Seize the Political Moment

All the energy and interest in the political system generated by the recall campaign against Gov. Gray Davis will be wasted if Sacramento slips back into deadlock and polarized politics-as-usual. Gov.-elect Arnold Schwarzenegger has said he is bent on preventing that, promising "action, action, action, action" on taking office Nov. 17.

Unfortunately, one of his first scheduled actions is a political fund-raiser Dec. 3. An effective overhaul of state government will require something much less ordinary: leadership and strong bipartisan cooperation.

The pieces of reform must work in concert. Allowing legislators to serve longer terms will do little good if they still are elected from "safe" districts that encourage extremism. Giving the Legislature and governor more flexibility to deal with tough state problems, such as the budget deficit and the need for new infrastructure, won't help much if lawmakers remain beholden to special- interest contributors and restricted by special-interest initiative measures. A good example is a planned California Teachers Assn. initiative, aimed for the ballot next year, to boost property taxes on businesses to generate money exclusively for teacher salaries and preschool programs. Such earmarking hampers both annual budgeting and reform of spending and revenue.

Lawmakers will never advance bold proposals or seek to solve long-range problems if they not only operate under the nation's most restrictive term limits but also fear being recalled from office. The initiative and recall processes need modernization. For one thing, the percentage of signatures required to start a recall is the same as in 1911, long before the advent of paid signature-gathering. Grass-roots legislating has become too much a special-interest tool, as the teachers union initiative illustrates.

A reform package must be done within the next two election cycles, by the end of 2006, to work as a whole. Any reform by itself is likely to fail, becoming a target for the "I told you government doesn't work" crowd.

Building State's Assets

Schwarzenegger takes office with a chief goal of easing business regulation and taxes to make California a more attractive place economically. Business executives and economists need to point out that other factors are also critical to a good business climate: a well-educated and skilled workforce, an attractive natural environment -- always one of California's biggest advantages -- a good transportation system and housing availability. Those are investments that pay a handsome return. "It's the quality of the human resources, the capital resources, the infrastructure" that matter most, says Robert Friedman, chairman of the Corp. for Enterprise Development.

Here are some essential actions:

* Enhance the workers' compensation revisions that the Legislature started last year, to lift a crushing, unpredictable cost burden that dampens job creation. By doing this first, the Legislature would give business more confidence in wider reforms. Requires only a majority vote of the Legislature.

* Fix the campaign finance system to greatly reduce special-interest clout with elected officials. Casino-operating Indian tribes, public employee unions, trial lawyers, the big-spending insurance and finance industry, the land developers who back Schwarzenegger and the political parties themselves all encourage pay-for-play government. The state should consider public campaign financing to return power to voters without opening new loopholes. Requires a constitutional amendment, put on the ballot either by a two-thirds vote of the Legislature or by initiative petition.

* Lengthen legislative terms to 12 years in each house, six two-year terms in the Assembly and three four-year terms in the Senate. Requires a constitutional amendment.

* Turn over redistricting of legislative seats to an independent commission -- possibly made up of retired judges -- overseen by the state Supreme Court. The present districts assure either Republican or Democratic control and too often are won by die-hard conservatives or liberals. Moderates get squeezed out. Requires a constitutional amendment. A voter initiative in the works could accomplish this change by 2006.

* Reduce the margin needed to pass a state budget and any other spending bill. In 47 other states and in Congress, a majority suffices. The two-thirds rule in California ties up budgets for weeks or months beyond the deadline. The change would force the majority party, answerable to the voters every two years, to accept clear responsibility for its spending program. Requires a constitutional amendment.

* Increase the signatures needed for initiatives and recalls. A measure to reform recalls has been introduced in the Legislature and should be broadened to both.

Past initiative measures earmarking state revenue for special items, including education, should be revised or repealed to give the Legislature and governor the flexibility to adapt state spending to existing needs and economic circumstances. In many cases requires a constitutional amendment.

* Review the tax code to level out revenue spikes and plunges. Revise Proposition 13 regulations so business properties are reassessed for property tax purposes when ownership changes. The sales tax could be reduced if it were extended to services such as dry cleaning and legal work, reflecting the state's modern economy. The overly volatile income tax should be flattened slightly, even if the middle class pays slightly more. Combine with overhauled spending limits.

The recall showed that state government's problems run deep. Much of the advice Schwarzenegger is receiving from narrow interest groups such as the Howard Jarvis Taxpayers Assn., which emerged from the Proposition 13 campaign, will be to clamp ever more restrictions on ever-smaller government. Schwarzenegger has a choice. He can submit, Gulliver-like, to being tied by a thousand special-interest strings. Or he can exercise the boldness needed to revive a California of opportunity, beauty and rational growth.

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