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GEORGE SKELTON / CAPITOL JOURNAL

Gov. has power to cut spending if he'll use it

January 21, 2008|GEORGE SKELTON

SACRAMENTO — Listening to Gov. Arnold Schwarzenegger, you'd think the role of California's governor was strictly ceremonial, like being the British queen. Pageantry but no power, especially over the purse.

That "crazy deficit spending" -- as Schwarzenegger called it while running for office -- is always the fault of something or someone else: "the system" or those "spending-addicted" legislators.

"They now have promised everyone this high spending, but they can't keep the promise," Schwarzenegger told local officials in Santa Barbara on Friday, as if he weren't one of the "they." "That's the problem in politics: People promise things they can't keep."

Sacramento is facing a projected $14.5-billion deficit over the current and next fiscal years. And whose fault is that? Not just the system's. Not just the Democratic-dominated Legislature's.

"If a governor wants to reduce spending, he has a lot of institutional power to do it. What he has to do is to exercise the power," says Fred Silva, fiscal policy advisor for Beacon Economics and previously a longtime fiscal advisor in the state Senate.

California's governor -- like many state governors -- has more control over spending than does a president. Certainly a lot more than Schwarzenegger lets on. A governor's line-item veto -- the ability to pare spending projects without vetoing an entire budget -- long has been the envy of presidents.

The line-item veto is limited, however. If a law requires a certain level of service -- such as an inflationary adjustment -- the state controller must fund it. The governor can "blue pencil" the budget item -- Capitol talk for reducing the appropriation -- but ultimately the money has to be paid, unless the law is changed.

But the law frequently is changed. The governor and Legislature often whack the impoverished aged, blind and disabled, for example.

The governor's budget writers point out that 87% of the state general fund -- $89 billion out of $102 billion currently -- is irreducible without accompanying legislation. The biggest chunk of that, 41%, goes to schools: kindergarten through community college.

Schwarzenegger is proposing a $400-million cut in the current school year and a $4-billion slash in the next. He's asking the Legislature to suspend education's minimum guarantees under Proposition 98.

So the governor does possess powerful carving tools. The fact is, no spending bill can be enacted without his signature.

Schwarzenegger and Republicans rail against a Sacramento "spending spree" during the dot.com bubble from the late 1990s through 2000.

"When the revenues skyrocketed by 23% in one year," Schwarzenegger told a Salinas citizens group last week, "well, guess what they did? Not one single penny did they put aside. They took all of that money -- all of that money -- and spent it. The next year, the revenues went down. They had to start borrowing."

It's a good point, but not the complete story. The spending spree included a tax-cutting tear, roughly $5 billion worth. When bust times returned, the wimpy politicians were stuck with the tax cuts -- just as they were the ongoing spending -- and couldn't summon the courage to reverse course.

Indeed, some of the tax cuts went into the ledger as expenditures. Cutting the vehicle license fee, as Govs. Pete Wilson and Gray Davis did, resulted in billions of dollars in added state spending. That's because revenue from the VLF -- known as the car tax -- actually goes to local governments. To avoid catching heat from the locals, Sacramento generously compensated them for their lost revenue by dipping into the state general fund.

Confronted by a huge deficit, Davis finally became brave enough to raise back the car tax. The next thing we knew, a demagogic film actor was beating him over the head for his uncommon exercise of courage.

On Schwarzenegger's first day in office, he ceremoniously cut the car tax again. And the state has been paying the price ever since, literally.

The cut currently results in roughly $5 billion in additional state spending a year. Add up two years worth and it accounts for roughly two-thirds of the two-year $14.5 billion deficit.

"Some people say, 'Arnold, you are part of the reason why we have this deficit because you stopped the car tax increase,' " Schwarzenegger said during his State of the State address. "Well, yes, I did that. And you know something? I would do it again because it is not fair to . . . ask [people] to pay for a tax increase to cover Sacramento's overspending."

Instead, Schwarzenegger is proposing 10% across-the-board cuts, which means closing 48 state parks, releasing tens of thousands of convicts, firing game wardens, short-changing schools and nickel-diming the aged and disabled.

"The governor's own budget proves that virtually all aspects of the state budget are controllable -- if policy makers are willing to make tough choices," nonpartisan Legislative Analyst Elizabeth G. Hill wrote in an assessment of his spending plan.

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