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The lariat or the noose

October 30, 2005|Bill Whalen | Bill Whalen, former chief speechwriter for Gov. Pete Wilson, is a research fellow at Stanford University's Hoover Institution.

THE STATE BUDGET wastes tax dollars -- and does it ever waste time.

The budget process begins in early January, when the governor introduces his spending blueprint. The Democratic-controlled Legislature cries foul, and various interest groups complain about misguided priorities. After a week of shouting, all sides return to their corners until mid-May, when a revised version of the January plan is unveiled.

Nearly five months thrown away.

Then the fun begins. Because the fiscal year begins July 1, lawmakers have about six weeks to reach an accord with the governor. This rarely happens, so negotiations drag on through the summer until both sides agree on a plan that neither is terribly wild about.

Seven months of wheel spinning produce mediocrity.

If Proposition 76 passes, and Gov. Arnold Schwarzenegger has the power to gain greater control over the budget, the above scenario would change in three ways.

First, real-time budgeting would occur during those seven months. More frequent snapshots of the state's fiscal health -- every two to three months instead of January and May -- would be taken. The governor could speed up the pace by introducing budget revisions every two to three months. Interest groups eager to frame the debate in their terms would increase their activities. All this would make budget negotiations in June and July easier.

A permanent campaign cycle is more likely under Proposition 76, as long as there are economic dips prompting budget cuts. But that wouldn't be much different from the current situation. Since taking over as governor, Schwarzenegger has campaigned almost nonstop for his pet causes.

The second change Proposition 76 would bring about is a needed reality check.

The revenue streams feeding the state budget are volatile. When the economy thrives, as it did during the late 1990s, money pours into state coffers. But when the dot-com boom went bust, the state was forced to borrow and raise taxes to maintain spending. Voters learned this the hard way in 2003, when the state's vehicle license fee was tripled to make up for a revenue shortfall caused by run-amok spending.

In a Proposition 76 Sacramento, lawmakers faced with spending cuts would have to reexamine their priorities. That would be a problem for the Democrats who control the Legislature. Given a choice of trimming expenditures or raising taxes, they reach for the latter. But they're currently double-booked.

Assembly Speaker Fabian Nunez (D-Los Angeles) supports the Reiner initiative, a possible June ballot measure that would raise taxes on the wealthy to finance preschool for 4-year-olds in California.

He also says the state should tax the wealthy to boost K-12 education funding.

Nunez can't have it both ways. Proposition 76 would help concentrate his mind by forcing him and his fellow Democrats to clarify their spending and tax priorities. The party might even develop a vision of governing.

Call the third effect of Proposition 76 the collision of rhetoric and reality with risk and reward.

Fiscal conservatism is the GOP's way of saying, "Of course, I'll respect you in the morning." Party candidates promise to rein in spending, and once safely in office, they do the opposite.

But armed with Proposition 76's powers -- the authority to reduce entitlement spending if the Legislature can't agree on budget cuts within 45 days -- does Schwarzenegger practice old-time Republican religion and slice away, or does he duck the opportunity?

Given the governor's bipolar approach to politics, the answer isn't self-evident.

Schwarzenegger is surrounded by Republican and Democratic advisors. Some advise against tax hikes, while others urge him to reform Proposition 13. There's even a dichotomy on fiscal planning. The governor's California Performance Review bemoaned a lack of long-range budget planning, yet when given the opportunity to do something about it, Schwarzenegger vetoed a bill that would have required the state Department of Finance to come up with five-year forecasts of projected department spending.

If he aggressively cuts spending, Schwarzenegger could find himself doing what he does best: traveling to local districts to sell his agenda. That would help reconnect the state to Sacramento. It would also mean that interest groups would continue to portray him as a budget bully. That's the risk and reward: putting his popularity on the line to ensure more sensible spending down the road.

And if the governor chickens out, higher taxes are in the offing. (Schwarzenegger has hinted as much, to raise the stakes in the Proposition 76 debate.) That would guarantee two things: the mother of all bipartisan photo ops and an insurrection among the state's more conservative Republicans.

That might be the best argument in favor of Proposition 76.

Depending on economic times and Schwarzenegger's political courage, the initiative is either a lariat for roping in spending profligates -- or a noose around the governor's neck.

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