Broken budget process (MP3)
Arnold Schwarzenegger: The system is a complete failure. I knew this from the beginning because it got Davis into trouble. And it got Pete Wilson into trouble and Deukmejian and all those guys. I think that, I knew when I came into office that it needed to be changed. So we tried twice. We tried to change it the first month. And we really couldn't get the changes that we wanted. The compromise version was OK, but it wasn't really what we wanted to solve the problem. And then we tried it again in 2005, and again it was not approved, this time by the voters. And so now we're trying a third time. And I believe very strongly that when there is a crisis like that it gives opportunities because it does rattle the cage and wakes everyone up that we do have a problem, and gives a chance fore everybody to sit down and talk about fixing the system itself.
It's pretty much like the levies. When I came into office I said, "We have to fix the levies; we have to fix the levies." And nobody paid attention. Then Katrina happened and all of a sudden everyone came and said, "You mentioned something about levies; let's talk about it." And within a short period of time it became part of our infrastructure package and our strategic growth plan, and we approved $4.6 billion to fix our levies. It's the same with this: Crisis sometimes creates great opportunities...
Tim Cavanaugh: When we say fix the system itself, what are we talking about?
Arnold Schwarzenegger: You're talking about the two proposals I have made in my budget presentation. First, put a rainy day fund aside, so in years where you have excess revenue as in 1999 for instance, when revenues skyrocketed 26% you could let spending increase by 5%, but you take the rest and put it in the rainy day fund so when the downturn came the next year we would have had money to supplement those revenues, and no-one would have had to take a big hit like that. Just recently, two years ago, we had an increase in revenues. We were fighting to put as much in one-time spending, so we don't put it into ongoing programs. So it was a big battle... That's just the way it is, in Sacramento and elsewhere; if people have a chance to spend it they will spend it. So if we have a formula in place where we have to put a certain percentage aside, we won't have that problem. There will always be money available, so we won't have to suspend Proposition 98, which is always terrible. Schools cannot operate when you do that; our schools are so complicated.
That's number 1: The rainy day fund. Number 2 is, if we run out of the rainy day fund and you have to make cuts, we have a formula like they have in Arkansas where you have predetermined which programs you cut first. So you don't have to fight when it happens. You don't have to sit down and use it for a political weapon. Automatically in Arkansas, they have a system in place so that if they money goes down you know which programs get cut, and if it goes down further other programs get cut, and if the revenues go down even further or longer, you have other programs that get cut. So you have a three-tiered program, and I think that's the best way to go. Because that means no more fights.
Tim Cavanaugh: Wouldn't a simple system of across-the-board cuts, in which everything gets reduced by whatever amount you need to make the number, be simpler? Because how much a program is worth has already been decided when you originally decided what percentage of spending it should be.
Arnold Schwarzenegger: Yes, I mean, this was my approach this year, to cut across the board 10%. But I think you'll find the legislators have certain things that mean more to them than others. I could not pick what that is. I can't look at it and say, "Education is more important than keeping our people healthy; or education is more important than law enforcement." When you look at the budget there are three things: Education is one of them; health care is another one; and prison. That's where most of the money goes. So which one can you cut. There are a lot of people screaming now that you can't let prisoners out. Well I don't feel any worse about that than I do about education. They're all horrible cuts, and I think they're all, you know, uncalled for. If we have a system in place that creates stability then we won't have to make those cuts. So I hope everyone wakes up and we can finally get something accomplished.
Robert Greene: If California's in this mess because of all these automatic triggers, from Prop 98 on down, why is it a step forward to add another set of automatic triggers? Isn't that going in the wrong direction?
Arnold Schwarzenegger: For instance what?
Robert Greene: Prop 98 is an automatic thing based on the revenue that comes in and the spending the year before. So how is it a step forward to have an automatic trigger that says when the revenue falls off we already know exactly what's going to be cut, rather than having our elected officials make that decision?
Arnold Schwarzenegger: The advantage is that the elected officials take always months to battle over those things. So if you take three months out of the legislators' time because usually during budget negotiations they don't talk about anything else it becomes just horse-trading. If I had talked during the budget negotiations about health care, they'd say, "Well now come to think of it, it seems to me health care's very important to you. So why don't we give you this, and you give us that in the budget." So it becomes kind of a trading thing, and that's not what you want to do. Therefore, we just want to concentrate on the budget. It's a huge disadvantage to California, because we are facing huge challenges. That's why we're still talking now about health care reform, which should have been accomplished last fall.
Cuts as bargaining chips, or dieting tips
Jim Newton: The budget you put on the table last week contained a lot of draconian cuts: closing of parks and so forth. Did you mean it; would you want the legislature to adopt that budget as is or did you mean it as a conversation starter?
Arnold Schwarzenegger: I would love it if they could adopt it the way it is. Because then we could move on immediately, and go into other areas and talk about other problems that California is facing, and talk about infrastructure and finishing our thing with health care.
But this is obviously not going to happen. It will be a three-step process. I think Sen. Perrata commented on that briefly yesterday. One is that we have to fix the problem this fiscal year, because we're short of the revenues we anticipated... Right now, we are watching $400-$600 million every month we're spending more than we're taking in.
