How to end state deficit spending

A new reform group is proposing several fixes to Sacramento’s red-ink budget writing. And one fix doesn’t require a vote of the people or even legislators.

It requires only intellectually honest and civil discourse.

“Just a personal observation,” says former Washington insider Leon Panetta, co-chairman of the group called California Forward. “Part of the problem across the street [at the Capitol] is that they don’t spend a lot of time talking to each other.”

Panetta laughs, but he can’t be more serious.

The group’s other co-chairman, Thomas V. McKernan, chief executive of the Automobile Club of Southern California, quickly adds that even among Capitol politicians lined up on the same side, there’s not much productive dialogue.

Indeed, the Republican governor and GOP legislators don’t get along. Relations between Democratic leaders in the Senate and Assembly have been chilly, heated or barely existent.

“They don’t trust one another,” chimes in Bill Hauck, a member of the group’s leadership council and president of the California Business Round Table.

“I’m not one of these ‘good ol’ days’ people,” asserts Hauck, a longtime Capitol hand who has been a senior advisor to governors and legislative leaders of both parties. “But there was a time when you could get a group of legislators in a room -- Democrats and Republicans -- and you’d get eventually to ‘the greater good of California.’ Not always, but . . . today, given the lack of communication, lack of trust and the complications of California, we’re not getting that enough.”

One notorious result is the endless red ink flowing into a $15-billion budget deficit for the fiscal year that starts July 1.

The trio had just returned, on an uncomfortably hot, windy day, from outlining their proposed budget reforms to legislative leaders and gubernatorial advisors. Panetta seems to have found the Capitol more depressing than he had envisioned.

“The reaction we’ve been getting,” he reports, “is, ‘Look, these [reforms] are important, but how do you think we could solve the budget problem this year?’ ”

Another laugh.

And what causes him to conclude that the politicians aren’t talking enough to each other? “Because they were essentially asking us,” ’What did so and so say? Where do you think this is headed?’

“It’s like, wait a minute, we just came in for today.”

Panetta adds: “In Washington, ultimately the only way this gets done is everybody gets in the room, puts everything on the table and has a degree of trust that there can be some give and take.”

But, hey, give credit to the state lawmakers, many of whom lack political prowess because of term limits. They at least were seeking advice from an expert, experienced budget brawler. They’d be derelict not to.

Panetta, 69, is a former eight-term Democratic congressman from Monterey, a pragmatic moderate who chaired the House Budget Committee before becoming President Clinton’s budget director, then chief of staff. He returned home in 1996 and created a think tank, the Panetta Institute, at Cal State Monterey.

California Forward was created by five foundations frustrated with the paltry performance of Sacramento politicians. They staked the reform group with $16 million and recruited Panetta and McKernan, a moderate Republican activist, as co-chairmen.

The group’s first action in April was to endorse a November ballot initiative, sponsored by good-government groups and Gov. Arnold Schwarzenegger, that would end the Legislature’s infamous gerrymandering -- the blatant self-interest drawing of its own districts. The group hopes to raise big money for the fall campaign.

The budgeting proposals are California Forward’s first package of reforms. The recommendations include:

* Requiring new or expanded programs -- whether created by the Legislature or ballot initiative -- to contain a specific funding source. That could be either new taxes or money gleaned from another program that is eliminated.

* Regularly examining spending programs to determine whether they should be revised, reduced or rubbed out.

* Also regularly reviewing tax loopholes to see if they’re still needed: “Treat tax breaks like spending.”

* Creating a rainy-day fund fed by unexpected tax gushes. When revenue dwindles, dip into the fund. Or use it for one-time public works projects or even tax rebates.

* Modernizing the tax system “to reflect the contemporary economy.” Extend the sales tax to services while reducing the overall tax rate.

* Focusing on multiyear spending plans, rather than merely passing one-year budgets.

* Granting more power and responsibility to local governments.

* Changing the two-thirds majority vote requirement for budget passage. It wasn’t suggested what the vote should be, but any change must be tied to “other reforms designed to improve performance, accountability and public trust.”

Public trust is a huge problem, Panetta notes.

“We can’t justify to the people that their tax dollars are doing what they’re supposed to be doing,” he says. “The fiscal management of this state is off-kilter.

“It’s due to a series of things that have basically distorted the ability to exercise good government. The combination of initiatives, politics, gerrymandering, plus term limits. You put all of that together and it’s very difficult for the governor and the Legislature. . . .”

He adds: “They can’t break out of the political stranglehold that this town is in. When you’ve been in trench warfare as long as people here have, nobody likes to stick their head up out of the trench.”

Laugh.

The reformers are prepared to take their proposals to the ballot in 2010 if they’re ignored by the Legislature. But they’re hoping the lawmakers will adopt at least incremental changes. A good time to start will be during this summer’s budget negotiations. The reforms could “give Republicans a little comfort on spending and how tax dollars are used,” Panetta theorizes.

But first the politicians have to start talking to each other.

Here’s a suggestion: Turn off the BlackBerrys and cellphones. Better yet, lock them in a desk. Look people in the eye. Smile. Sit down and deal.

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george.skelton@latimes.com