SACRAMENTO - Gov. Arnold Schwarzenegger released a state budget proposal Thursday that would close a projected $14.5 billion gap by giving schools 10 percent less money, releasing 22,000 inmates early and closing dozens of state parks.

Cuts or freezes in funding for children of welfare recipients and elderly, blind or disabled people also are contained in the proposed $141 billion budget for the fiscal year beginning in July.

"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."

At the same time, Schwarzenegger declared a fiscal emergency in California because of a $3.3 billion deficit in the current year's budget. Lawmakers will have 45 days to decide how to fix it.

Economists have long advocated measures to control spending as a way to bring California's revenue and expenditures in line - unless Schwarzenegger reneges on his promise not to increase taxes. Trimming education and social programs, however, will be difficult if not impossible in the Democrat-controlled Legislature.

The governor proposes saving almost $10 billion by trimming 10 percent from what almost all state agencies and programs would otherwise receive in the 2008-09 fiscal year. Overall spending would drop about 3 percent from this year's levels; that would be the first time California's annual budget decreased since 2001.

Education would lose more than $4 billion, cuts that would require the Legislature to suspend provisions a voter-approved initiative that guarantees a minimum funding level for schools.

"The governor's budget takes a giant step backwards," state Superintendent of Public Instruction Jack O'Connell said in a statement. "Our state shouldn't punish our children for its grown-ups' mistakes."

Cuts to the prison system would come through the early release of inmates determined to be "low risk" who have less than 20 months remaining on their sentences. Only prisoners serving sentences on nonviolent, non-sex-offender crimes would be eligible.

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

"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."

The governor also proposes cutting 48 state parks, nearly one in five.

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.

The governor's plan is sure to reignite an intense partisan budget battle after several years in which tax windfalls prompted Schwarzenegger to increase spending on education and social programs.

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 the bonds, which were 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.

The cuts outlined by the governor are larger than what Democrats expected. They are pushing for a combination of cuts and tax increases.

"It's the governor's day of reckoning," said Steve Maviglio, spokesman for Assembly Speaker Fabian Nunez, D-Los Angeles. "And it won't be pretty."

Legislative Republicans are unhappy with one component of the governor's budget: a firefighting surcharge on homeowners' property insurance that they consider a veiled attempt to increase taxes.

The proposed budget is just one of three battles brewing over California's finances.

Schwarzenegger issued the emergency declaration, triggering a special session in which the Legislature must address the current year's budget by cutting costs or increasing taxes.

The governor also wants to resurrect his efforts to create a constitutional amendment to cap state spending as a long-term fix. He'll have to introduce his proposed constitutional amendment by Feb. 1.