The Republican governor tells ABC's "This Week" that the state is mired in a worldwide slowdown that has hammered businesses and housing. He says experts predict a turnaround could start early next year.
But Schwarzenegger warns that it could take years for things to return to normal.
After months of gridlock in Sacramento, the governor and lawmakers agreed last week to increase taxes and cut spending to help close a projected $42 billion budget gap. Key parts of the plan will go before voters in May.