Schwarzenegger's legacy of promises squandered

Schwarzenegger's legacy of promises squandered

Cutting the vehicle license fee and borrowing $15 billion early in his tenure as governor helped force the state into the budget box it's in today.

George Skelton
Capitol Journal
May 16, 2010

From Sacramento

Pretty pathetic, all of it: The bleeding state government, the weakened Legislature, the lame duck governor.

The governor especially. Promise unfulfilled. Opportunity squandered.

It's the choices one makes in the early years — in life and in a governor's office — that usually determine one's fate. Options narrow. The path can become one-way.

For Arnold Schwarzenegger, two very early decisions as governor helped force him into the budget box he found himself in Friday, where the only moves he dared make were, he said, personally painful. Those two fateful moves were:

First, cutting the vehicle license fee, or "car tax." Ironically for Schwarzenegger, it counted as a spending increase, costing roughly $5 billion annually. That's because local governments, not the state, had banked the VLF revenue, and Sacramento graciously reimbursed them for their loss.

Second, the new governor used his star power to persuade the Legislature — it wasn't hard — and the voters to borrow $15 billion to pay not only for inherited debt, but the initial car tax cut and other daily expenses. The state still is paying off those bonds and the money's long gone. The annual cost: $1.2 billion.

Add to those missteps Schwarzenegger's over-reaching in his second year by calling an unpopular special election for too many flawed "reform" initiatives, all rejected by voters. The sum total amounts to wasted opportunity.

A blown opportunity, when he was extraordinarily popular, to impose significant spending constraints, pare back overly generous state retirement benefits and modernize the tax structure — all goals he's still trying to achieve, but with little political capital and fewer than eight months left in office.

There are many culprits, of course, led by the global recession. Most states are hurting, although none seem as critically ill as California.

In Sacramento, Democratic legislators have been too cozy with public employee unions. Republicans have been too rigidly anti-tax.

Legislators of both parties are handicapped by term limits.

The two-thirds vote requirement passing budgets and raising taxes creates gridlock and pork payoffs.

The boom-or-bust tax structure is broken and needs an overhaul.

Roughly 70% of the hemorrhaging general fund flows to local governments and schools. Sacramento hasn't stopped bailing them out since Proposition 13 slashed their property tax revenue 32 years ago.

The bottom line is a projected $19.1-billion state deficit for the fiscal year starting July 1, with no politically acceptable means of filling the hole in sight.

Moreover, even if all of Schwarzenegger's desperate proposals were adopted by the Legislature —recommendations to hit the elderly, poor and disabled especially hard and completely eliminate the main welfare program that benefits 1 million children — it wouldn't solve the long-term budget problem.

There'd still be a $6.6-billion deficit in the next year, and $6 billion the year after that, the governor's finance department calculates.

But it's moot because the Legislature will not — neither Democrats nor most Republicans — vote to make California the only state without a welfare program.

The governor knows that. His primary goal Friday was to just get through the day, meeting his legal obligation to present an updated "balanced" budget by May 14, one that didn't renege on his promise to not raise taxes —again.

It was Schwarzenegger's final budget proposal. And the contrast between this budget rollout and his first more than six years ago was stark.

Back then, the auditorium in the Secretary of State's building — his favorite Sacramento venue — was jammed with 21 TV crews, about 50 reporters, several star-gazing legislators and a cheering section of doting Schwarzenegger appointees. The rookie governor exuded confidence.

"The politicians have made a mess of the California budget; now it's time to clean it up," he asserted. No more "shell games, using tricks and gimmicks to put off the hard decisions."

If anything, the mess has gotten worse.

On Friday, there were roughly half as many cameras and reporters, very few legislators, some aides, but hardly any applause. Definitely no cheers.

These are the symptoms of a lame duck governor. They're also the signs of a life-endangering budget proposal.

Schwarzenegger was glum and defensive, blaming Democrats, "special interests" — theirs, not his — judges and the feds.

"I now have no choice but to stand here today and to call for the elimination of some very important programs," he said. "If we had reform in place, we would not be facing the 'Sophie's Choice.' "

Still talking tough, he pledged: "I will not sign a budget until we fix our broken systems … if we don't have pension reform and budget reform…. We cannot go on like this."

Senate leader Darrell Steinberg (D-Sacramento) was singing the same tune, but with slightly different lyrics.

"The status quo is unsustainable," he said. "Think about it: For the past 32 years, we've had a system where the state raises the money and acts as merely a pass-through to local government."

Steinberg thinks the budget crisis presents not only an opportunity but also an imperative to wean local entities off Sacramento. Allow more local control and the ability for communities to raise their own revenue.

That would be controversial. It would entail lowering Proposition 13's requirement of a two-thirds voter majority for most local tax increases. But "we're not going to touch residential property," he pledged.

Maybe they'll all get together — Schwarzenegger, Steinberg et al — and compromise on some long-jabbered-about reforms along with an honestly balanced budget. Maybe.

More likely, they'll muddle through again with another gimmicky budget "balanced" only until the ink dries. They'll delay the tough decisions until after the November election and wait for the next governor to arrive.

Hopefully, whoever the new governor is will have learned from Schwarzenegger's misadventures.