Schwarzenegger’s boffo budget goes bust

The North County Times Editorial, July 12, 2007

New state budget, old dysfunction

Our view: California’s fiscal condition even worse than it appears

It wasn’t supposed to be like this. By this stage in the Schwarzenegger administration the budget was to be balanced and state spending under control. That the “Governator,” whose starring role in epic films was his primary qualification, squandered an epic opportunity for reform can’t be denied, but there’s plenty of blame to go around.

In case you’ve been enjoying your summer instead of following state politics, here’s an update: The state missed the June 30 deadline for passing its $100 billion-plus budget, and all sides —- the governor and Republican and Democratic legislative leaders —- say a compromise is unlikely anytime soon.

After promising to reform government and curb spending, Schwarzenegger stood by as the state’s general fund, which covers spending for just about everything the state does, in his first three years in office grew by 30 percent ($24 billion) . This from a candidate who sold himself as a fiscally responsible, small-government, free market-oriented Republican.

After asserting this January that the state’s operating deficit —- the structural debt that gets rolled over every year because we refuse to pay it down —- would be zeroed out, the governor announced in May that next year’s operating deficit would actually be more than $1 billion. The Legislative Analyst’s Office, the state’s nonpartisan fiscal adviser, has since increased that number to more than $3 billion .

The real tragedy is that the state’s revenues increased on Schwarzenegger’s watch by 37 percent, or $25 billion. Despite this windfall, or perhaps because of it, the governor was unable or unwilling to restore fiscal sanity.

The governor is now bailing water just to keep the ship of state afloat. In the budget negotiations now under way, he’s asking for about that include some cuts to social programs $5 billion in “budget solutions” . He eagerly signed four renegotiated tribal compacts on Tuesday to use the jackpot of hundreds of millions of dollars in additional annual gambling revenues to plug holes in the budget. He’s even trying to unload the lottery system to bring in extra cash.

But the governor is just one of three parties to the budget negotiations, and the other two aren’t any better.

Perhaps Democrats are the most honest of the group. They believe in spending money and growing government and make no apologies for either. Their budget proposal had $1 billion more in spending than the governor’s.

Their opposition to the governor’s budget is based on their correct assertion that his modest cuts would impact education and health spending. Of course, since nearly 70 percent of the budget goes to fund education and health programs, it would be tough to make any cuts that don’t affect those two liberal shibboleths.

Bringing up the rear are the minority Senate and Assembly Republicans, who, because the budget must be passed by a two-thirds majority, will actually decide what the compromise budget looks like.

They’re asking for another $1 billion or so in cuts , on top of what the governor has requested. It’s good to see Republicans demanding fiscal accountability, but the state GOP is dodging its own accountability to identify what cuts should be made. They helped get us into this mess, after all, approving the budgets of yesteryear.

Believe it or not, things are actually worse than they sound. Since the state technically isn’t allowed to run an annual deficit, it has, both before Schwarzenegger was elected and since, borrowed money to cover its debts. The state now holds at least $8 billion in deficit-related debt; the Legislative Analyst’s Office puts that figure as high as $18 billion. Making matters worse, actual state revenues this month are below what the governor estimated in his May revision of the budget.

The state stands on the edge of a precipice. We’ve got a growing budget, billions in debt, recurring deficits and declining revenues. The budget has become a summer blockbuster that offers thrills and chills but no happy ending. Unfortunately, the matinee superhero who was supposed to save us from this disaster met his demise before the intermission.


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