Spending Cap Called Key to National Plan

The cap on state spending that Gov. Arnold Schwarzenegger wants voters to pass in November is emerging as a centerpiece of a nationwide strategy by influential conservatives to slash government spending in state capitals across the country.

Although the authors of the California proposal say they were not influenced by out-of-state groups, a loose affiliation of ideologically conservative organizations are hoping that the proposed California “Live Within Our Means Act” will help fuel a national taxpayer revolt they are working to coordinate in more than two dozen other states.

“This is the next big thing at the state level,” said Americans for Tax Reform President Grover Norquist, one of the country’s leading anti-tax activists. “A lot of groups have become involved.... Soon you will see it on the ballot in every initiative state.”

The California “Live Within Our Means Act” would prevent the budget from growing faster than the average increases in state revenues over the previous three years. Other states have taken somewhat different approaches, prohibiting budget growth that is faster than the rate of population and inflation or personal income.

A spending restraint initiative is also expected to appear on the November ballot in Ohio, where a signature gathering effort is wrapping up. By 2006, Maine and Oregon residents probably will vote on similar proposals.

Meanwhile, in Georgia, Missouri, Tennessee and Wisconsin, spending cap bills are picking up significant support in legislatures. And as lawmakers elsewhere continue to balk at such proposals -- they have come up in 23 state legislatures this year but have not passed in any of them -- activists are planning to go directly to the ballot in many of those places.

Hard-line fiscal conservatives say they hope to reinvigorate the types of populist uprising that led to the approval by California voters of landmark protections against property tax increases through Proposition 13 in 1978 and the passage of term limits on politicians here and in several other states.

“The general gist is the same,” said Dick Armey, an anti-tax advocate and former House of Representatives majority leader. “It is that we citizen activists have got to find a way to put restraints on our legislators.”

Ultimately, Norquist, Armey and others say, they would like to see a federal spending cap to control escalating costs of entitlement programs such as Medicare and Medicaid.

As Schwarzenegger pushes the California measure, Washington-based organizations have opened offices in a number of states to pressure lawmakers for support and to help citizen groups bring such spending controls before voters.

The national movement has alarmed opponents of the measures, some of whom will gather at the upcoming convention of the National Conference of State Legislatures to discuss how to beat it back.

Organizers of the forum describe the push for more spending restraints as “a serious problem that threatens to undermine the stability of state governments.”

The American Legislative Issues Exchange, a policy forum made up of thousands of liberal elected officials, has warned members that the spending restraints would “decimate education, healthcare, parks, highways and the very infrastructure of state government.”

The proposals put strict limits on how much state budgets can increase each year. Anti-tax activists see such controls as a means to scale back spending on education, healthcare and social-service programs that even the staunchest free-market Republicans have been reluctant to cut.

Schwarzenegger and his advisors, already battling charges that their spending cap is part of a conservative agenda the governor is trying to force on Californians, have resisted forming alliances with the national groups. But the groups have eagerly embraced the governor’s crusade.

“We think California is very important,” Armey said. “It is a trend-setting state. Getting it done in California will set a very good example for all these other states.”

The Washington, D.C.--based organization Armey now leads, FreedomWorks, has only a limited presence in California, but chapters in 10 other states have full-time directors involved in efforts to put spending controls in place.

Colorado is bucking the trend. There, a decade-old cap threatens to squeeze state spending so much that Republican Gov. Bill Owens and leaders of the state’s business community are imploring voters to pass an initiative on the fall ballot that would lift the cap for five years.

Owens has warned of dire consequences for the state’s road system and universities if voters refuse to lift the cap.

“Our spending formula is like a mandated weight-loss diet,” said Wade Buchanan, president of the Bell Policy Center, a left-leaning think tank in Colorado. “We’ve lost so much weight we are nearly anorexic. But the state Constitution says we need to lose more weight.”

Owens has now been tagged a lightweight and traitor by some of the people who once were his staunchest supporters.

Armey recently accepted Owen’s invitation to debate the issue on public television in Colorado, and his group has taken a lead role in working to defeat the proposal that the governor is supporting on the November ballot. It has all frustrated the Colorado governor.

“They don’t have a clear understanding of what the issues here are,” said Dan Hopkins, a spokesman for Owens. “They are calling this a tax increase. It clearly is not.”

Yet the governor is having a tough time selling that message to voters so far. In a recent Denver Post poll, only 43% of them supported his proposal.

Spending cap advocates in other states seem undeterred by Colorado’s troubles.

Mary Adams, a leader of the initiative effort in Maine, said her state was “in awful shape” and that residents “have been abused up here by overspending.”

Adams, 67, might be described as Maine’s Howard Jarvis. She led a successful 1977 initiative battle in that state to abolish a law she believed unreasonably drove up property taxes of coastal residents. Now she has her sights set on a spending cap.

When speaking to groups up and down the state, she takes her pony Stormy with her to give rides to children of voters -- and also to make a point.

“I hold up his bridle and I say, ‘Stormy doesn’t behave very well when he doesn’t have this bit in his mouth. But if he has the bit in his mouth and you are holding the reins, he behaves very nicely. This measure puts the bit in the mouth of state government. It puts the bridle in the hands of the people of Maine,’ ” she said.

Adams, like many spending cap advocates, doesn’t point to specific programs she would like to see cut. Rather, she said, the proposal is about keeping state spending from increasing too much, not “draconian cuts to the current budget.”

Opponents of the measures caution that it is not that simple. It is a pitch that is attractive to voters, they say, but does not take into account that the cost of providing existing services -- things such as art classes in elementary schools, meals on wheels for the elderly or the operation of a mass transit system -- often grows more quickly than the spending caps allow.

“A lot of states have experimented with these kinds of formulas in the past and found they didn’t really work,” said Iris Lav, deputy director of the Washington, D.C.-based Center on Budget Policy and Priorities, a leading opponent of the spending restraints.

Many states, including California, have all but abandoned spending limits enacted in the past. But Colorado voters passed a more ironclad version, and lawmakers there have not been able to find a way around it without voter permission. Colorado’s law has now become the model for the legislative proposals and ballot measures sprouting nationwide.

When Wisconsin lawmakers balked at passing such a measure this year, national anti-tax groups worked to replace the popular Senate majority leader, a Republican. Her primary opponent won in a landslide.

“We’ve now drawn first blood,” said Norquist, the anti-tax activist. “As soon as someone loses an election on an issue like this, elected officials see that it is real.”

In Richmond, Va., last month, the State Policy Network, an umbrella organization for free-market-oriented state think tanks, held a summit in which members worked on strategies for putting the spending controls in place in more states.

The initiative that Schwarzenegger helped put on the ballot was drafted by the California Chamber of Commerce and California Business Roundtable. The governor and those business groups have kept the national anti-tax organizations at arm’s length.

“I am not aware of any input from those groups,” said chamber President Allan Zaremberg. Despite its warm embrace from the likes of Norquist and Armey, Zaremberg called the measure in California “significantly different” from the boiler-plate “Taxpayer Bill of Rights” being pushed in other states.

Budget analysts, however, note that the end game is the same: ratchet down spending.

In every state where such a measure is proposed, including California, they project the proposals would result in significant reductions in services. In California, it could have the effect of immediately knocking as much as $4 billion out of payments owed local schools.

Said Lav, of the Center on Budget Policy and Priorities: “In California, you are trying to move toward what Colorado is trying to get rid of.”