Arnold Schwarzenegger has been hammering at legislators not only for their record-long stalemate on a state budget, but for entertaining quick fixes that would merely, as he puts it, "kick the can down the road" without solving the state's chronic fiscal ills.
"Let's fix the budget problem once and for all," the governor said last week as he tried – so far unsuccessfully – to pressure the Legislature to pass a budget.
It's a noble sentiment, certainly, but none of the budget versions floating around the Capitol, including Schwarzenegger's, would do it. Each is flawed because none recognizes that California has two budget problems, a "structural deficit" due to spending that's permanently higher than the revenues even in a prosperous economy, and a hopefully temporary deficit caused by recession.
There are three versions of the budget on the table, plus countless variations. Schwarzenegger's – his third of the year – would raise sales taxes and other revenues by about $5 billion a year, but only for three years. The Democrats would raise taxes on high-income individuals by $8-plus billion a year. A new Republican version would eschew new taxes, cut spending more and borrow about $2 billion that would be "securitized" by diversions from the state lottery.
There are also huge disparities on so-called "budget reform" that, at least in theory, would avoid future crises by creating more reserves and/or imposing caps on spending increases and/or allow the governor to cut spending unilaterally when revenues fall short.
Schwarzenegger lays claim to a permanent solution, but when his sales tax increase runs out in three years and taxes then are cut below current levels, it could merely dump the problem on the next governor.
Democrats contend their permanent tax increases would solve the problem permanently, but they would leave the state even more vulnerable to boom-and-bust budgeting because of increased dependence on personal income taxes.
The Republican version is more or less business as usual, covering the deficit with short-term gimmicks and loans, and leaving us in the same boat unless the economy recovers suddenly.
That said, as public pressure mounts, the short-term Republican approach may become the most likely outcome, since GOP votes are needed for any budget and its legislators are showing remarkable unity and a tactical cleverness not previously seen.
They are, for example, putting Democrats on the spot by suggesting a stop-gap spending bill to relieve financial pain on nursing homes and others whose payments have been blocked by the prolonged stalemate. Another tactic is pointing out some questionable, if minor, pieces of the Democrats' budget, such as $118,000 to hire two people to distribute arts and crafts materials to inmates on death row.
In a game of political chicken, time may favor the Republican plan, even if it doesn't fix the problem permanently.
Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.
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