Unlovely Budget Buys Time

What would summer in Sacramento be like without a knock-down budget battle? Just fine. The unaccustomed calm in the Capitol flows from another exercise of political muscle by Gov. Arnold Schwarzenegger. He’s again fulfilling his campaign promise to end political gridlock, even if it comes at the expense of another campaign promise -- to “tear up the state’s credit card.”

The Legislature appears willing to go along. It probably will accept most of Schwarzenegger’s revised budget, even though it depends as heavily on borrowing and one-time tricks as anything proposed by then-Gov. Gray Davis. A final budget probably will pass by the state deadline of June 30, a rare event outside boom years.

Schwarzenegger also promised early on to end the structural imbalance in the budget. These are provisions in state law that require continuing levels of spending -- for instance on schools and welfare -- even if there’s not enough tax revenue to cover it. No overall reforms are in the proposed budget. The governor promised an audit, to uncover billions of dollars of “waste, fraud and abuse,” within 60 days of his inauguration. Auditors are still hunting those billions and may not be finished until next year.

None of that, however, is necessarily bad. Start with the structural deficit, which is expected to remain at about $6 billion in the 2005-06 budget year. Majority Democrats in the Legislature avoided a major struggle this year by dropping their demand for new taxes, specifically by raising the income tax rates on the wealthiest Californians. Schwarzenegger, for his part, carefully avoided pledging “no new taxes” forever. The compromises that make up this unlovely budget bought time and allowed all sides to prove that they could actually govern.

Democrats will certainly pick a few favored fights, such as over fee increases for higher education. A Senate subcommittee started easing some of the governor’s cuts in the University of California and California State University systems last week. Squeezing higher education, Democrats say, would hurt the state’s economy because its well-educated and trained workforce is a business attraction. Democrats also may seek elimination of some healthcare cuts. It will be another chance for the governor and Legislature to visibly reach agreement.

An on-time budget that doesn’t leave lawmakers throwing daggers across the partisan aisle has another advantage. It would provide time and the right atmosphere to begin real fiscal reform. The Legislature could start to modernize its antiquated tax distribution system. It could model ways to chip at the structural budget deficit.

Lawmakers need not wait for Schwarzenegger’s audit or government reorganization programs to pursue everyone’s common goal: an efficient state government that provides people the services they require. It sounds simple, but it fell to pieces in recent years. The relative calm in the Capitol offers hope for change beyond one on-time budget.