Analyst Is Critical of Spending Controls

Gov. Arnold Schwarzenegger’s proposal for tough state spending controls is flawed and could force dramatic cuts in programs least able to sustain them while leaving others unscathed, according to the nonpartisan legislative analyst.

In a report released Wednesday, analyst Elizabeth G. Hill, whom lawmakers of both parties look to for guidance on fiscal matters, said her office has “serious concerns” with the governor’s proposal. Schwarzenegger’s plan would automatically cut spending across the board in years when the budget falls out of balance, and in the event lawmakers and the governor cannot agree on a spending plan by the July 1 deadline.

Hill suggested the proposal is too rigid and could force deep reductions to programs in dire need of funding. The proposal also may shift too much power to the governor, she said, calling it “a serious diminution of the Legislature’s authority to appropriate funds and craft budgets.”

Democrats seized on Hill’s report to continue their attack on the governor’s plan.

“We need to avoid automatically slamming the brakes on Californians that need government’s help,” said state Controller Steve Westly.

But administration officials defended the governor’s idea as a reasonable way to keep state spending in check without raising taxes.

“Everybody knows that if things are allowed to go unchanged, the prophesy of there being deficits year upon year will continue to fulfill itself,” said H.D. Palmer, spokesman for the Department of Finance. “The governor thinks this is the year to go after this, and he has a plan.... The governor has put his cards on the table.”

The spending controls were in the $111.7-billion budget the governor proposed Monday. They are part of his plan for closing what administration officials now estimate is an $8.6-billion shortfall. The governor will send the proposal to the Legislature in bill form, where it will be debated in committee hearings. But Schwarzenegger also made it clear Monday that he is prepared to take his proposal directly to voters in a ballot initiative if lawmakers reject it.

In her annual review of the governor’s budget, Hill agreed that major reforms are needed to keep the state from continuing to run deficits. She said that even the governor’s budget -- which she called a “reasonable starting point” with a number of sensible, long-term solutions -- relies heavily on borrowing, and would result in a $5-billion shortfall by fiscal 2006-07.

But she expressed grave doubts about the governor’s strategy for erasing such gaps.

The constitutional spending control, she said “would dramatically reduce the ability of future policymakers to establish budget priorities.”

As soon as the governor were to declare a fiscal emergency, according to the proposal, lawmakers would have 30 days to bring the budget into balance and approve it with a two-thirds vote. If they were unable to agree on how to do that, the automatic cuts would take effect. Democrats say that prospect would embolden Republicans to delay any solutions, forcing the across-the-board cuts.

What appeared to most concern Hill, however, was that even in a fiscal emergency, the plan prohibits the Legislature from tapping money normally set aside for education or transportation. She warned that such a ban is dangerous. If it had been in effect last year, she said, lawmakers would have had to give schools double the $2-billion increase they ultimately received, forcing much steeper cuts in other areas, more borrowing or a tax hike.

All of the cuts the governor is proposing this year in healthcare programs for the poor, welfare, aid to the disabled, the prison system and environmental programs combined do not add up to $2 billion.

Republican lawmakers said the state’s history of racking up deficits calls for such dramatic action.

“The Legislature needs some internal discipline forced on it so it spends within its means,” said Assemblyman John Campbell (R-Irvine).