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Arnold’s Broken Bond

Fresh from his “Year of Reform” debacle and glitzkrieg of China, Governor Arnold Schwarzenegger is again “thinking big.” Chastened by the predictable failure of his Republican rhetoric in blue state California, the governor says he is reaching out to Democrats, leaving the defining rancor of this year’s State of the State address behind in a new burst of big-spending bipartisanship. He claims to be working with Democrats on his forthcoming State of the State — they deny it — and on the biggest bond measure in history, a Big Bang Bond of $50 billion (that’s the public number; $100 billion has been mentioned privately).

“It all seems rather manic, don’t you think?” Arnold’s special election Hollywood nemesis, Oscar-winning director/actor Warren Beatty, remarks dryly. “Wasn’t he just saying he needed more budget powers because the state is broke?”

Whatever Arnold’s got going is not a humming machine, or even a Hummer. Ranking Democrats say, to the contrary, they are not working with him on the big bond or his annual address. In fact, they’re not even sure who in his operation they would work with. Schwarzenegger spent Monday in private meetings on his plans.

Instead, Dems are working on their own infrastructure bond measures, Senate President Don Perata on one version and Assembly Speaker Fabian Nuñez on another, both in the $9 billion to $15 billion range. The Governor’s Office has failed for two years running to comply with state law requiring an audit of California’s infrastructure needs, so clearly Team Schwarzenegger had nothing in place before Arnold started talking.

Republicans seem balky, especially in the State Assembly, where getting to the needed two-thirds vote for a bond measure with any tax increase will be difficult. “Does he really expect Republicans to turn around after a year of his ‘live within your means’ antitax rhetoric and vote for a sales tax increase in an election year?” asks Republican analyst Tony Quinn.

So this seems like just the latest Arnold notion masquerading as a plan. A notion that has Republicans e-mailing me saying “this is no longer amusing.”

And yet there is something to it. Here’s the story behind the story.

Two weeks before the election, as Schwarzenegger’s campaign steamed toward its reckoning with the voters, a group of Republican and Democratic lobbyists and consultants who work together on transportation issues met to discuss how to protect Proposition 42 gas-tax transportation funds from the education lobby. They reviewed private polling that revealed something striking: namely that voters fed up with the state’s deteriorating roads and infrastructure could go for a much bigger bond than that proposed initially by Perata. Fifty-billion was not a crazy figure. The group discussed the implications of this. Clearly a bond without revenue sources would be problematic. Among other things, it would have Schwarzenegger presiding over a tripling of the state’s bonded indebtedness. But the combination of a quarter-cent sales-tax hike, the dedication of existing Prop. 42 funds and new port fees could bond out to around $40 billion.

In the Capitol way, word of the idea’s apparent popularity made its way to the governor through Steve Merksamer, who had been Republican Governor George Deukmejian’s chief of staff.


In its haphazardness,
the idea seems to many to lack seriousness. But experts say many of the projects would likely be in Riverside, San Bernardino, Orange and San Diego counties, all with major infrastructure needs. All are counties with many Republican legislators, all were targeted by Team Schwarzenegger in the special election.

Some think Republicans will go along with something very big, though perhaps not this big. Greed is the motivator. This could be a bonanza for communities, politicians and lobbyists. And Republican legislators don’t have to actually endorse a tax increase; they must merely vote to allow a public vote, though many don’t see it that way.

The scramble is on to get projects onto lists for a coming logrolling of epic proportions. So much for strategic planning. The danger, if Arnold’s Big Bang Bond actually goes forward, is that what emerges is a “Christmas tree” loaded with ornaments placed by greedy children. All it would take is a few big ornaments put in the wrong place — the wrong dam, the wrong toll road, the wrong tunnel through earthquake territory — and the tree falls over.

Polling is being conducted on various funding options to determine what the voters will buy. But the sales tax may not fly. Passing it would require only a majority vote of the electorate, but two-thirds of the Legislature to put it on the ballot. As Prop. 76 speakers bureau member Jon Fleischman, publisher of an influential conservative newsletter, puts it, “What happened to ‘live within our means’?”

So various combinations are being looked at in addition to sales tax, tolls, user fees, surcharges. It may all be too much for the Republicans, who were traumatized by the thought of a few billion in temporary tax increases to balance the budget.

As some Arnold aides like Finance Department spokesman H.D. Palmer cut a backtrack for the governor, talking of smaller projects, former Democratic Assembly Speaker Bob Hertzberg, former Republican gubernatorial nominee Bill Simon and Office of Planning & Research chief Sean Walsh are reportedly tasked with moving the Big Bang Bond forward.

Arnold is privately a huge Bond fan. But this particular bond needs more shaking and stirring to get beyond the usual spectacular opening credits.