Step number 2 is as important as if not more important: working on next year's budget. And then step number 3 is fixing the budget system itself...
Robert Greene: Are the cuts you're proposing in for example parks, are those temporary stopgap measures or are those permanent structural measures? For example, do you see private funds to keep certain parks open as a permanent solution? If Will Rogers Park could be kept open with private funds, and next year you had a big revenue surge, would you then say to the private contributors, "Thank you very much but we don't need you anymore."
Arnold Schwarzenegger: Oh, I don't think I would ever say "Thank you very much; we don't need you anymore." Anybody who provides money, whether it's for afterschool education or for parks or whatever someone's interests are, we will always welcome those opportunities.
Robert Greene: So you see it as part of a permanent solution, and public funds wouldn't have to be expended on that park.
Arnold Schwarzenegger: Yeah, but you know something? That's not the solution. The solution is to fix the budget system. That is the solution, because as I've shown you, the spending always goes up and the revenue always goes up. So it's not like from one year to the next you take something away. We have to even it out from year to year and create stability. Then we can fund all of those other things. We have enough money to fund education, parks, all those things. But we have to recognize that when revenue goes through the roof, don't think that will be there forever. That's the mistake they always make: They go and try to fix all the things, give money to the parks or whatever. Then the next year there's another downturn and we don't have that money.
Jim Newton: Isn't that in effect the mistake you made by giving back the car tax?
Arnold Schwarzenegger: Not at all, the car tax, taxing the people is not the solution. That was the problem in the previous administration, and the administration before that. That when there was a problem they went immediately to the people and said, "We haven't figured out our tax system is flawed. But we can't get our minds together to fix it, so you pay." Wrong approach. Give back the people their money. That's why I gave it back, about $20 billion to the people of California. We want to give people their money, they spend it and that's what stimulates the economy.
Jim Newton: If some of that money had gone into the rainy day fund you're proposing we wouldn't be in this trouble now, right?
Arnold Schwarzenegger: The rainy day fund happens when as soon as there's a peak in revenues you take some of this money and put it in the rainy day fund, rather then going to the people and asking them for more money. That's the wrong approach... This is a problem we have to fix. It's like when someone is overweight. I would go to them and say, "Look, you just have to change your eating habit. All this crash diet thing, and the little fixes you're trying to do you can read every book and try every gimmick and every pill you want, but the only way you're going to fix your problem is to start eating only two meals a day, start eating only salads at night, and blah blah, and get onto a program... I don't believe in quick fixes because they don't solve the problem.
Robert Greene: Didn't we adopt a rainy day fund with Prop 58? What happened?
Arnold Schwarzenegger: Yes, but what happened was when we negotiated Prop 58, when I first came into office, our proposal, which was to put a much larger portion of the money into the rainy day fund, was voted down. So then we found a compromise, because it was very important to me to show that I can bring people together. So we came up with a compromise which says that Prop 58 says you can borrow against ongoing programs, and all that kind of thing. We got the commitment to put 1% of revenues into the rainy day fund. But that's $850 million. That gets sucked up; just this year it's all gone.
Evan Halper: Governor, you're going back to an idea that, as you said, this is the third time we've tried this concept of budget reform. It's not popular with the majority in the legislature; it's proven unpopular with voters and interest groups. I mean, have you given any thought to reforming the tax code? Not just raising taxes but changing the state's tax system?
Arnold Schwarzenegger: Absolutely. We have talked about that. Our economic advisors this year, under the leadership of George Schultz, have looked at that. As a matter of fact we're working with Democrats and Republicans to form a team to look into that. It's crazy that you have 10% of the people paying 80% of the taxes, so that when you have a little bump economically, it affects the rich people, their incomes drop, and as a result our revenues drop. Anything we can do to eliminate those peaks and valleys, and have just rolling hills going up, we have to do.
Writers strike (MP3)
Jim Newton: Governor, we just got handed a note from our business desk. As you know the Directors Guild signed a contract this afternoon. They'd like to ask if that will help in getting the writers and the studios back to the table and settling their strike. And second, given how much the strike has cost California in the 11 weeks it's been going, whether that cost isn't enough to justify your personal intervention in trying to resolve this.
Arnold Schwarzenegger: First of all, let me say that we made it clear to both sides that this would be a big hit on the California economy, and also therefore on our revenues. We're not sure how much, but it will be a considerable amount. Two, I think that having the studios and the directors work out an agreement, I think, is inspirational in a way. Because so much of this stuff is psychological. Because both parties think they can't come to a deal. So something like this deal kind of makes everyone feel that it is possible. Why can't we also make a deal? This may be a motivational vehicle, which I think is so important. Because the money that's being lost for writers is extraordinary. More than they can make up with another deal.
And what I'm concerned about is not just the writers but, I've been on movie sets enough to know, the little guys. The catering, the little guy who's pulling the cables, the electricians and the set builders. The head guys always get jobs. But it's the little guys whose jobs get taken away, and they have to make their house payments and pay their bills. Even if they don't get a movie for a few months they're scrambling with their money. I've heard this over and over, so just imagine what effect this must have. So for all those people.
