Democrats to Shift Tactics in Push for State Tax Hikes

Facing an extremely popular Republican governor who has vowed repeatedly not to raise taxes, Democrats this week will roll out a strategy designed to make him change his mind.

Gov. Arnold Schwarzenegger comes off last week’s election with a strong mandate, making the Democrats’ task even harder, and some argue that they are wasting their time. But with the bond issue out of the way, both sides must focus on the $14-billion budget hole that remains and the cuts that the governor has proposed to close it.

Democrats recognize that tactics of the past -- simply advocating tax increases to protect the needy -- won’t work, and they are trying to take a page out of Schwarzenegger’s playbook, embracing a strategy that looks for waste first and relies heavily on economic arguments.

“We’re not saying tax first,” said Senate Budget Committee Chairman Wes Chesbro (D-Arcata). “We have an obligation before we ask people for taxes or cut any services to people to reduce state government spending in every way we can.”

In a series of “efficiency” hearings over the next several months, Democratic lawmakers will aggressively and publicly go after waste themselves, working with the governor, to see how much they can find. Then they will make the case that it is not enough alone to close the gap.

In still another set of hearings that begin today in Sacramento and around the state, Democrats hope to put a human face on the cuts, in particular showcasing sympathetic middle-class families whose lives would be disrupted by Schwarzenegger’s proposed cuts in human services and educational programs.

And last, Democrats will stress that the deep cuts the governor is supporting would have adverse economic consequences -- i.e., access to higher education is important to improving the economy, as are well-paved roads and better infrastructure.

“We need to change the budget debate in California,” said Assemblyman Darrell Steinberg (D-Sacramento), the new chairman of the Assembly Budget Committee. “The conversation has become stale. It’s overly ideological. It is overly rhetorical and it ... has not done justice to California.”

Steinberg said Democrats in the Legislature must “make clear what we believe the priorities are for California, what we believe is vital to our state’s economic development ... and to make the case.”

If Democrats frame the debate in a different way than in the past, Steinberg said, “We can get to a solution that will contain cuts, which there must be, and will contain revenue.”

Republicans find the idea of new taxes impractical and distasteful. “The governor has made it very clear that he is opposed to increasing taxes,” said Department of Finance spokesman H.D. Palmer. California already is a high-tax state, and further increases would be a drag on the economy, he said, adding that “people and businesses can move out of state.”

But Palmer also said the administration intends to work with Steinberg and Democratic lawmakers to find ways to make state government more efficient. Last month, the governor launched a project to examine all state programs and find ways of delivering services more efficiently and economically.

The Democrats’ message that they will cooperate with Schwarzenegger is in keeping with the bipartisanship that led to placement of Proposition 57, the $15-billion deficit bond issue, and Proposition 58’s balanced budget amendment on last Tuesday’s ballot.

“In the big picture,” Steinberg said, “we do well by working with the governor and at the same time making it clear where we stand. Bipartisanship doesn’t mean you fold up your tent and agree with everything that the administration or the Republican leadership wants. It’s all about the spirit with which it’s approached.”

That spirit is a hallmark of the new Assembly speaker, Fabian Nunez (D-Los Angeles), a former political director of the Los Angeles County Federation of Labor.

One of the Senate’s most outspoken liberals, Sen. John Vasconcellos (D-Santa Clara), said Schwarzenegger needs to embrace the same collaborative spirit that helped propel the two propositions to victory Tuesday.

He said the governor needs to recognize that the bond measure might have failed without the backing of Democrats, labor, environmentalists and other factions not normally allied with a Republican governor.

“The lesson was that collaboration works,” Vasconcellos said. “Now I think we both have got to stretch. There will be cuts I can’t stand, but there will also be some revenue he doesn’t like.”

Even after the $15-billion refinancing plan approved Tuesday, the state faces a $17-billion budget gap for the fiscal year that begins July 1. Of that, $3 billion will come from the bonds. That leaves $14 billion to be made up from spending cuts and taxes.

Thanks to Proposition 58, also passed last week, there are fewer ways to make ends meet. That measure requires lawmakers to pass a balanced budget by June 15, and bans long-term borrowing to cover budget deficits.

On Friday, lawmakers offered a preview of their new approach to the budget debate with a daylong hearing at Los Angeles Valley College.

At that hearing, Teresa Lindhardt of San Diego praised a state program that pays family members to care for a chronically ill or disabled relative. Schwarzenegger has proposed eliminating the program.

Lindhardt explained that the state now pays her $45 a day to care for her 5-year-old son, Trenton, who is a poster child for the United Cerebral Palsy Assn. in San Diego County. “I don’t want to leave the state of California,” she said, struggling to hold back tears. “But I don’t want to put my son in an institution either. And I don’t want to the governor to do this to us.”

Kristen Testa, an advocate for the Children’s Partnership, warned that the governor’s proposed cap on the Healthy Families health insurance program would “lock out” an estimated 300,000 children.

And Dr. Peter Gruen, president-elect of County-USC Medical Center, told lawmakers that Schwarzenegger’s proposal to cut by 10% the amount the state pays to doctors in the Medi-Cal program would deny poor Latinos and African Americans access to healthcare.

As hearings, news conferences, marches and rallies go on over the next few months, Democrats say they hope nightly newscasts will be filled with images of thousands of Californians demanding that the governor and Republicans rethink their plan.

Beth Osthimer, state director of the Children’s Defense Fund, said the case has to be made that the proposed cuts go too far.

“We want to live in a state where we invest in things that make sense, in kids, in families, in healthcare, in nutrition -- things that pay off in terms of long-term worker productivity and quality of life,” she said.

Schwarzenegger appears to have the upper hand on just about every issue right now. But many Californians are unaware of exactly what the governor is proposing to cut, and how his plan to close the budget without new taxes would impact services they rely on, said Jack Pitney, a professor of government at Claremont McKenna College and former research director for the Republican National Committee.

“I don’t think that part of the argument has gotten much attention yet,” he said. “It will get more and more attention as the day of the decision on the budget grows closer.”

Analysts differ on just how much Schwarzenegger has boxed himself in on the tax issue. He has shown himself to be an artful negotiator who has had no problem drawing a line in the sand very publicly and then compromising at the last minute.

When the governor’s proposed midyear cuts to services for the developmentally disabled triggered widespread criticism, he took them off the table and moved on.

Administration officials say the governor will hold the line against taxes. Palmer warns that increasing taxes on the wealthy -- one of the only tax increases the majority of Californians support in public opinion polls -- would only be a Band-Aid.

“If we do that, what do we do next year when these programs continue to grow?” he said. “Do we tax the rich again and again and again?”

And other Republicans say that the failure of Proposition 56, which would have made it easier for the Legislature to raise taxes, shows that the public does not support closing the deficit that way. “Californians chose fiscal responsibility over raising billions of dollars in taxes on hard-working families,” said Assembly Republican Leader Kevin McCarthy (R-Bakersfield).

As debate over how to close the budget gap begins in earnest, some of the governor’s Democratic supporters are distancing themselves from his budget cuts.

Schwarzenegger is in for a struggle, said state Controller Steve Westly, a Democrat who campaigned with the governor around the state and co-starred with him in commercials touting the $15-billion bond.

“The governor thinks he can close the gap without new taxes. We’ll see if he maintains that,” Westly said. “I think as reality sets in as to how painful some of the cuts will be, the discussion will change.”

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Times staff writers Eric Bailey and Nancy Vogel contributed to this report.