Gov. Arnold Schwarzenegger put up his usual optimistic front Friday as unveiled his first budget proposal -- for the fiscal year that begins July 1. But even the governor's sunny disposition couldn't conceal the pain his proposal would spread to just about everyone who depends on services the state provides.

The grim document, if enacted by the Legislature, holds kindergarten-through-12th grade education relatively unscathed, but hits hard just about every other part of state government.

It would cut health care and monthly stipends for the poor, reduce services to the disabled, block access to college for thousands of students and raise fees on those who do get into the universities and community colleges. The plan would also shift $1.3 billion in property taxes away from local governments, forcing them to cut their services as well -- everything from police and fire protection to health care, parks and libraries.

All this and more, Schwarzenegger said, is necessary to bring the state's finances back into balance after years of deficit spending.

"Over the past five years, the politicians have made a mess of the California budget," Schwarzenegger said. "Now it's time to clean it up."

Schwarzenegger derided his predecessor for using an array of gimmicks to paper over deficits, and insisted his budget has none. But his plan includes billions in borrowing, assuming voters approve his proposed bond measure March 2, and envisions many of the same kind of funding shifts that Gray Davis employed to avoid tough decisions.

Even so, Schwarzenegger's finance director, Donna Arduin, insisted that the plan the governor presented Friday puts the state on a glide path toward bringing the budget back into balance. She said it would reduce the structural gap between projected spending and revenues from $14 billion to about $3 billion next year. And, Arduin added, dozens of long-term reforms measures sprinkled through the budget will, if enacted, help erase what's left of the gap by the 2006-07 fiscal year.

The Legislature's independent budget guru, Elizabeth Hill, will comb through the governor's document and render her verdict on its long-term effects within a few days. It would be wise to await her assessment before judging the fiscal strength of Schwarzenegger's offering.

It's clear that his plan includes more than just belt-tightening. It is chock-full of real cuts that will hurt. But the governor does deserve credit for offering a number of proposals that would stretch the taxpayers' dollars without savaging public services.

For instance, while he proposed raising undergraduate fees on college students by 10 percent, he suggests a 40 percent increase for graduate students, under the rationale that students in professional schools are headed for lucrative careers as doctors, lawyers, engineers and the like and need not receive the same level of subsidy as their undergraduate peers. Another sensible proposal would limit the size of financial aid grants given to private college students to the maximum allowed for students attending the University of California.

He also proposes charging fees on a sliding scale for subsidized child care and services to the developmentally disabled, arguing that those who have some ability to pay should share in the cost so that those who have nothing can continue to receive these services.

In the state's largest welfare program, Schwarzenegger wants recipients to begin looking for work as soon as they receive benefits. For those who remain on the program beyond the federal five-year limit, Schwarzenegger would reduce benefits by 25 percent, and an additional 25 percent to those timed-out recipients who don't meet the program's work requirements.

In Medi-Cal, the state program that provides subsidized care to one in five Californians, the governor wants to simplify eligibility, conform benefits to those offered in private plans, use more managed care and charge premiums and co-payments in some cases to those with higher incomes.

Schwarzenegger is also taking on the state's powerful public employee unions, which won big pension increases under the previous administration. For those already on the payroll, the governor proposes raising their contribution to the pension fund from 5 percent of their pay to 6 percent. And for new employees, Schwarzenegger wants to reinstate a less expensive, no-frills pension plan that was in place for most of the 1990s, until Davis and the Legislature repealed it and gave all state workers higher benefits.

The one thing the governor doesn't propose is raising taxes. He is adamant that doing so would weaken the economic recovery and prolong the state's fiscal problems. It is over that issue -- and the cuts to health and welfare programs -- that he and the Democrats who control the Legislature will most likely come to blows.

Except on taxes, Schwarzenegger has made it clear that everything is negotiable. Let the bargaining begin.