Peter Schrag: Gov. Arnold Schwarzenegger, the autopilot man

According to a perceptive Sacramento aphorist, part of Gov. Arnold Schwarzenegger's State of the State speech last week must have been written by first lady Maria Shriver, the rest by Mike Genest, his director of finance.

It began with up-talk about all the things government can do, even citing FDR, then devoted most of the remainder to an elucidation of what his government couldn't do, except cut. The system, he said, is the problem, "the wolf is back." And this time (presumably compared to all prior years) there was no way out of a fat deficit, currently estimated at $14.5 billion, except with an ax.

So, as outlined in the governor's budget proposal, the remedy is to cut spending across the board, preferably beginning yesterday. Also, to combat the roller coaster of fiscal highs and lows, the state needed (yet) another constitutional amendment, this one to stash away money in the good years for a cushion in the bad.

If he can do that, and get the state to stick with it, you can call him Ben Franklin, author of the classic maxim, "a billion saved is a billion earned." Once again the issue was autopilot spending, the formulas that he says drive up expenditures with no link to whether there are commensurate revenues. He didn't let on that he sponsored some of the costliest of those formulas and thus helped make sure that this time (as he said in his speech) "there is no way out."

It was Schwarzenegger who sponsored Proposition 49 in 2002 that locked in an additional $500 million a year for children's after-school programs without providing any additional revenues to pay for them. (Yes, the governor now proposes to cut far more from other, more urgent social programs).

It was the governor who locked in an added $6 billion a year in state spending by cutting the vehicle license fee in 2003 which, with a little fiscal discipline of the kind that he now wants, would have easily precluded this year's deficit and saved the state many millions more in interest on the money the governor borrowed in the meantime.

That $6 billion shows on the state's books not as a horribly timed tax cut, which it was, but as a spending increase to backfill for money local governments lost when the car tax was cut. With a brief exception that tax had been on the books for decades; hardly anyone noticed until one politician chose to make an issue of it.

It was the governor who made the bargain with the transportation lobby that sharply curtailed the ability of the state to borrow, much less divert, funds from gasoline sales taxes for purposes other than transportation. Why? Sales taxes on refrigerators and washing machines aren't allocated to energy projects and sewer maintenance.

There's now the widespread belief in Sacramento that the sharp cuts in programs the governor is proposing – closing state parks and public beaches, releasing thousands of convicts from state prisons, whacking schools – are a little phony, a Washington monument strategy to get voters (and Republicans) to accept some sort of tax increase – maybe coupled to some sort of long-term fiscal restraint formula.

Which would you rather have – a bunch of early-release felons in the neighborhood, more cuts at the local school, shuttered state parks – or an extra levy on the richest taxpayers?

In this case, let's hope the conspiracy theories are right and that Schwarzenegger is squinting at some sort of revenue increase to offset the most severe budget cuts. That's what Gov. Ronald Reagan did in 1967 and Gov. Pete Wilson agreed to in 1991. They split the difference.

Even Schwarzenegger's proposal this year isn't totally innocent of gimmicks – some accounting fudges, plus the sale of the remaining $3 billion plus in deficit reduction bonds that voters approved in 2004.

But he's probably right in his "no way out" declaration: The choice voters should probably have been confronted with immediately after they passed Proposition 13 in 1978 – do you want lower taxes or do you want a prosperous, modern society – may now be unavoidable.

Instead, politicians, always seeking to please, taught their constituents that with enough fudges, borrowing and lots of luck they could have their fiscal cake and eat it, too. Any imbalance between revenues and generous expenditures was attributable to that elusive budget item: waste, fraud and abuse.

In fact, the cake isn't as rich as it had been; infrastructure was neglected, the freeways went to potholes and per-pupil school spending slipped to the point where it's now almost $2,000 below the national average (the governor proposes to cut some more). And given the gap between white, affluent voters and the people most dependent on public schools and other social services, it's not at all clear how those voters will choose.

* * *

Last week's column incorrectly stated that federal Pell grants are linked to student fees. A change in federal law last year now allows community college students full access to the grants, notwithstanding California's low fees.

About the writer:

• Peter Schrag can be reached at Box 15779, Sacramento, CA 95852-0779 or at pschrag@sacbee.com.