Governor’s Budget Plan Criticized by Both Parties

Gov. Arnold Schwarzenegger’s budget plan ran into continued resistance from members of both parties in the Legislature on Wednesday as Democrats proposed an alternative and some Republicans expressed skepticism that his proposal is tough enough.

Schwarzenegger has proposed balancing the current year’s budget by borrowing $15 billion, to be paid back over as many as 30 years. Coupled with that bond measure, he has proposed amending the state Constitution to put a long-term cap on spending. Both measures would require approval of voters.

In committee hearings and interviews Wednesday, Republicans openly criticized the governor’s spending cap proposal as having too many loopholes. Some warned that if he makes good on his promise to exempt education from the cap, the spending limit would simply become ineffective.

“This has so many loopholes in it, it is a nice sentiment, but that is all it is,” said Sen. Tom McClintock (R-Thousand Oaks). McClintock said his main concern is that the cap applies only to the state’s general fund, so future governors and lawmakers could easily evade the spending limits by transferring programs into special fund accounts.

Senate Budget Committee Vice Chairman Dick Ackerman (R-Irvine) cautioned the governor against heeding the demands of education groups. School spending guaranteed by Proposition 98 accounts for nearly half of the budget, he said, so a meaningful spending cap cannot be created without cutting that area.

Schwarzenegger has said he opposes cutting education funds, although experts on the state’s school funding formulas said his proposed cap would reduce the amount of money going to schools in the future.

“If you put a spending cap in without dealing with Proposition 98, I don’t think it is going to be effective,” Ackerman said. “Most of the people here realize you have to deal with that. Otherwise, education would continue on its merry way, and everything else would get reduced.”

The cap has become a difficult juggling act for the governor as both Democrats and Republicans express their concerns and wait for the governor to come back with a revised proposal.

“It is in the administration’s court,” Ackerman said. “They will have to make their judgment call on what will achieve the desired outcome, and what will get the necessary two-thirds vote.”

If the governor sticks to his pledge not to raise taxes, his spending cap would essentially force the state to make $14 billion in cuts to programs for the budget year that begins in July. After that, it would limit the growth of spending using a formula tied to growth of population and per capita income.

After educators complained loudly that the cap would essentially result in a $2-billion cut in funding to schools and community colleges, the governor agreed to work with them to change that. So far, he has been noncommittal about what other changes he would make.

“There is good ongoing dialogue, which is where you want to be at this stage,” said H.D. Palmer, spokesman for the Department of Finance.

Meanwhile, Democrats on the Senate Budget Committee said they were willing to meet the governor halfway on his proposed borrowing. They are supporting the concept of borrowing $15 billion, but they want the bond paid back over seven years.

Repaying the bond faster would reduce the long-term cost to taxpayers but would mean a larger amount of money would have to be repaid each year.

“The sooner we can pay it off, the better,” said Sen. Denise Ducheny (D-San Diego).

Administration officials said they will consider the counterproposal, which the committee voted 7-3 to move ahead with. But Senate Republicans immediately opposed the move, which would involve guaranteeing repayment of the bond with existing sales tax money.

That sales tax revenue is currently going to local governments. Under the Democratic plan, local governments would receive property tax money to replace the sales tax revenue. Republicans warned that that swap would cause chaos in city and county accounting offices.

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Times staff writer Jeffrey L. Rabin contributed to this report.