Analysis: Pundits call proposal an opening volley

Stand in Capitol Park, and in any direction you see a state building, something is likely on the chopping block.

In his bleakest budget to date, Gov. Arnold Schwarzenegger on Thursday proposed a $101 billion general fund spending plan that would release thousands of prisoners, slash school funding, shut down 48 state parks, reduce Medi-Cal health services to the poor and cut aid to blind and disabled people.

Some found the governor's cuts so draconian that they suspect his budget is merely a strategic attempt to scare legislators and voters into accepting tax increases to help close a $14.5 billion budget gap. Assembly Speaker Fabian Núñez even suggested the governor himself probably disagrees with his own proposal.

"It's a negotiating position," said John J. Pitney, professor of government at Claremont McKenna College. "From his perspective, if he had proposed tax increases right at the start, the Democrats would have taken that as a sign to propose even bigger tax increases. … However, this way, even if he has to accept tax increases at the end, he might get a little political credit for trying to hold the line."

The 10 percent across-the-board cut Schwarzenegger promised weeks ago would hit almost every department and save about $9 billion next year and $217 million for the rest of this fiscal year. The budget anticipates a reduction of about 7,086 state employees over the next 18 months – 6,054 of them from the prisons.

"This is a budget that doesn't please everybody, I know that for sure," Schwarzenegger said. "And you will have people coming out of this room afterwards and spinning why this is all terrible. But the bottom line is, I think this is the fairest way to go."

Jaime Regalado, executive director of the Edmund G. "Pat" Brown Institute of Public Affairs, said most governors try to create worst-case scenarios early in the budget process in order to give themselves negotiating room.

"Part of it's real, and part of it's fluff," Regalado said. "You take away from every program and then negotiate with the Democratic leadership and to a lesser degree the Republican leadership about what cuts and fees might be rolled in there … The budget is always about overstating the case and then coming back home to renegotiate something."

Schwarzenegger also called a fiscal emergency Thursday, setting a 45-day deadline to impose immediate cuts, and used the occasion to pitch a spending cap he said would stabilize the budget by creating a rainy-day fund in good years.

Democratic lawmakers responded with a drumbeat of criticism, charging that his budget would imperil students and the state's neediest residents. Party leaders did not make bold calls for new taxes but said they must be considered.

"Cuts alone simply will not work," Núñez said. "And given the arcane structure of the budget, what is sold as an across-the-board cut winds up being a below-the-belt hit to Californians who are in desperate need of real help. I've made it clear that taxes should be the last resort. But a blind pledge to never raise any taxes, at any time, I believe is a straitjacket that ill fits California."

Asked whether Republicans and Democrats would resolve the budget easily, Assemblyman Roger Niello, R-Fair Oaks, vice chairman of the Assembly Budget Committee, sarcastically quipped, "Oh, sure, kumbaya, we'll all agree on everything."

"This is going to be difficult," Niello added. "It's going to be an ugly year, unfortunately. But the approaches of the past aren't working. … I already stated taxes don't work. We have to bring our spending in line with our revenue."

The governor did not accept blame for the $14.5 billion budget hole, instead pinning it on a network of voter-approved spending formulas he suggested were too great for any governor to overcome.

He described the gap as a "historic" opportunity to enact the rainy-day fund in a constitutional amendment, which he suggested would save the state from facing another budget problem as severe as this one.

About the writer:

• Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548. Jim Sanders and Dan Smith of The Bee Capitol Bureau contributed to this report.