Winners and losers in the budget battle

"I’m very disappointed. Let’s just put it that way. Now, when the state gets out of the red, we’ll just have to re-enact them somehow," said former state Sen. John Burton on the loss of annual cost-of-living adjustments to benefits.
(Los Angeles Times)

Who are the winners of the California budget battle? Yes, there are some, even though there are many more losers.

Set aside individuals for a moment and assess victory and defeat by political ideology. Distinguish between short term and long term.

And include the entire multi-round fight over the newly balanced budget -- balanced for the moment on paper anyway -- starting with its unprecedented early enactment in February, its torpedoing by voters in May and recent painful repair.

Anti-tax conservatives clearly are winners because, in the May election, they scuttled two additional years of tax increases that would have raised $16 billion for the deficit-plagued general fund. But that’s only a short-term win. In 2011, the next governor -- especially if that person’s a Democrat -- can team up with a Democratic Legislature and perhaps reimpose those taxes.


Meanwhile, by fretting over the temporary tax increases, conservatives blew an opportunity to cement some long-sought spending controls into the state Constitution. The spending cap would have triggered the dreaded tax-hike extension.

Under Proposition 1A, spending growth would have been capped based on the previous 10 years’ revenue trend. That could have been a fiscal conservative’s dream because state revenue has been plummeting, down 13% in the last two years even with February’s tax increases.

The liberal spending lobby -- labor unions, welfare activists -- feared the spending cap and fiercely fought it in an abnormal alliance with anti-tax conservatives. Since it’s highly unlikely there’ll ever again be as good a chance to enact state spending controls, this wound up a long-term win for the libs.

But liberals and their causes -- public employees, poor people, the disabled, schools -- now are taking a short-term pounding, not only because of the recession, but because the voters’ rejection of three other ballot measures left the state $6-billion deeper in the hole.


That forced Gov. Arnold Schwarzenegger and the Legislature to cut even more aggressively to resolve what ultimately became a $26-billion deficit.

Using the threat of still further draconian cuts as leverage, Schwarzenegger muscled in some controls on safety-net spending that no Democratic-dominated Legislature would ever have passed previously.

Politically, Schwarzenegger is a budget loser, based on a poll released Wednesday by the Public Policy Institute of California. It shows only 29% of voters approving of his job performance, with 61% disapproving. A California governor’s job rating hasn’t been that low since Gray Davis was fighting his recall, says the pollster, Mark Baldassare.

The poll was taken before the governor and Legislature announced their tortured budget agreement.


Based on public policy, however, Schwarzenegger is a budget winner.

In a major blow to “auto-pilot” spending, he managed to permanently eliminate all automatic annual cost-of-living adjustments, except for education. Repealed were yearly 5% funding increases for state universities and inflationary hikes for welfare families and the aged, blind and disabled. That’s projected to save $300 million this fiscal year and $4.2 billion through mid-2013.

Moreover, it represents a power shift from the Legislature to the governor because lawmakers in the future will have to pass a bill to grant a cost-of-living increase. Until now, a bill was needed to deny one.

I called former state Senate leader John Burton (D-San Francisco), the father of California’s automatic safety-net adjustments. He finessed Gov. Ronald Reagan into enacting them nearly 40 years ago. Burton now is chairman of the state Democratic Party. I asked how he felt about Democratic legislators surrendering to the Republican governor and repealing the yearly benefit boosts.


“I’m very disappointed. Let’s just put it that way,” Burton said. “Now, when the state gets out of the red, we’ll just have to reenact them somehow.”

Any of the spending “reforms” Schwarzenegger won for Medi-Cal, CalWorks, In-Home Supportive Services -- programs for the poor and disabled -- could prove to be only short-term victories, depending on the next governor. Same for the boards and commissions he consolidated in an attack on “waste and redundancies.” But for this governor, they achieved a long-time goal.

“I mean, this is huge,” he told me after signing the budget fix Tuesday. “We used this crisis as a great opportunity.”

But there also were the “bad and the ugly” cuts he had to make, especially in children’s healthcare.


One loser, at least within the governor’s office, was new Assembly Republican leader Sam Blakeslee of San Luis Obispo. Blakeslee and other legislative leaders agreed with Schwarzenegger to seize $1 billion in gas tax money from local governments. But then Blakeslee failed to deliver the Assembly Republican votes.

The gas tax bill was dropped, forcing the governor to make an additional $489 million in “ugly” cuts himself before signing the revised budget. “A terrible situation,” Schwarzenegger said. “I had sleepless nights over that.”

So is anyone scared yet?

Schwarzenegger and the Legislature were widely accused of scare tactics -- crying wolf -- when they warned about the consequences of voters rejecting the May ballot measures. The wolf just broke down the door.


“It’ll be interesting to see how people react to the budget and its pain,” says Senate leader Darrell Steinberg (D-Sacramento). “Are people going to say, ‘Enough. We’ve got to find another way?’ ”

If they do, some winners could become losers.