Promises Kept, Promises Broken

Yet the governor ruled out a tax increase, even for the wealthiest Californians, saying “that’s not really enough,” that such a tax would raise only $1.25 billion, maybe $1.5 billion at most — though some economists have challenged his figure as a low-ball estimate. “I’d rather go the more creative way rather than the traditional way,” said Schwarzenegger. “The bottom line is, I am a strong believer that increasing taxes will hurt our economy. Otherwise, I would go and increase taxes . . . We’ve got to bring jobs back. We’ve got to bring companies back. That will create revenue and then we have money to pay for the programs.”

The governor’s reasoning for not raising tax rates — even temporarily — on the wealthy drew a sharp rebuke from State Treasurer Phil Angelides, a Democrat. “Cutting universities by several hundred million dollars didn’t solve all the problem either, but he did it,” said Angelides to reporters during a conference call. Angelides characterized the budget as unfair and unbalanced. “The company with the phony Bermuda address is not scathed by this budget.”

Schwarzenegger will need all his charm and skill — not to mention good lawyers — to pull off much of his proposal. For starters, he’s projected nearly $1 billion in savings via a form of Medi-Cal cost reductions that a lower court has ruled illegal. Ditto for his plan to borrow $950 million to cover payments owed to the state’s pension fund.

Schwarzenegger’s budget also includes hoped-for financial concessions from the prison-guards union and the cash-rich tribes that operate casinos. And maybe he can get them, given what he pulled off last week by getting the education establishment to accept a $2 billion to $3 billion trim that virtually eliminates per-pupil funding increases. The California Teachers Association and its allies could have proved to be powerful and persuasive critics of the Republican governor’s agenda. Instead, they signed off and withdrew to the sidelines before the trench war even started. “I am pleased with this compromise,” said union president Barbara Kerr in a radio interview. “The schools were entitled to $2 billion more than we received, [but] just because we’re entitled doesn’t mean we would have gotten anything.”

The new governor was not so deft with cities and counties. Their roller coaster began with the slashing of the car tax, which was being used to fund local governments. The governor theatrically “restored” these lost funds late last month — city officials praised Schwarzenegger for keeping his word. But now the just-released budget takes 40 percent of that money away all over again.

“It’s outrageous,” fumed Los Angeles County Supervisor Zev Yaroslavsky. “This is what Pete Wilson did. This is what Governor Davis did.” The county would lose $350 million. “It cannot be allowed to stand. It’s essentially a declaration of war on cities and counties.”

This war will play out over the next six months in the Legislature and in the court of public opinion. A key early hurdle for Schwarzenegger will be his $15 billion deficit-bond proposal on the March ballot. Most of that money would consolidate past debt, but about $3 billion could go to next year’s budget — even though Schwarzenegger had pledged that the government wouldn’t borrow more money after this year. To make matters worse, the nonpartisan Legislative Analyst’s Office concluded this week that the governor’s staff had undershot its own balanced-budget target by $6 billion. Team Arnold hopes that the debt picture will improve as the crew led by Finance Director Donna Arduin labors to uncover waste-fraud-and-abuse.

And yes, there’s waste-fraud-and-abuse out there. Even the governor’s critics, such as Angelides, find common cause with the goal of a more efficient, more cost-effective government. But early on, they also pointed out that such efforts take time and commitment, something that Schwarzenegger implicitly acknowledged last week when he spoke of setting up a long-running commission — whose job will include eliminating some long-running commissions. Like a lot of things, ending waste-fraud-and-abuse seemed like such low, pluckable fruit when Schwarzenegger was a candidate making promises.