Schwarzenegger’s budget boss to step down

Gov. Arnold Schwarzenegger’s budget director is departing after nearly four years in one of the most influential posts in Sacramento.

Budget czar Mike Genest announced his departure Monday, as a financial crisis continued to grip the state. His Department of Finance has predicted a $7.4-billion deficit for the fiscal year that begins next summer.

The figure is expected to balloon -- perhaps tripling -- as a result of sagging revenues, court rulings blocking recent budget cuts and overly optimistic savings projections by the Legislature and governor.

Genest said in an interview that he would leave by year’s end, or sooner if a replacement is found earlier.

“It feels like a good time for me to step back from the day-to-day fray of things,” he said.

Red ink has plagued Sacramento during much of Genest’s tenure, the second-longest for a budget director since Ronald Reagan was governor.

There have been deep cuts to education, and social services for the needy have been slashed.

In addition, the state passed temporary increases in the sales tax, income tax and vehicle license fees early this year.

Still, stubborn deficits have persisted, making budgeting -- once an annual exercise -- a year-round struggle.

Next year’s deficit could be as large as $20 billion, according to an estimate last week by Assembly GOP leader Sam Blakeslee of San Luis Obispo.

“As soon as you get a budget done, you realize you have more work to do,” Genest said. “That’s just the nature of our business right now.”

A veteran of Capitol budget wars, the conservative Genest developed a close rapport with Schwarzenegger.

During this year’s prolonged budget talks, the governor often tried to lighten the mood by introducing Genest as a man on “suicide watch.”

“I always turned it around and said that once everyone saw what we were proposing that it went from suicide watch to homicide watch,” Genest said.

Despite the onslaught of bad fiscal news, Genest said, he was proud that his department hadn’t “flinched from the reality of the situation,” releasing up-to-date projections of the state’s budget woes no matter how bleak.

One of the Capitol’s old hands, Genest could steer through the byzantine and conflicting budget rules etched into the state Constitution, by voters and lawmakers alike.

“I’ll miss him,” State Treasurer Bill Lockyer, a Democrat, said in an e-mail. “He’s been a great navigator and a great partner through the toughest budget struggles the state’s ever seen.”

Genest has been with the Schwarzenegger administration since its inception, joining first as chief deputy director of finance. He assumed the post of budget director in December 2005.

He is the third person to hold that position under Schwarzenegger, following Donna Arduin and Tom Campbell, a former GOP congressman who is now running for governor.

Genest said he doesn’t have his next job lined up yet but plans “to stay involved with public policy issues, because I care about the state.”

Whomever Schwarzenegger taps to replace him, meanwhile, will have his or her hands full.

“The state budget is going to need a lot of attention for some years to come,” Genest said.

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shane.goldmacher@latimes.com