Schwarzenegger Seeks Public Support for Borrowing Plan

Times Staff Writers

With his budget proposals already facing opposition in the Legislature, Gov. Arnold Schwarzenegger appealed to the public Thursday, complaining on talk radio and at a rally in Los Angeles that the same old ideological ghosts still haunt the Capitol.

Legislative Democrats want to raise taxes and Republicans want drastic spending cuts, he said.

"Have the legislators learned anything from this last election?" Schwarzenegger said on Sacramento radio station KFBK-AM (1530). "If they didn't get it, there will be severe causalities come the election in March, severe casualties come November."

Schwarzenegger has asked lawmakers to place on the March ballot a borrowing plan of up to $15 billion to pay off past deficits, and a spending cap to make future shortfalls less likely.

A senior Schwarzenegger aide told legislators, however, that drafting a workable permanent spending cap was proving more difficult than expected and that the governor might have to shift focus to a temporary cap.

To meet election deadlines, the ballot proposals must pass by Dec. 5. But lawmakers on both sides of the aisle complain that they lack sufficient detail and that budget cuts should be considered first.

At a lunchtime rally of about 400 people at the Galpin Ford dealership in North Hills, organized by his gubernatorial campaign team ostensibly to celebrate the governor's recent repeal of a car-licensing fee increase, Schwarzenegger took aim first at Democrats:

"Many of them in Sacramento are saying they are against this bond, this recovery bond. You know why? Because they want to increase your taxes.

"The politicians up there, all they know is increase the taxes when they get into trouble. What I say is, we should have this recovery bond so we don't have to increase the taxes."

Later, on KFBK, his focus shifted to members of his own party:

"The Republicans have a choice: It is the recovery bonds, or it is raising taxes. That's a choice. It's up to them. I am only going to make cuts to a certain point. I'm not going to cut dog food for blind people."

As Schwarzenegger returned to campaign mode, legislators continued to meet in special session. At a hearing before the Senate Budget Committee, Democrats and education lobbyists criticized Schwarzenegger for wanting to put his bond proposal alongside an already scheduled $12.3-billion education bond. The combination might panic voters, they said. At the same time, Republicans challenged the wisdom of borrowing money to cover past deficits.

"We just believe it's too great a risk to the education community and our schools to put the [deficit bond] on the same ballot as a school bond," said Mike Weimer, a lobbyist for the California Federation of Teachers.

If the education lobby mobilizes against the Schwarzenegger deficit bond, it could pose major problems for the governor's plan. He does not have the option of waiting until next November's ballot because the state needs the money to pay back $14 billion in short-term loans due in June to avoid running out of cash.

Throughout his appearances Thursday, Schwarzenegger sought to position himself as a populist in the political center, caught between unreasonable politicians with secret agendas. The governor even suggested that the public could register its opposition to tax hikes -- and its support for Schwarzenegger -- by purchasing automobiles as a demonstration of their support for his fee repeal.

"Go out there," Schwarzenegger implored. "Buy cars. Buy new cars. Buy used cars. Go out there and pay a reduced vehicle license fee. That's what we're celebrating here today."

But as the governor was speaking in Los Angeles, legislators gave a chilly greeting to his finance team before the Senate Budget Committee.

Some Democrats expressed frustration that Schwarzenegger's finance director, Donna Arduin, did not appear personally before the Senate Budget Committee on Thursday. The day before, Arduin had abruptly walked out of an Assembly Budget Committee hearing as she was being asked a question.

"I am very concerned about the message [Arduin's absence] sends," Sen. Joe Dunn (D-Santa Ana) told Deputy Finance Director Mike Genest. "I would like to know, Mike, where is she?"

Genest said Arduin had another engagement and had informed committee Chairman Sen. Wes Chesbro (D-Arcata) that she could not attend. She is scheduled to appear before the committee Tuesday, Genest said.

On the Republican side, Genest ran into sharp questioning when he explained that a constitutional spending cap Schwarzenegger is demanding cannot be tied directly to the deficit bond proposal -- making it possible that one proposal could win approval without the other.

Conservatives feared it could mean that the state would borrow billions of dollars more without making any move to restrict future spending.

"It is conceivable we would end up with a $15-billion bond being approved by voters without a spending cap?" asked Sen. Tom McClintock (R-Thousand Oaks).

The same issue caused liberal consternation, too. If voters approve the cap but reject the deficit bond, Democrats worry they could be locked into a lower spending level that would force massive cuts in social services.

Both sides showed impatience with Schwarzenegger's unwillingness thus far to identify specific spending cuts.

So far, the only cut that Schwarzenegger has proposed is eliminating a $127-million cost-of-living increase for welfare recipients. The increase had taken effect Monday.

Genest acknowledged that coming up with an effective spending cap while keeping the governor's pledge not to interfere with education spending formulas guaranteed by the Constitution is proving difficult.

Genest said doing so could result in large parts of the rest of the budget getting wiped out in the future. "It is clearly an issue," he said, adding that Schwarzenegger may deal with it by shifting focus away from a permanent spending cap and toward one that is temporary.

After mostly staying out of sight during his transition into the governorship, Schwarzenegger seemed to relish a return to a more overtly political posture.

His North Hills rally closely mirrored events held during his gubernatorial campaign. His campaign advance men were there. More than 100 metal bike racks had been set up on the car lot, a tactic used during the campaign to keep Schwarzenegger from being jostled by excited fans. Across the street from the rally, the Burger King marquee read, "Go Governor Arnold."

Schwarzenegger was introduced by talk radio hosts John Kobylt and Ken Chiampou of KFI-AM (640), both of whom had appeared at his campaign events.

But the rally also showed how the governor's tune has changed -- quite literally. His campaign anthem, Twisted Sister's "We're Not Gonna Take It," was ditched in favor of a new theme, "Takin' Care of Business," by the Canadian classic rock group Bachman Turner Overdrive.

The song gave the event a double-edged cast. Car dealers gave Schwarzenegger and his recall committee more than $489,000 during the recall, plus at least an additional $20,000 to the committee that organized his swearing-in.

Bert Boeckmann, owner of Galpin Ford, and his wife, Jane, a Gov. Gray Davis appointee to the California Arts Council, each had given Schwarzenegger the individual maximum of $21,200. Boeckmann, who also was a leader in the Valley secession movement, is one of Southern California's most active political donors, giving to members of both parties.

Boeckmann said he supported Schwarzenegger not based on any specific promise, but because he had known him personally for some time and that "he was the one who could win who, by and large, I could be in agreement with."

Schwarzenegger has kept his political team in place to run any initiative campaigns he supports next year, and there were hints at Thursday's rally that there could be several. Six petition gatherers worked the crowd, with initiatives on taxes, immigrants and mandatory employer-provided health insurance.

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Times staff writers Dan Morain, Peter Nicholas and Jeffrey L. Rabin contributed to this report.

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