Governor’s Spending Plan Breaks Capitol Mold

Gov. Arnold Schwarzenegger, a man who delights in defying the naysayers, will release a revised state spending plan today that puts him closer to delivering on a promise most thought impossible -- a budget on time, with no new taxes.

Today’s proposal will mark a milestone on the way to the June 30 constitutional deadline for obtaining a budget agreement from the Legislature. It is built largely on a series of deals privately negotiated by the governor, the latest of which was announced Wednesday: an agreement between the administration and local government officials that would save the state $1.3 billion in the coming fiscal year.

Despite the state’s persistent multibillion-dollar budget gap, despite a Legislature controlled by Democrats who want new revenue, and despite the governor’s resistance to cutting programs more deeply, he is on his way to delivering on his pledge.

“It’s kind of like Arnold the weightlifter,” Assemblyman John Campbell (R-Irvine) said of the governor’s budget progress. “He made bench-pressing 300 pounds look easy.... He has been able to maneuver everything both fiscally and politically to eliminate both the need and the opposition’s arguments for tax increases.”

The budget proposal Schwarzenegger plans to release today will include about $99 billion in state spending. To bring the budget into balance, he will rely on slightly higher revenues from an improving economy, cuts in government services, fee hikes and a lot of borrowing.

The deals the governor has negotiated all adhere to a similar form -- major recipients of state funds agree that they will not fight a cut this year. In return, Schwarzenegger promises to protect their programs in years to come.

Some budget experts insist that by doing that, the governor is painting himself into a corner, making new taxes all but inevitable next year. Under this budget, the state will continue to spend more than it receives, which is what drove Wall Street to slap California with the nation’s lowest credit rating.

“We’re getting more deferrals, more gimmicks, and no cure to our deficit,” said state Treasurer Phil Angelides.

But Angelides is the only high-ranking Democrat making much of a fuss, and a year is a long time away in politics. For now, it appears that Schwarzenegger will be able to lead GOP lawmakers into the November elections with lots to brag about.

He is doing it by stealing away some of the best friends of the Legislature’s Democrats. He worked a deal with a powerful teachers union, so Democrats cannot use them for support. He worked a deal with colleges, neutralizing in some ways the deep cuts that were made to higher education. And, on Wednesday, he lined up with police officers and firefighters, mayors and county supervisors, leaving few critics to challenge his plan.

“It’s actually been a brilliant strategy for him,” said Assemblyman Joe Canciamilla (D-Pittsburg), a fiscal moderate who believes that taxes are needed to get the state out of the red, but acknowledges that it is not going to happen this year.

“He is picking off each of the natural constituencies that normally would oppose this kind of budget,” Canciamilla said. “That leaves us with no one to stand with in battle. He’s gotten the teachers. He’s gotten the local governments. They are all satisfied. So what are you going to argue about?”

In the deal announced Wednesday, cities and counties would accept a $1.3-billion cut for each of the next two years. In return, the governor will support a constitutional amendment that would prohibit the state from reducing funding for local governments in the future. The day before, the heads of the University of California and California State University systems accepted hundreds of millions of dollars in cuts and fee hikes this year in exchange for the promise of modest funding increases in years to come.

Administration officials say the governor will soon reach a deal with Indian casinos that could also produce $1 billion to $2 billion this year. And in an agreement Schwarzenegger made with the teachers and other school groups over the winter, they pledged to support a temporary $2-billion cut to K-12 education.

Given all that, Canciamilla says his party is simply not prepared to take on the popular governor in any meaningful way. Not in an election year. And not with the resentment that the public holds for the Legislature, created over the years as progress was gridlocked by political quarreling.

Californians are used to the governor signing a budget late, and public opinion polls suggest few things make them angrier about government. In the past 25 years, only eight budgets have been signed on time. In the late 1980s and early 1990s, state budgets were habitually late -- including a budget signed on Sept. 2, 1992, two months into the fiscal year. The latest was two years ago, when then-Gov. Gray Davis signed the state budget on Sept. 5.

“The message from voters is clear,” said Democratic political consultant Darry Sragow. “Don’t gum up the works of government.”

Schwarzenegger acknowledged Wednesday that he would face a challenge next year dealing with what many analysts project will be a $10-billion deficit. At that point, there will be few places to cut as a result of the deals he is making this year, and he may have no money left from the $15 billion in deficit bonds approved by voters in March.

“I have an overall plan,” he said at a news conference in the Sacramento suburb of Elk Grove, where he announced his $1.3-billion deal with local governments. “This is just a small part of the overall plan. I cannot give you the whole plan today, because this is like seeing a movie in the beginning and then giving them the end. It’s the wrong thing to do.

“So I’m laying out a nice script, a nice James Cameron script, with a great, great ending in the end.”

Kim Reuben, a budget analyst at the Public Policy Institute of California, said the plan is going to have to be dramatic. So far, she said, the governor’s budget strategy does not come close to curing the state’s chronic deficit. Even with all the spending cuts and fee hikes that it calls for, by next year the state will be billions of dollars short of bringing in enough revenue to pay for all its expenses. “We’re not solving the problem and it is going to get worse next year,” she said.

Angelides, who has said he intends to someday run for governor, said he is astounded that Schwarzenegger is putting the state in such a predicament.

“These are the very kind of actions that got this state into deep fiscal trouble,” he said. “This is a Bush-like approach to the deficit, which is to push every problem into the future.”

In contrast to Angelides, the Legislature’s Democratic leaders, Senate President Pro Tem John Burton of San Francisco and Assembly Speaker Fabian Nunez of Los Angeles, have lain relatively low.

The governor has also worked hard to keep them at bay. He is doing it mainly by avoiding the Democrats’ sacred cows in the budget. When he hits a nerve, he has tended to back off.

After initial talk about privatizing government angered Democrats, for example, Schwarzenegger toned it down. He has retreated from proposals to cut in-home care for the physically infirm, blind and elderly, as well as aid to the developmentally disabled, and he abandoned his plan for a hard cap on state spending, accepting, instead, a balanced budget amendment Democrats could live with.

“I think he believes that the primary job is to re-instill confidence in state governments, to tell people the gridlock is broken, and get through the November elections as quickly as possible,” said Allen Hoffenblum, a Republican political consultant.

At Wednesday’s news conference, Schwarzenegger’s “blowing up the boxes” theme took a backseat to another message, borrowed from a popular Beatles song. The lyrics started blaring over loudspeakers as soon as the governor ended his last question -- and it was a little puzzling at first.

“He got joo-joo eyeball. He one holy roller. He got hair down to his knee. Got to be a joker; he just do what he please.”

But the chorus spoke to the point Schwarzenegger wanted to drive home: “Come together. Right now. Over me.”