Schwarzenegger discovers budget reality a bit late

Just four years ago, Gov. Arnold Schwarzenegger wagged his finger at the Republican National Convention and declared, “To those critics who are so pessimistic about our economy, I say: ‘Don’t be economic girlie men!’ ”

say: Here’s your pink tutu, dude.

Schwarzenegger finally bowed to reality last week and proposed nearly $11 billion in tax and fee increases to help cover a projected budget shortfall of more than $24 billion by 2010.

Why? The economy has gone down the toilet and, according to a statement from the governor’s office, “the state faces the very real possibility of running out of the necessary cash to meet all its obligations.”

My only question to Schwarzenegger is: What took you so long?

Hey, I don’t like paying taxes -- who does? And I don’t like that our state government, like all bureaucracies, wastes a lot of money. But let me tell you what I do like.

I like firefighters, paramedics and police officers who respond quickly when there’s trouble. I like bridges that aren’t falling into the water and roads that aren’t deteriorating around us.

I like schools where students get the education they need to compete and excel in a fast-moving world. I like hospitals and clinics where patients get the care they require. I like prisons that can house inmates in a humane manner.

And I like having the vision and wherewithal to invest in game-changing technologies such as stem cell research and high-speed trains.

Do we have all these things? Not even close.

But they’ll be even more out of reach if we fail to accept that, as Californians, we have a profound sense of entitlement, and the things we expect aren’t cheap.

“We have wants that exceed our willingness to pay for them at the state level,” agreed Steve Levy, director of the Center for Continuing Study of the California Economy.

He said Schwarzenegger was correct to seek higher taxes as state revenue plunges, but the governor’s timing couldn’t be worse. The way it should work, Levy said, is that lawmakers should spend money during economic downturns to keep the state running, and should then recoup that money during good times.

“We forget to do that,” Levy said. “We don’t raise taxes when times are good.”

As California and the nation tumble down the rabbit hole of recession, Schwarzenegger is proposing a 1.5-percentage-point increase in the state sales tax for three years. That would bring the statewide rate to 8.75% and Los Angeles’ levy to a whopping 10.25% (including Measure R’s half-cent sales tax for transportation projects).

The governor also wants to expand the sales tax to include some services, such as vehicle repairs and veterinarian care, and would hit oil companies with a 9.9% tax for extracting black gold in California.

Schwarzenegger is simultaneously seeking $4.5 billion in immediate spending cuts, with more than half of that amount coming from public schools (which the governor’s kids don’t attend).

And just when many Californians are thinking, “Man, I could use a stiff drink,” Schwarzenegger wants to raise alcohol excise taxes by 5 cents a drink.

These are short-term measures. But California’s budget problems aren’t short-term. The governor and his legislative cohorts also need to be thinking about long-term solutions to the state’s chronic budget mess.

“California should have looked at reforming its tax system years ago,” said Terri Sexton, an economics professor at Cal State Sacramento. “Unfortunately, this only becomes obvious when we need more revenue.”

I’ll fasten my seat belt and say once again that it’s time we revisited Proposition 13. No, I’m not proposing that everyone’s residential property taxes go through the roof. Yes, it’s probably a good idea for commercial property taxes to reflect market values.

A 2003 study by the UC Davis Center for State and Local Taxation found that at least $3.3 billion could be raised if commercial properties were taxed at a rate of 1% of market value, rather than being based on 1975 values as per Proposition 13.

Meanwhile, it’s silly for California to be one of just three states -- the economic powerhouses of Arkansas and Rhode Island being the others -- requiring a two-thirds legislative majority for budget matters. While this requirement might be well-intended, keeping Republican lawmakers in the game, it means the budgetary process is held hostage annually to special interests and ideological grandstanding.

California should join nearly all other states in requiring a simple majority for budget approvals. This could be done either by a ballot initiative or by holding a constitutional convention (although that too would require the support of two-thirds of lawmakers).

It’s not Schwarzenegger’s fault that a tanking national economy has blown a hole in the state’s finances. But it’s taken him far too long to accept that California has financial obligations that are plentiful and pricey, and that spending cuts will get you only so far toward balancing the budget.

“We have a dramatic situation here and it will take dramatic solutions to solve it,” the governor told reporters last week.

Welcome to the real world, bub. And if being a girlie man means that you stop living in fiscal fantasy land, then let’s hand tutus to everyone in the Capitol. It would certainly make the budget process more entertaining.

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David Lazarus’ column runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com.

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