Jan. 10 (Bloomberg) -- Governor Arnold Schwarzenegger proposed spending $43 billion more in public works bonds and said California should set an example for the nation by making health insurance universal and imposing landmark clean-fuel standards to fight global warming.

Schwarzenegger said the borrowing is needed for the state's infrastructure to keep pace as its population, already the U.S.'s largest at 36 million, grows by a projected 30 percent in the next two decades. Two months ago, voters approved $43 billion of Schwarzenegger-backed bonds as they re-elected the Republican to a second term.

In his annual State of the State speech to lawmakers, Schwarzenegger pushed the bond proposal in an agenda that also includes the $12 billion health insurance plan and the unprecedented clean-fuel standards for motor vehicles to curb greenhouse gas emissions.

``Not only can we lead California into the future, we can show the nation and the world how to get there,'' Schwarzenegger, 59, said. ``We can do this because we have the economic strength, the population and the technological force of a nation-state. We are a modern equivalent of the ancient city-states of Athens and Sparta.''

The governor's program last year to expand construction on roads, schools and other projects helped restore his popularity. The speech yesterday marked the third time since he won office in 2003 that Schwarzenegger used his January address to endorse borrowing billions. The first was to alleviate budget shortfalls; the second to improve infrastructure.

Boon for Underwriters

More bond sales could be a boon for Wall Street underwriters hired to sell the debt to investors. A bond sale of $43 billion would generate fees of about $235 million for banks, based on the $5.46 per $1,000 worth average charged in 2005, according to Thomson Financial.

California is rated A+ by Fitch Ratings and Standard & Poor's, and A2 by Moody's Investors Service. They have rebounded from near junk status when Schwarzenegger first took office. California bonds maturing in seven years yield 13 basis points more than top-rated bonds, down from a high of 38 basis in November 2005, according to Bloomberg data.

The latest bond proposal would including $29.4 billion of general obligation bonds that would need to be approved by voters as well as $13.9 billion of other types of bonds.

The borrowing proposal met resistance from Republican lawmakers whose votes would be needed to reach the two-thirds majority required for passage. Democrats control both legislative houses by smaller majorities.

Bipartisanship Urged

``Taxpayers continue to provide record revenue to the state's bank account, only to see the state of California increase spending to higher and higher levels,'' said Senator Dave Cox, a Sacramento Republican. ``We must pay down debt and stop using the state's credit card.''

Schwarzenegger urged Democrats and Republicans to put aside partisan differences and ``work out a solution that is the best possible answer to the challenges that we face.''

The health plan, announced two days ago, would extend health insurance to 6.5 million uninsured Californians and be funded in part by levying taxes on businesses, doctors and hospitals. It would require all Californians to have coverage and force insurance companies to spend 85 cents of every premium dollar on services.

The fuel standards are aimed at reducing greenhouse gas emissions by 10 percent over the next 13 years by requiring the production of fuels that will produce less carbon dioxide.

Budget Cuts

Schwarzenegger is scheduled to release his budget proposal today, including a reduction in welfare of almost $500 million by cutting funds for children of illegal aliens and for parents who fail to participate in work programs, finance director Michael Genest said. The governor also seeks to rescind a cost-of-living increase for welfare benefits set to take effect this year.

Democrats said they won't approve drastic cuts on programs for the poor to pay for the new spending proposals and won't agree to environmental regulations that give too much control to industry. Under Schwarzenegger's plan, oil and gasoline producers that don't meet the new standards would be allowed to purchase or trade emission credits from companies that do.

``We won't take breakfasts away from poor kids,'' said Senate President Pro Tem Don Perata, an Oakland Democrat. ``We won't let Wall Street traders control our fight against global warming.''

Hapsburg Turnover

Schwarzenegger also asked lawmakers to revive an idea rejected in 2005 when voters defeated his entire government- overhaul agenda, prompting the former film star to seek consensus instead of trying to go around the Legislature.

He called on the Legislature to approve a new commission to redraw political boundaries to make elections for state and federal offices more competitive.

``In the past three election cycles, only four of California's 459 congressional and legislative seats changed hands. There was more turnover in the Hapsburg monarchy than the California Legislature,'' said the Austrian-born Schwarzenegger.

To contact the reporters on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net; William Selway in San Francisco at wselway@bloomberg.net.

Last Updated: January 10, 2007 00:06 EST