Tired Old Budget Tricks

Gov. Arnold Schwarzenegger disavowed his own state budget Monday even as he introduced it. “This budget doesn’t have much in it I want,” he said. Which raises the question: Why did he bother?

Schwarzenegger gave the impression that he submitted this budget to show what he can’t do under the current system and to cement his argument that voters must agree to let him make across-the-board spending reductions if the Legislature won’t go along.

As with budgets of the last few years, Schwarzenegger’s $111.7-billion plan for the next fiscal year would be “balanced” by papering over a projected $8-billion deficit with borrowing, accounting gimmicks, reneging on earlier pledges and imposing some steep cuts on individual programs. It does nothing to permanently correct the “autopilot” laws that keep some programs growing faster than state revenues.

The governor already has broad power to delete or reduce any budget item after it passes the Legislature. Of course, such individual line-item vetoes are politically harder than across-the-board cuts, and they leave the governor solely accountable for them. Across-the-board percentage cuts, Schwarzenegger’s favored alternative, seem to spread the blame but would hit their own roadblocks. Police and fire spending is sacrosanct. Spending for some programs is controlled by federal law. Less-protected programs, like state parks, end up taking much larger hits.

There is a way out. Open “everything is fair game” negotiations with Democratic legislative leaders, who should agree upfront that some spending (for instance, state worker and teacher pensions, which are outstripping revenue increases) has to be curbed. Schwarzenegger’s ideas for streamlining government, as long as they honestly save money, should get some respect.

Schwarzenegger should put taxes on the table. Maybe a small, temporary income tax surcharge on the wealthiest Californians, as was done by two earlier Republican governors, Ronald Reagan and Pete Wilson. Unfortunately, the absurd “millionaire” tax imposed by voters last November to fund mental health services means any increases would be smaller than in the past. Federal tax cuts would still keep high-bracket taxpayers ahead of the game.

California has cut taxes repeatedly over the last decade, to the point that the state and local tax burden ranked No. 26 among the states last year. Tax cuts just since 1999 have saved state taxpayers a cumulative $12 billion and starved state programs across a wide area.

The easiest compromises should be over such changes as closing glaring tax loopholes and broadening the sales tax to services such as accounting.

Schwarzenegger is right when he says the budget system is a mess. He should be willing to say the state’s archaic revenue system is just as bad. Instead, his new budget depends on tired old tricks.