After the Cold War ended and the Berlin Wall came down in 1989, California’s aerospace-and-defense-heavy economy took a nose dive. One result was that, in 1991, Gov. Pete Wilson faced the worst budget shortfall in the state’s history.
The revenue picture was especially glum. What had started as a revenue gap the size of one-seventh of the state’s general fund steadily grew until, by May that year, it was the equivalent of one-third of the fund.
But through a combination of spending cuts, tax increases and a historic transfer of several state health programs to county control, Wilson bested the budget disaster. He was temperamentally suited for the task at hand.
Wilson loved making public policy, earning the nickname “Old Iron Butt” for his ability to sit for hours discussing issues. “He could see the big picture but knew the details. He was focused 24/7,” Tom Hayes, his finance director, told me. “I can’t tell you how many phone calls I got after I was sound asleep.”
Democrats urged the newly elected Republican governor to deficit-spend, but Wilson said that would be unconstitutional.He had campaigned, however, on the idea that state government should spend more money to avoid higher back-end healthcare and criminal-justice costs. Wilson thus wasn’t eager to dismantle the instrument of his vision -- state government.
The governor used every tool at his disposal -- news conferences, staff scuttlebutt, political arm-twisting -- to secure the budget deal he wanted.
He bit the tax bullet in January, proposing more than $3.1 billion in new revenue -- more than half of it by changing the way the state counted its money -- in his first budget. Wilson knew that Democrats would demand that tax hikes be part of the solution, so he included them in the hope of achieving a budget resolution sooner.
Wilson also met early and often with the four leaders of the Legislature at that time -- Assembly Speaker Willie Brown, Senate President Pro Tem David Roberti, Senate GOP Leader Ken Maddy and Assembly Republican leader Ross Johnson. He understood the political pressures and negotiating limits that each faced.
Among them, Brown, Roberti, Maddy and Johnson had 80 years of legislative experience. And, like Wilson, they were pragmatic deal-cutters.
With revenues continuing to plummet, Wilson unveiled a new spending plan in April rather than wait for the traditional May revision that would include actual tax receipts from November through April.The governor’s second proposal achieved a balanced budget through roughly 50% spending cuts and 50% higher taxes. He called for passage by May 1, an unprecedented two months before the close of the fiscal year on June 30.
Democrats wanted the sales tax increase to be smaller -- and the income tax rate hike for the wealthy to be higher -- than Wilson proposed. But the governor pledged to veto any budget that contained the higher income taxes.
Wilson regarded his April proposal as his last, best offer -- particularly on taxes. He spent the next two months pushing his budget, calling individual Democratic and Republican legislators to make his case and entertaining additional cuts only when the revenue shortfall grew an additional $2 billion in April.
“Am I willing to look bad in order to get it right? The answer is yes,” Wilson said.
But Johnson, the Assembly minority leader, opposed Wilson’s proposed tax increases. So Wilson had to personally line up the nine GOP votes he needed in that chamber to pass the budget.Later on, he publicly embraced each of the Republican lawmakers who had broken ranks with their party to vote for tax increases.
Roberti said Wilson was the first governor he’d ever worked with who personally rounded up votes, often by telephoning lawmakers on the floor of the Legislature.
When the budget was finally signed July 20, each side had moved far beyond their parties’ supposed ideological limits.
Democrats, in Wilson’s words, did things “they swore on their mother’s grave they would never do,” such as cutting welfare checks by nearly 5% and suspending for five years automatic spending increases for various state programs.
At his own political expense, Wilson ultimately accepted higher taxes for the wealthy, gave public schools more money and scaled back some healthcare and welfare reductions.
One of the few bright spots of the deal was the transfer of mental and public health programs to counties, a move that, over time, has proved to be cost-effective and smart.
When state employees took a 5% salary cut, Wilson did too. Good executives do that.
Greg Lucas has been a California political writer and satirist for 20 years. He blogs at www.californiascapitol.com.