Arduin to Leave Finance Position

Times Staff Writer

Donna Arduin, Gov. Arnold Schwarzenegger’s lead budget advisor and an early conservative voice in the administration, has resigned and will leave office as soon as Friday, the governor’s office said.

Arduin is stepping down after 11 months as state finance director, where she helped shepherd through the initial budget of Schwarzenegger’s tenure. She is the first major political appointee to leave Schwarzenegger’s government and is one of few aides with a public profile in an administration dominated by the governor’s celebrity. Schwarzenegger has called her his resident “genius” and praised her “machine”-like work habits.

Arduin’s departure means the administration’s inner circle will lose one of its true conservatives as it is about to make crucial decisions on the governor’s 2005-06 budget.


With a multibillion-dollar shortfall facing California again next year, Schwarzenegger’s team is likely to face stark choices between raising taxes or cutting deeply into spending -- a reckoning that the governor has postponed to date.

Republicans have already expressed discomfort with some of Schwarzenegger’s budget practices, including his reliance on borrowing and reluctance to slash spending. With Arduin out -- and with speculation that she might be replaced by an aide to one of the Senate’s most liberal members -- the administration’s more conservative ambitions could be blunted as Schwarzenegger heads into a tough budget season.

“It’s broader than just a disagreement over fiscal policy. It’s a realigning of Schwarzenegger’s management team to more reflect his own priorities and issues,” said Barbara O’Connor, director of the Institute for the Study of Politics and Media at Cal State Sacramento. “She came to do what she did, and she did it, and she left. And he may be taking a different tack in the next year -- more bipartisan and issue-centered than partisan.”

The governor’s staff did not reveal what Arduin would do next, though people familiar with her plans said she may become a private consultant on government finance matters. Administration officials said her resignation was not a surprise. She had committed to staying for about a year, they said, though there was no mention of that when Arduin’s appointment was announced publicly.

“When she first joined, she said she’d only make a one-year commitment because of family considerations, and we’re grateful she was able to see us through this first budget season,” said Margita Thompson, a Schwarzenegger spokeswoman. “And now we wish her all the best as she goes on to new endeavors.”

The Cabinet position will be temporarily filled by Arduin’s deputy, Michael Genest. The governor is looking for a permanent replacement. One person being mentioned as a possible successor is Diane Cummins, the chief financial aide to Senate President Pro Tem John Burton (D-San Francisco) and a top official in the Finance Department under former Republican Gov. Pete Wilson.


Arduin, 41, joined Schwarzenegger’s team during the transition last year, scouring the state’s finances as a volunteer from Florida Gov. Jeb Bush’s budget office. She had accepted the Cabinet position only after a bit of prodding from Schwarzenegger.

It was a rocky adjustment. Arduin was to preside over what Schwarzenegger pledged would be a line-by-line audit of the state’s finances. No such audit was ever released.

During Schwarzenegger’s first week in office, Arduin abruptly walked out of an Assembly committee meeting as she was being asked a question. A spokesman later explained that she was running late for an appointment with the governor and had been kept waiting by the committee.

“You’re leaving us?” a surprised Assemblywoman Jackie Goldberg (D-Los Angeles) had asked.

At times, Arduin appeared uncomfortable with the public parts of the job. In February, she attended a meeting at the Ritz-Carlton Hotel in New York with the governor, billionaire investor Warren E. Buffett and Wall Street investors to talk about a future California bond sale. Approached by reporters afterward and asked what happened, Arduin declined to comment, referring questions to a junior press aide. After a few awkward moments, the governor’s political advisor, Mike Murphy, who did not attend the meeting but was standing nearby, began answering questions in her stead.

The initial budget plans rolled out by Schwarzenegger included some embarrassing snags. Eager to close a budget shortfall, Schwarzenegger in December proposed $274 million in cuts to programs that serve the developmentally disabled population. He dropped the plan amid furious protests.

As the budget season wore on through the year, Schwarzenegger made more and more concessions to Democratic lawmakers in an attempt to forge a compromise, yielding a budget that many Republicans and conservative critics said resembled the spending plans that took shape under former Gov. Gray Davis.


The budget relied on billions of dollars in borrowing. Because the governor did not raise taxes or cut deeply into spending, the state has yet to fix the fundamental imbalance between what the state spends and what it takes in. State financial analysts project a shortfall of at least $6 billion next year. Schwarzenegger aides are not ruling out the possibility of a tax increase.

Had Arduin stayed, she would have faced tough choices. Still, she had the confidence of the governor’s conservative base.

“I’m pretty close to Donna, and I think she always took the job with the idea she would do it for a year or 18 months, and then move on,” said Stephen Moore, president of Club for Growth, a Washington-based anti-tax group. “So I think that her attitude is, I’ve come and rescued California, and pretty soon it’s time to pass the baton to someone else and go back to Florida or privatize herself in some way.”

Few of Schwarzenegger’s staff members entered the Capitol after the 2003 recall with the fanfare that Arduin received, in part because Schwarzenegger had ridiculed Davis’ stewardship of state finances.

Arduin’s work in finance departments in Michigan, New York and Florida showed she specialized in deep cuts to social programs and privatizing government services. She also promoted performance-based budgeting, forcing agencies to reach goals in order to receive funding.

But in Florida, she endured criticism for allowing tax cuts that left some programs without proper funding. In a previous interview with The Times, Florida state Sen. Tom Lee, a Republican, said she “created a game of hot potato for future elected officials.”


After she arrived in Sacramento, Burton called her an “ogre” because she had called for ending some Medicaid payments for eyeglasses and dental work in Florida.

So Arduin put up a sign on her Capitol office door: “Ogre X-ing.”

Times staff writer Robert Salladay contributed to this report.