Dan Walters: Legislature stalls, governor dithers as budget gap widens

Gov. Arnold Schwarzenegger proposed a new state budget – more or less – just over three months ago, saying it would address a $14.5 billion deficit, which later grew to $16 billion.

Schwarzenegger and state lawmakers devised "solutions" that total $8 billion, supposedly reducing the $16 billion gap by half, even if they are mostly borrowed money and bookkeeping tricks. But that still leaves an $8 billion hole that will surely grow larger, at least by $2 billion to $3 billion, as the state's economy deteriorates, with rising unemployment, sharp price spikes in fuel and other household and business commodities and, perhaps most important, declining consumer confidence.

Having dipped deeply into its bag of fiscal tricks, including the last remnant of a 2004-vintage bond issue, and with just weeks remaining before a new budget is due, one might expect that the Capitol would be working furiously, or at least diligently, on the crisis.

Anyone with that expectation, however, will be sorely disappointed because if anything, the pace of budget deliberations appears slower this year than usual and politicians are more deeply lodged into mutually exclusive, line-in-the-sand positions.

Democrats flatly reject Schwarzenegger's across-the-board-reduction approach to the budget and he appears to be abandoning it as well, although his position changes daily, if not hourly.

Last week, during one of his many appearances to tout long-term budget reform, Schwarzenegger contradicted himself, at least conceptually, in just one paragraph, to wit:

"And we have to find revenues this year, because I don't think that we can cut, do everything through cuts. So I think that the legislators have to get very creative, because I dislike raising taxes. I always made that clear. I am not a believer in raising taxes, because you cannot raise your way out of this problem. You can't. The only way you can get out of this problem is by just simply fixing the budget system, but not by raising taxes. If every single time we fall short on revenues we raise taxes, eventually we are going to hit 100 percent taxes, so that's not the answer."

Did that advance the business of closing the deficit? Hardly. Schwarzenegger may think that taking his budget show on the road is somehow clearing the way for agreement on a budget and the longer-term reforms he wants, but his mixed messages merely add to confusion inside and outside the Capitol.

Democrats and their interest groups are unwilling to talk about spending cuts, especially in the schools, as long as he's talking about adding revenues of some kind, while Republicans are growing more suspicious that while saying he doesn't want new taxes, he'll attempt to raise them when pressed to the wall.

Whatever Schwarzenegger's true position is, it means the budget he proposed in January is already inoperative, and that it is meant, as he once said, only to "rattle the cages" and not to be taken literally. And that, in turn, has given the Legislature's budget subcommittees, which should be making some fairly firm decisions by now, no incentive to act. Why waste time on a budget that the governor is disavowing?

Not only is a larger deficit looming, but so is the prospect of a bloody and ultimately unproductive summer. As the oft-violated deadline for enactment of a budget approaches, the contending factions believe that they can prevail in their endless game of political chicken. Democrats believe if they hold out long enough, Republicans will surrender on taxes and Republicans believe that they can stand firm on taxes and force Democrats to accept spending cuts.

It never works out that way, however. Perennially, it results in a get-out-of-town budget that relies on even more borrowed money and Enronlike accounting tricks and leaves the deficit fundamentally untouched.

About the writer:

• Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.