The 2008-09 budget and State of the State speech delivered by Gov. Arnold Schwarzenegger this week contain something to infuriate virtually every organized interest group in California. However, the governor is making a lot more sense about the state’s bleak long-term financial outlook than any other Sacramento politician.
The Legislature apparently still prefers to attempt business as usual, hiding from the unpleasant reality that it consistently spends approximately $20 billion a year more than incoming revenues, even as voter-mandated set-asides automatically increase spending by 7.3 percent annually. This created a fiscal booby trap that has caught California in a $14 billion deficit this year.
Meanwhile, Schwarzenegger started 2008 by demonstrating willingness to face facts and lay out the kind of tough, serious-minded emergency measures obviously necessary to balance the coming budget and, even more importantly, to finally repair California’s dysfunctional financial structure.
In Tuesday’s State of the State, the governor called for a new constitutional amendment triggering automatic cuts to be specified by the Legislature when revenues drop below expenses, along with enforced deposits to a reserve fund during surplus revenue years. This is Schwarzenegger’s third try at instituting some sort of spending cap. And interestingly, the latest plan was pioneered by Bill Clinton as governor of Arkansas.
Schwarzenegger is also declaring a fiscal emergency this month, a first-time use of powers granted by the voters in 2004. This would call a special session giving legislators a 45-day deadline to balance the budget, including making early cuts in current spending. If they do not agree on a solution, they are barred from doing any other legislative work or adjourning until they succeed.
Schwarzenegger’s $141 billion budget draft yesterday provided bombshells galore. It would cut nearly 10 percent of the funding for public education, grant early release to 22,000 supposedly low-risk prison inmates, temporarily close nearly one in five state parks, cut benefits for the children of welfare recipients if their parents fail to get jobs, freeze subsidies for the elderly, blind and disabled through the end of the decade and cut Medi-Cal by $1 billion.
The governor also seeks a firefighting surcharge on homeowners’ property insurance and wants to borrow an additional $3.3 billion using bonds voters approved for deficit relief in 2004. The total package would result in 3 percent less spending than this year’s budget. There is nothing upbeat about any of this. But who can doubt that measures this extreme are necessary for digging California out of both its immediate and long-term fiscal hole?
Predictably, the first response from both political parties was a reflexive repetition of entrenched positions that guarantee continued gridlock. The Democratic majority essentially said, “No cuts, especially to social programs.” And the Republicans promised to block any new taxes.
Unfortunately for apologists of the status quo, business as usual just cannot work any longer. Painful though it might be, California lawmakers will now be forced to make tough choices between draconian service cuts or possibly reviewing the state’s loophole-plagued tax structure.