Gov. Arnold Schwarzenegger has been chanting this mantra since he first landed in Sacramento: Sacramento must learn to live within its means.
The volume rose in late June when budget talks heated up.
The governor lambasted “Sacramento’s failure to live within its means” -- as if he weren’t Sacramento’s most powerful politician.
At a Los Angeles news conference, he complained that “they live way, way beyond their means.”
He also repeatedly asserted that “we must stop promising programs and services that we can’t afford.”
But rather than talking to a TV camera, Schwarzenegger should be talking to a mirror.
It’s true that Democratic-dominated legislatures have been guilty of passing bills that spent money the state didn’t have. But most of what gets spent in Sacramento must be OKd by a governor.
Besides the power to veto any bill, California’s governor can grab his “blue pencil” and reduce spending, within limits, before he signs a budget. It’s a “line-item veto” power that Schwarzenegger has frequently used, but obviously not enough, given the anti-tax climate he has helped generate.
All told, this governor has blue-penciled $5.1 billion from budgets, $2.4 billion of it general fund spending.
For Schwarzenegger to rail about the state not living within its means is disingenuous, to put it politely. He’s as guilty as anyone -- at minimum a co-conspirator. In fact, he’s directly responsible for a significant portion of the current $26-billion budget gap.
Rewind to even before Schwarzenegger came to Sacramento vowing to “end the crazy deficit spending.”
In 2002, Hollywood’s action hero created a ballot initiative for after-school programs that he used as a springboard to the governor’s office the next year. He charmed the business and school lobbies and intrigued the electorate, which approved his Proposition 49 by a 57% majority. The program became a $550-million annual hit on the general fund.
Schwarzenegger’s ballot measure provided no separate funding for the program. The money comes off the top of the deficit-ridden general fund. So while classrooms are closing, summer schools are being canceled and music and art are being scrubbed, the state must pay for after-school programs. That $550 million could support roughly 7,000 teachers, according to the Legislative Analyst’s Office.
Schwarzenegger has resisted legislative efforts to return Prop. 49 to the voters for revision, if not outright repeal.
The governor committed his biggest fiscal blunder, however, immediately after being sworn in. That was his so-called car tax cut, a crowd-pleaser.
Schwarzenegger had campaigned full throttle against Gov. Gray Davis’ “outrageous” raising of the vehicle license fee. His favorite stunt was using a wrecking ball to smash an old jalopy that symbolized the tax.
Davis really had only bumped the fee back to its historic level: to 2% of a vehicle’s value, rather than a recently enacted 0.65%.
Schwarzenegger’s canceling of the fee hike actually amounted to the single biggest spending increase of his reign. That’s because all the revenue from the vehicle license fee had gone to local governments, and Schwarzenegger generously agreed to make up their losses by shipping them money from the state general fund.
The annual drain on the state treasury was $6.3 billion until February. Then the governor and Legislature raised the fee to 1.15% of vehicle value, saving the state $1.7 billion. But it will revert to its lower level in two years.
Cutting the car tax plunged the state deeper into debt just as Schwarzenegger was taking the wheel. To cover it -- at least temporarily -- the new governor went on a borrowing binge. It didn’t take much to persuade the Legislature and voters to authorize $15 billion in “economic recovery bonds.”
Passing those bonds and a companion spending “reform,” the governor promised, would mean “no more deficit financing.” They’d live within their means. Sacramento would “tear up the credit card and throw it away.”
The only thing thrown away was all the bond money, spent long ago on daily expenses -- the equivalent of borrowing to buy groceries.
The state’s annual tab on the debt currently is $1.2 billion.
The bonds are only half paid off and aren’t scheduled to be fully retired until 2016.
Granted, Schwarzenegger committed those errors early, as a rookie. He might act differently today, although there’s little evidence of it.
He has a pattern of supporting exotic ballot measures that authorize discretionary spending without the revenue streams to pay for them, thus piling more of a burden on the bleeding general fund.
One example: the nearly $10-billion bond measure last November to make a down payment on a bullet train from Los Angeles to San Francisco. That will cost the treasury $647 million annually for 30 years.
Example two: the $3-billion stem-cell research bond in 2004, costing the state $200 million annually for 30 years.
Now, to balance the budget, he wants to raid local governments’ money. That’s hardly living within the state’s means.
All that said, general fund spending hasn’t been as “out of control” as the deficit or Schwarzenegger’s rhetoric would indicate.
The governor’s number crunchers calculate that average annual spending growth under Schwarzenegger has been a mere 0.8%, based on his latest budget proposal. Under Davis, it was 6.3%; Pete Wilson, 4.6%; George Deukmejian, 8%; Jerry Brown, 12.7%; Ronald Reagan, 13.6%.
Neither was February’s $12.5-billion tax increase that horrific, looking at the big picture. Schwarzenegger keeps calling it “the biggest tax increase in the history of California” -- not to brag but to get liberal taxers off his back.
In strictly dollar terms, he’s right. But in relevant terms -- comparing the tax hike to the general fund size -- the all-time champ is Reagan. His tax increase equaled roughly 30% of the general fund. Wilson’s was 16%; Schwarzenegger’s 14%.
Living within your means sometimes requires increasing the means.