Arnold Schwarzenegger hits the right note

Capitol Journal

Gov. Arnold Schwarzenegger’s final State of the State speech was his best. The budget proposal he’ll send the Legislature on Friday almost certainly will be his worst.

The budget will be full of wishful assumptions, sleights of hand and cuts into the bone.

Facing a $20-billion deficit over the next 18 months, the governor will have no other choice unless he’s prepared to raise taxes again, which he isn’t. Not yet anyway. We’ll see how the year unfolds -- how receptive Washington is to Sacramento’s pleas for more bailout money, and whether the courts wind up accepting the governor’s previous budget remedies.

But let’s not get ahead of ourselves. Schwarzenegger will be pummeled plenty beginning Friday. Today, he’s due praise for his State of the State speech.

Over the years, Schwarzenegger’s addresses have been mixed -- some stiff, one belligerent (2005) and another repentant (2006).

Wednesday’s seemed just right: moderate in tone and substance, skillfully delivered and limited to a few priorities.

The governor’s priorities: Selling voters on an $11-billion water bond slated for the November ballot. Making California more business-friendly and creating jobs. Restructuring the tax system. Reforming the budget process. Renewing California’s commitment to higher education. Reining in prison spending. Lobbying Washington for “federal fairness.” Scaling back state pensions.

No catalog of cabinet members’ agendas. No stridency. Very upbeat.

“Together as a team . . . we got California through the front end of the worst financial crisis since the Great Depression,” he told the legislators, and declared: “The worst is over for California’s economy.”

“The tone was excellent,” Senate leader Darrell Steinberg (D-Sacramento) told reporters. Assembly Speaker Karen Bass (D-Los Angeles) also said she was “pleased with the governor’s tone.”

After the speech, Schwarzenegger -- in a first -- hosted the entire Legislature at a lunch across the street at a private club.

At least it was a peaceful start to what’s sure to be a bloody year of political brawling.

Two Schwarzenegger proposals are especially intriguing.

One is a constitutional amendment to prohibit the state from spending more on prisons than it does on higher education.

“The priorities have become out of whack,” the governor said. “Thirty years ago, 10% of the general fund went to higher education and 3% went to prisons. Today, almost 11% goes to prisons and only 7.5% goes to higher education.”

Schwarzenegger’s proposal would flip those allotments -- requiring that at least 10% of the general fund go to higher ed and no more than 7% be spent on prisons.

He asked: “What does it say about our state -- about any state -- that focuses more on prison uniforms than caps and gowns?”

One thing it says is that California in the last three decades has gone on a prison-building binge and jacked up criminal penalties without raising the money to pay for the incarceration -- an example of the state desiring something but not being willing to pay for it.

Schwarzenegger’s answer is to turn over operation of more low-level prisons to private corporations. Four California prisons currently are privately managed.

“If California prisons were privately run,” the governor contended, “it would save us billions of dollars a year. That’s billions of dollars that could go back to higher education, where it belongs.”

The savings would come from lower wages for private guards and no state costs for healthcare or retirement.

The prison guards union won’t allow that to happen without an all-out fight. And the majority Democratic Party is perpetually protective of public employee unions. Steinberg and Bass both immediately dumped on the privatization idea, although Steinberg praised the goal of spending more on universities than prisons as “aspirational.”

Yes, it truly is. California’s higher education system, once a source of pride and economic development for the state, is becoming inaccessible for many students. Schwarzenegger certainly senses the public’s disgust and is onto something potentially popular.

There’s too much ballot-box budgeting involved. But Democrats should try to compromise and not be so knee-jerk opposed to privatizing prisons.

The second intriguing Schwarzenegger move is his stab, one final time, at scaling back state employee pensions. The governor said that state pension costs have risen 2,000% in the last decade while revenue has increased only 24%.

“We are about to get run over by a locomotive,” he said. “We can see the light coming at us.”

Last June, Schwarzenegger proposed that future pensions of new hires be scaled back to what they were before Gov. Gray Davis and the Democratic Legislature generously enhanced benefits in 1999. The governor still embraces that modest plan, which seems reasonable.

The prospective pensions of current employees would remain intact. “These pensions cannot be changed -- either legally or morally,” the governor said Wednesday. “It is a done deal.”

If Democrats won’t listen to Schwarzenegger, they should at least pay attention to their icon: legendary Assembly Speaker Willie Brown.

In his weekly column in the San Francisco Chronicle on Sunday, Brown wrote about the “out of control civil service.”

“The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life,” Brown asserted. “But we politicians -- pushed by our friends in labor -- gradually expanded pay and benefits . . . while keeping the job protections and layering on incredibly generous retirement packages. . . . This is politically unpopular and potentially even career suicide . . . but at some point, someone is going to have to get honest about the fact.”

Brown attended Schwarzenegger’s speech, sat in the Assembly balcony and was introduced by the governor. I asked him when he had concluded that public employee unions were out of control. After he became mayor of San Francisco, Brown said.

Schwarzenegger -- most of us -- could use Willie back in the Legislature.