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The wrong people pay for Schwarzenegger's busted budget

The state's wealthiest residents would make out just fine under his plan to cut services, hike taxes.

January 08, 2009|MICHAEL HILTZIK

The Schwarzenegger administration, which was launched via an electoral campaign of majestic hypocrisy in 2003, has finally fulfilled all the heady promise of those distant days of the Gray Davis recall.

Just a few days after being featured on "60 Minutes" talking about his commitment to "what is best for the people of California," he sneaked his sixth annual budget plan into the public spotlight on New Year's Eve. Of course, nobody would be too distracted by merrymaking and alcohol to realize that he's out to sock it to the middle class and the working class again. ("I'm a public servant," he reassured the man from "60 Minutes.")

The governor himself was not on hand for the unveiling, having hared off to a ski vacation in Idaho. (Aren't there any ski resorts in California?)

The man who coasted into office by railing against his predecessor's borrowing plans proposes to meet a looming $40-billion budget deficit by borrowing $10.3 billion. He also wants to slash K-12 and community college programs to save $5 billion. Cut grants for the disabled, aged and poor to save $2.5 billion. Hack away at medical care for the needy and slice home health workers to minimum wage.

"These are very deep cuts to education and health and human services," Jean Ross, executive director of the nonprofit California Budget Project, told me this week, unfortunately sounding like a broken record.

The state's wealthiest residents would make out just fine under the budget plan. (Unless you think that having to pay sales tax on golf fees for the first time is an unholy burden.)

But the not-so-wealthy? Consider his proposed cut in the income tax credit for dependents, which is designed to generate $1.4 billion in savings. My back-of-the-envelope calculation says this change will lower the income level at which many California families of four start owing state income tax to about $33,000 from $49,000. That will affect more than 825,000 households, judging by 2005 figures from the state Franchise Tax Board.

It's not as if these Californians have been getting away with something by not paying state income tax. They're people who already get disproportionately socked by Schwarzenegger's budget-balancing -- his policies of fewer parks, higher fees, less money for schools and colleges. Now he's also proposing a 1.5-cent-on-the-dollar hike in the regressive sales tax, which will strike harder at this same cohort. And if they're sending their children to community college or Cal State, they'll pay more for tuition, if those staggering systems still have student places available.

The fundamental reason for California's budget crisis isn't the economy, although the governor would have us think so. It's the state's ridiculous tax and budgeting system.

Passing a budget or raising taxes requires a two-thirds vote of the Legislature. That gives Sacramento's Republican minority, which is just big enough to snake over the 33% threshold, an outsize veto.

The budget is also hostage to any interest group that can gather a few hundred thousand signatures to place its pet program on the ballot and raise the money for a deceptive statewide television campaign. I'm not against the early-childhood programs, mental health services or stem cell research funded via such ballot-box subterfuge, I'm just concerned that it has left the University of California, Medi-Cal and hospital, road and bridge programs starved for money.

California voters love the supermajority provision. "We're told that most Californians think it's the only thing holding us back" from overspending, says Thomas V. McKernan, CEO of the Automobile Club of Southern California and co-chair of California Forward, a coalition of government reform organizations. But he says that the partisan gridlock and too-easy recourse to the ballot box impose "more and more constraints" on what the Legislature can achieve.

Schwarzenegger could have done something about this. He came into office with so much adoration that the public would have followed him anywhere.

Instead, he ran from every tough choice. ("I love challenges," he told the man from "60 Minutes," who slurped it up.) Even before the recall election, when his economic advisor Warren Buffett questioned why he paid pennies in property tax on his own multimillion-dollar California home -- thus putting his finger on the most dysfunctional element of the state's tax structure -- Schwarzenegger browbeat the billionaire investor into backing off his criticism of Proposition 13.

Having based his campaign on a demand that California live within its means, Schwarzenegger balanced his first budget with a $15-billion bond issue. Remember his pledge to "blow up the boxes" by reorganizing state government? His new budget plan mandates a bunch of reorganizations, such as the long-awaited consolidation of the Hearing Aid Dispensers Bureau with the Speech-Language Pathology and Audiology Board. (This will "further improve governmental efficiency," the budget office says.)

Schwarzenegger told his television interviewer that show business was indispensable training for running the state. In the movies, Schwarzenegger was an actor of impressive but narrow talents. You wouldn't cast him as the lead in "Message in a Bottle," but you couldn't ask for a better candidate to play the monosyllabic cyborg from the future. Yet that doesn't mean that voters in 2003 expected him to play Gort, the immovable 16-foot robot, in "The Five Years California Stood Still."

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Michael Hiltzik's column appears Mondays and Thursdays.

You can reach him at michael.hiltzik@

latimes.com and read his archived columns at www.latimes.com/hiltzik "> www.latimes.com/hiltzik .

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