far more difficult to return lawbreakers to prison.

In all, the cuts were expected to reduce California’s prison population by 35,000 over the next two years.

Republican lawmakers have been critical of any attempt to release inmates early and reacted angrily to Schwarzenegger’s proposal.

“It’s difficult for me to understand how a governor who said he would never support the early release of prisoners would dare to make such a proposal to solve his budget deficit,” said Assemblyman Todd Spitzer, R-Orange. “The governor is unequivocally proposing to jeopardize public safety to balance his budget, when he’s always said he would never do that.”

California Department of Corrections and Rehabilitation Secretary James Tilton said the department would eliminate 6,000 positions. He estimated about 2,000 prison guards would have to be laid off.

The list of proposed cuts includes 48 state parks, nearly one in five, visited by about 6.5 million residents annually.

Schwarzenegger also will resubmit a proposal the Legislature rejected last year to cut benefits for the children of welfare recipients if their parents fail to get jobs. State subsidies for the elderly, blind and disabled also would be frozen through the end of the decade, while Medi-Cal would be cut by $1 billion.

A large part of the savings would come from eliminating dental coverage for millions relying on the system.

In essence, the governor’s budget proposes many of the draconian cuts economists have long said would be necessary to bring the state’s revenue and expenditures in line if the Republican governor would not raise taxes, which he has pledged not to do.

But the cuts may be politically impossible in a state controlled by Democrats, who have long championed robust spending on education and social programs.

The governor’s plan re-ignites an intense partisan budget battle after several years in which tax windfalls prompted Schwarzenegger to increase spending on those popular programs.

The majority of the estimated $14 billion deficit is closed by an across-the-board cut of 10 percent to almost all state agencies and programs. The move saves almost $10 billion.

“Ten percent across-the-board is already tough, but it at least spreads the pain evenly,” Schwarzenegger said Thursday.

The governor also proposes borrowing an additional $3.3 billion under bonds voters approved for deficit relief in 2004. That would extend the state’s repayment of bonds designed to cover the budget shortfall resulting from the dot-com bust well into the next decade.

Schwarzenegger has vowed to avoid using the money since he persuaded voters to approve the massive borrowing shortly after taking office.

The budget mess brings Schwarzenegger full circle to a central, unresolved issue from the 2003 recall election that propelled him to office.

The $14.5 billion shortfall rivals the one left by his predecessor, former Gov. Gray Davis. Schwarzenegger covered that gap with loans and other fixes shortly after taking office. He then glided on borrowing and an unexpected surge in state tax revenue, but now has far fewer options to bring the state’s spending and revenue in line.

California is further in debt thanks to bonds the governor has championed, voters have cut off the option of borrowing to balance the budget, and Schwarzenegger has promised not to raise taxes.

His new budget also calls on the Legislature to ask voters to approve another $38 billion in bonds for school construction, water projects, high-speed rail and new courts.

During his State of the State address earlier this week, Schwarzenegger confirmed his plan for the cuts, as well as his desire to resurrect a constitutional amendment to cap state spending as a long-term fix.

Democrats say the state cannot rely solely on spending cuts.

Assembly Speaker Fabian Nunez said everything should be on the table, including tax increases or getting rid of tax breaks for the rich.

“I have made it clear that taxes should be the last resort, but a blind pledge to never raise any taxes at any time I believe is a straitjacket that ill-fits California and the needs of the people we represent.”

The governor proposes spending less in the budget year that starts July 1 than the state is spending in the current fiscal year, making it the first time since 2001 that the state would retract general fund spending.

Schwarzenegger’s renewed call for a constitutional spending limit also has threatened to repeat a budget struggle unseen since Schwarzenegger’s last attempt to pass a spending cap in 2005.

Republicans also take issue with components of the governor’s budget. He proposes a firefighting surcharge on homeowners’ property insurance. The party typically views new fees as veiled attempts to increase taxes.

Such fees can be passed with a simple majority vote of the Democrat-controlled Legislature. Tax increases require a two-thirds majority and Republican support.

The budget Schwarzenegger released kicks off a more complicated debate than usual.

Along with announcing his spending plan for the budget year beginning in July, Schwarzenegger declared a fiscal emergency for the current budget year. He also opened debate on his proposed constitutional amendment to limit spending.

Schwarzenegger’s emergency declaration will be his first since voters gave the governor that power in 2004 by passing Proposition 58. The declaration triggers a special session and a constitutional mandate for the Legislature to address the current year’s budget, either by cutting costs or increasing taxes within 45 days.