At last, gov. gets realistic on taxes

FROM SACRAMENTO — He finally said it. I saw him. Heard his words.

Gov. Arnold Schwarzenegger acknowledged that Sacramento's problem is not overspending. The problem is that the state isn't collecting enough taxes.

"When we talk about living within our means," the governor told a Capitol news conference last week, "we say, many times, that we have a spending problem, not a revenue problem. It just has happened this year that it actually has switched. . . .

"It is now a revenue problem rather than a spending problem, because our spending in this state has not increased now for years. We have been very steady and we have been very fiscally responsible. . . . It's just that the revenues have dropped so rapidly."

Hallelujah!

Schwarzenegger began this year reciting the simplistic "spending problem" mantra chanted by fellow Republicans. He's ending it sounding like a realist, if not a Democrat.

Actually, Sacramento has been suffering a revenue problem for a long time, at least since the first day Schwarzenegger took office in 2003 and immediately dug the state deeper into recalled Gov. Gray Davis' deficit hole.

The showboating Schwarzenegger had campaigned gleefully against Democrat Davis' raising of the vehicle license fee -- the so-called car tax -- and had even used a wrecking ball to smash an old jalopy in one stunt. It was great TV. "Outrageous," Schwarzenegger called the tax.

So in his first act as governor, Schwarzenegger sharply whacked the license fee. The budget still hasn't healed.

All the fee's revenue had gone to local governments. Schwarzenegger generously agreed to "backfill" their loss out of the state general fund. And five years later, that fee cut amounts to a $6-billion annual state spending program.

Schwarzenegger initially covered the cost and "balanced" the budget by talking voters into borrowing $15 billion. All that money is gone and we're still paying off the loan.

Last week, while calling a special legislative session, the governor projected red ink for the current fiscal year at $11.2 billion. Without a fix, there'll be an additional $13 billion the next fiscal year.

As a first step, he proposed $4.7 billion in tax hikes and $4.5 billion in spending cuts -- on top of the nearly $11.4 billion in reductions already part of the current budget, according to administration figures.

Credit Schwarzenegger with at last facing the problem: a severe revenue shortage.