Will the governor be an oak or a willow?

ONE YEAR AGO, Gov. Arnold Schwarzenegger declared at his State of the State address: “We don’t have a revenue problem. We have a spending problem.”

But what has he done about it? Within two months of failing to persuade voters to “live within our means” in last year’s special election, the governor has now raised the white flag of surrender to the spending lobby by proposing a $222-billion infrastructure plan, which would include a record $68 billion in bonds, various fee increases and a $2.6-billion operating deficit this year, with another $29.3 billion of red ink projected for the following four years.

It seems we still have a spending problem.

Certainly California needs much of the investment in roads, schools, flood control and other items outlined in Schwarzenegger’s recent State of the State speech. Sacramento’s governing class has collectively ignored the problem of building infrastructure and created barriers to construction by increasing regulation and mandating above-market wages, all while raiding funds dedicated for these projects to cover still more budget shortfalls. But maxing out the state’s credit cards is not the solution.

What would the governor’s plan mean for average Californians?

Interest on bonds usually ends up matching the principal, so the $68-billion price tag probably would become $136 billion. Debt service would add to the state’s structural operating deficit, increasing pressure for a general tax increase to bridge the gap -- after the 2006 general election, of course.

Day-to-day fees also would go up. At least $21 billion of the $222-billion spending plan is to be generated by “revenue bonds,” which are designed to retroactively fund projects with the revenue paid by those who use them. Schwarzenegger also is proposing new fees on transportation carriers, plus a new household water tax to fund levees and other water projects.

These debt-financed projects would intensify demands for tax increases at the local level, because state bond rules require local governments to match any Sacramento money with bond issues of their own. Those who live in the largest communities -- the ones most able to issue massive bonds -- would receive a disproportionate share while burdening their overtaxed citizens even more. The Los Angeles Unified School District alone has passed four bonds over the last few years.

Without changes in the law to streamline the regulatory and construction process, taxpayers also would bear the extra costs created by unnecessary red tape and other building delays.

The governor does not have to capitulate to bigger deficits, debts and fees to invest in infrastructure. The Assembly Republican leadership recently proposed dedicating 1% of the general fund toward capital projects. That plan could produce about $35 billion for infrastructure without the costly interest payments, in part by enforcing Proposition 42 rules that were supposed to devote gas taxes to roads. And Schwarzenegger could use his emergency powers to waive some of the regulations that increase the cost of flood control projects.

The governor has other options. He should dust off the California Performance Review and implement some of its many sensible reforms. One of the 1,200 recommendations, for example, would consolidate healthcare licensing into one agency, saving an estimated $4.6 million every year. Schwarzenegger should point to each individual reform and say “implement this, so we can build one more school this year.” And so on.

Instead of attempting to appease his insatiable tax-and-spend opponents, Schwarzenegger should stay true to his “Austrian oak” nickname on the principles he articulated just a few short months ago, rather than build a legacy as the French willow that bent as soon as a breeze blew in another direction.