Jim Newton: Is there a role for you to play personally in bringing those people together?
Arnold Schwarzenegger: Yes, but they know I'm very interested and that I'm available anytime. But people have to be ready to make an agreement. There has to be a will there. And we always get the feeling: It's the will to say, "Let's sit down and make a deal." It's the same way in the capital, when you need to come together to make a deadline. I've not gotten that feeling from both sides.
Tim Cavanaugh: Does the industry itself need to change, so that it's not such a massive thing? For all the little guys who need to make their mortgage payments, can it really sustain an economy that large, with that many hangers-on, when we may be entering a post-blockbuster age?
Arnold Schwarzenegger: I don't think we do, really. I think people enjoy television, and there are a lot of television productions around. And people enjoy movies, big spectacles and all those things. I don't think they'll go away. I just think you would want to tell all those people: "Don't live beyond your means." But that's easier said than done. When somebody gets a job for four or five years on a television series, they think, "This is my chance; there's a secure income coming in. I'm going to buy this house." Everyone wants a house. It's an American thing, now worldwide: This is the dream, "I want to have my own house." Even though eventually you find it's a pain in the neck; you'd be better off with a condominium where you don't have to worry about the roof leaking and the plumbing. Nevertheless everyone should experience this great joy that a house may be... So how do you tell people who are working for years: "Don't make this mistake; put it aside for a rainy day."
Term limits (MP3)
Tim Cavanaugh: You mentioned when revenues are up, everybody assumes this is going to go on forever...
Arnold Schwarzenegger: When I say that I don't mean they literally believe that. They act like it's going to go on forever. They spend. In 1999, when revenues went up 26%, they raised the bar on education. This was the new baseline. Revenues will continue like this, as if there's no downturn. They lock themselves in. And all the other programs, the same thing. They lock themselves in. Now we can spend on this program and this program and this program, and expand Healthy Families from 200% to 250%, and how do you continue to doing this stuff?
Tim Cavanaugh: Well if you're in the graduating class you don't have to continue doing it. So my question is, have term limits contributed to that kind of thinking, on the principle that in the long run we're all out of office.
Arnold Schwarzenegger: Term limits, originally I felt very strongly that it was the greatest thing ever done. Because I despised the idea of guys being so locked in and safe in their positions, staying up in Sacramento and doing their deals and all this stuff. You need fresh blood coming in all the time.
Now I've been there for four years and I say to myself, "Oh my God, this is a disaster." And I see the special interests and those lobbyists up there are so much more sophisticated and so much more advanced and so much more experienced than the politicians up there. So who is this really helping? I'm seeing firsthand that the people up there I finally got used to working with now will be kicked out because of term limits. And who's it going to hurt? It's going to hurt the state, because we have to start all over again, getting acquainted with these new people coming in. So the turnover's too fast, especially the way it's done, where you're limited to six years in the house... John Burton, whom I'd just gotten used to working with; he used to bring me delicious Austrian coffee and apfelstrudel. Now he's gone. The new guys come in and the lobbyists and the experts are there with all their money; it's just awful.
So I learned a lot of things where I felt one way before I went into office, and then I get in and I learn things are not quite this way and I've changed. This is why, you know, people call it flip-flopping. I don't mind. I'd rather be flip-flopping when I see something that's the wrong idea than get stuck with it and live with it and make the same mistakes and stuff like that. So every so often the reality is that it's better to let people stay. Not to throw out term limits, but just to let people stay a little bit. So the change that is there [in Proposition 93], where someone can stay in the Assembly the whole time or the Senate the whole time. Is fine. I tried to tie it together with redistricting. But I don't really want to be against it just because it didn't include redistricting. I want this change...
The armed, pregnant governor (MP3)
Evan Halper: In Redding someone asked you about a bill you signed to ban a particular weapon, and then mentioned another weapon you're fond of. You said you went shooting with your kids, and said it's a good weapon to have in your home. Do you own weapons? Do you keep them in your home?
Arnold Schwarzenegger: Yeah. You can imagine with all the movies I've done; I keep everything that I use in the movies. I have around 20 swords, from samurai swords to broadswords; and axes and spears and everything from the Conan movies. I have any kind of outfit, including my pregnant outfit, you know from the movie Junior, and all the appliances they used to make me look pregnant. All the guns, the Uzis, machine guns, shotguns, pistols, revolvers. And remember all the law enforcement people I've played, how many military people I've played, and all the things. And the Terminator, with the gun that you with one hand cock and spin. All those things I have.
Jim Newton: All in your home?
Arnold Schwarzenegger: No no, not all in my home.
Jim Newton: I was going to say, I'm not gonna stop by your house!
Arnold Schwarzenegger: No they're stored away.
Lisa Richardson: Aren't they fake?
Arnold Schwarzenegger: There's no fakes, no.
Robert Greene: So they're in firing condition?
Arnold Schwarzenegger: They're in firing condition. Not the machine guns. There are federal standards, before it even gets to the movie set.
Tim Cavanaugh: So wait, did you actually kill James Earl Jones at the end of Conan?
Arnold Schwarzenegger: Oh yeah, you saw it happen. What do you think, it's fake?