The three-judge panel stopped short of holding Schwarzenegger in contempt of court, as requested by lawyers for prisoners who sued over their health care and mental health treatment. But the panel said it was "unaware of any excuse for the state's failure to comply" and would view any further noncompliance "with the utmost seriousness. "

Schwarzenegger was unbending.

"We continue to object to the panel's arbitrary cap under a two-year timeline and are continuing our appeal with the U.S. Supreme Court," said Rachel Arrezola, a spokeswoman for the governor. The state's appeal argues that federal courts have no authority to order a reduction in the prison population.

The panel ruled in August that overcrowding in the state's 33 prisons - now filled to nearly twice their designed capacity of 80,000 - was the main reason that health care for inmates violated the constitutional ban on cruel and unusual punishment. A judge appointed a receiver to manage the health system in 2006 after finding that substandard care was killing one inmate per week.

The court gave Schwarzenegger until Sept. 18 to present a plan that would reduce the population from 150,000 to 110,000 over two years, saying it could be done safely by such measures as sending low-risk inmates to county custody and treatment, and halting imprisonment for minor parole violations.

The governor had already proposed measures he said would lower the inmate population by 37,000 in two years. But after the state Assembly spurned all proposals to release inmates early, Schwarzenegger presented a plan to the court that would remove fewer than 20,000 prisoners in two years, and would take five years - and passage of previously rejected legislation - to come close to the court's population goal.

The plan includes extending a current program to transfer some inmates to other states, releasing some sick and elderly inmates to home detention, reclassifying some felony theft crimes as misdemeanors and increasing prison construction.

The court rejected the plan Wednesday and said it was running out of patience.

State officials have had ample time to propose changes that would bring the prisons up to constitutional standards, the panel said, and if they again fail to comply, the court "will be left with no alternative but to develop a plan independently and order it implemented forthwith."

The panel members are U.S. District Judges Thelton Henderson of San Francisco and Lawrence Karlton of Sacramento and Judge Stephen Reinhardt of the Ninth U.S. Circuit Court of Appeals.

E-mail Bob Egelko at begelko@sfchronicle .com.

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