Gov. Shows He’s Ready to Fight

His popularity is high, his reelection chances bright, but in the state Capitol, a quiet consensus had emerged about Gov. Arnold Schwarzenegger’s first year in power -- that in the end he didn’t want confrontation, preferring ersatz reform and quick compromise to bruising political fights that might jeopardize his bipartisan appeal.

With a single speech last week, Schwarzenegger sought to eliminate that impression for good. He proposed an array of ambitious changes, provoking the most influential interest groups in Sacramento and picking fights where the outcome is simple: He can win big or he can lose embarrassingly.

Schwarzenegger is to release his budget Monday, but in keeping with the new tone, he dismissed it in advance as not good enough. It won’t stop the state from spending more than it takes in; it won’t prevent a deficit next year that “will be even worse,” the governor acknowledged.

So in his State of the State speech, he called for enduring, if painful, solutions. He wants restraints in place that would trigger across-the-board budget cuts when spending outpaced revenue. That’s the same sort of strict spending limit he touted in the recall campaign but later abandoned in the face of Democratic resistance.

Last week’s speech called for scaling back pension benefits by switching to a 401(k)-style retirement plan in which state workers could no longer count on a set payout when they left government.

In a concession that partisanship and gridlock in Sacramento persist, he said he wanted to usher in, essentially, a different kind of Legislature.

He proposed a constitutional amendment to strip lawmakers of the power to carve their own districts, giving that authority instead to a panel of retired judges whose overriding goal would not be the protection of incumbents.

Schwarzenegger aides said that step would introduce more competition to legislative races, perhaps bringing more moderate lawmakers to Sacramento.

“They managed to get through the [last] year, basically, by borrowing a lot of money.... He was Gray Davis with muscles,” said Joel Aberbach, a UCLA political science professor. “Now the state is faced with a continuing deficit that’s quite large. One way to interpret this is: He’s finally facing the realities, and he has a set of proposals that at least is the beginning of an effort to come to grips with the problem.”

Schwarzenegger is moving fast. He has called the Legislature into special session, meaning that any changes lawmakers adopt would take effect immediately. In a regular session, approved bills usually don’t become law until the next year.

An early test of the governor’s resolve will come soon. Next week, he is to introduce his spending limit, which -- if approved by the Legislature -- would be presented to voters for ratification in an election later this year.

No program or agency would be spared in the event the budget ever fell out of balance. If state spending outstripped revenue, the controller would make across-the-board cuts.

The same procedure would kick in when the budget was late, as is perennially the case in Sacramento.

If the Legislature had not approved a budget and the governor had not signed it by the state’s July 1 deadline, across-the-board cuts would be made unless an agreement was reached within 30 days.

The plan would also force changes in one of California’s most popular voter-approved laws: Proposition 98, which guarantees local schools and community colleges 40% of the revenue coming into the state.

“This is our year of reform,” said Patricia Clarey, the governor’s chief of staff. “We could have done a budget that would just sort of gloss over the problems and get us through. And then we’d have the same problems next year. The governor is much more interested in making long-term structural change.”

Opponents ask: At what cost? They contend that spending formulas are necessary for basic healthcare and other services to keep pace with a growing population.

Some warned that the human consequences of the governor’s spending restraints would be severe.

“The fact of the matter is that voters passed Proposition 98 to protect their children from political wheeling and dealing,” said Scott Plotkin, executive director of the California School Boards Assn.

“And though the governor would have you believe otherwise, our children are not a special interest group.”

In the past, complaints like these caused Schwarzenegger to retreat.

Aides said that this year the governor won’t waver, determined to risk his popularity if it means strengthening the state’s finances over the long haul. He will campaign hard. As he did in past fights over the budget and workers’ compensation reform, he may sweep through shopping malls with rallies meant to pressure lawmakers to act, an aide said.

In his speech, Schwarzenegger invoked the name of former Gov. Pat Brown, an activist leader who presided over massive state highway construction, along with new state water and education plans. He is the governor Schwarzenegger wants to emulate, Clarey said.

“But he knows he can’t be that kind of governor until he fixes structural problems,” she added.

Brown’s legacy won’t be challenged by the spartan budget Schwarzenegger is rolling out.

He’s not raising taxes. Public schools would lose $2.2 billion in money that education leaders said the governor had assured them he would protect.

In an interview with The Times in 2003, Schwarzenegger, then a candidate in the recall, was asked if he would ever suspend or delay Proposition 98:

“The important thing to know is that there are certain fundamental things, I would just say, ‘Not over my dead body,’ ” he replied.

State Treasurer Phil Angelides, a Democrat considered a potential opponent of Schwarzenegger’s in the 2006 election, said last week: “It’s very clear right now that his word means nothing.”

The governor’s finance director, Tom Campbell, has already made clear that healthcare and social service programs will see major reductions.

Schwarzenegger pledged in his State of the State speech to build roads -- essential to a “car-centered state.”

But not right away. Administration officials said the governor would propose shifting $1.3 billion in gas tax money earmarked for the state’s weathered roads and use it instead to narrow the projected $8.1-billion budget gap.

That move comes months after the nonpartisan legislative analyst warned that tapping the state’s transportation accounts in years past had proved disastrous for California’s road network.

Motorists are spending too much time sitting in traffic, the analyst’s report said -- not just aggravating tempers but hurting the economy.

Even after the healthcare and social service cuts were made, the budget wouldn’t be balanced. So the governor will propose using $1.7 billion more in borrowed money approved by voters in March to keep the state out of the red.

For now, Democrats say, they are open to negotiating with Schwarzenegger.

But at least one of the governor’s ideas, the Senate’s Democratic leader said, is doomed.

Sen. Don Perata (D-Alameda) said in an interview that Schwarzenegger’s pension proposal was akin to “the Social Security privatization that [President] Bush proposed. And to me, that’s dead on arrival.”