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Ruling by Referendum

The new populist governor, Arnold Schwarzenegger, believes in giving people what they want. And part of this package is his faith in direct democracy, for letting voters make the choices, just like they chose him on October 7. It’s like he thinks of the body politic as though it’s of one mind, capable of self-governance — a sort of über-individual. He even compares California itself to someone short on cash when it comes to the current budget crisis.

A cash-strapped citizen has to live on a budget, the governor has explained. A real person can’t spend more than he takes in; regular folk make responsible choices about what to buy and when not to. And if the state, through its legislators, won’t act like a mature ordinary Californian, then the new governor’s prepared to take issues of state directly to the people through ballot initiatives.

This calculus worked fine for the governor this week, when the mere threat of going to voters compelled the Legislature to rescind its bill allowing undocumented immigrants to obtain driver’s licenses. It was Schwarzenegger’s second major post-election triumph, his second major promise kept — coming right behind his cancellation of the increase in the car tax. When it comes to cars and driving at least, this Humvee owner is good as gold.

But now Schwarzenegger has turned to a far more crucial portion of his agenda. He’s pushing a voter initiative that would retire this year’s state debt by selling $15 billion to $17 billion in bonds financed over as long as 30 years. He hopes to sweeten the pot for voters with a companion initiative that would “cap” future state spending. If he tweaks the package correctly in the next few days, he’ll have the Democratic votes he needs to get these measures on the ballot in March.

What happens then is anyone’s guess.

You just never know exactly what Californians will do when they govern themselves directly through the initiative process. One year they’ll slash government spending on schools and health care by passing Proposition 13; another year, they’ll lock in rising spending for schools by passing Proposition 98. In the mid-’60s, the electorate endorsed segregated housing; in the ’90s, they wanted to kick the children of undocumented immigrants out of schools and hospitals. (The courts overturned both of those initiatives.) One year they’ll re-elect Gray Davis governor; the next they’ll recall him from office.

Republicans and Democrats may tell voters that the deficit bonds are the best way out, the responsible path. But what if the people, collectively, behave as irresponsibly as their elected officials are sometimes wont to do? Since when have ordinary folk been willing to live within a budget?

Just maybe the hoi polloi are as ignorant of state budget intricacies and strategies as Governor Schwarzenegger admitted to being this week, when he said he had no idea how difficult and painful this whole budget thing would be. For its part, the electorate is under no obligation to vote the state out of this mess. Managing this predicament would actually be the job of Governor Schwarzenegger, meaning that the “action, action, action” man may have to act to resolve this crisis whether or not voters give him permission first.

 

For that matter, what would the Average Joe find so responsible about a Schwarzenegger plan that expressly blows its own budget by some $15 billion?

One person who won’t be jumping on the Arnold-wagon is fellow Republican Tom McClintock (R–Thousand Oaks), the conservative state senator who became well known statewide because he, too, ran in the recall election. “Deficit bonds were a bad idea when Governor Davis proposed borrowing over $11 billion to paper over the deficit, and it’s still a bad idea to borrow $15 billion to paper over the same deficit,” said McClintock. “Borrowing $15 billion will cost us $30 billion with principal and interest over time, which needlessly drags this budget problem with us years in the future.” He also doesn’t buy the argument that Schwarzenegger’s borrowing is okay because the new governor inherited most of the problem. “If every governor who inherited a deficit passed it on to the next generation, we’d be drowning in debt. We’re swimming in it already.”

Most Republican lawmakers will support the Schwarzenegger plan, but getting it on the ballot with a two-thirds vote of the Legislature will require Democratic backing. Don’t expect an endorsement from state Treasurer Phil Angelides, a Democrat poised to run for governor against Schwarzenegger.

Indeed, the Schwarzenegger bonds would be a tough pill for Dems to swallow, because getting his bonds would be the kind of widely hailed political victory that could propel Schwarzenegger into a second term. Republican state Assemblyman Ray Haynes, who supports the bonds, insisted that Democrats have little alternative.

“This plan benefits the Democrats’ social programs,” said Haynes (R-Temecula). “These are not all programs that I’m in favor of. And this is not a proposal a normal Republican would go along with. The message from the governor to the Democrats in the Legislature is: ‘Either you vote for this or I cut your programs.’ And if this doesn’t get on the ballot, and if the governor has to come in with proposed cuts, I think it hurts the Democrats. I think the voters will stand behind the governor.”

Incoming state Assembly Leader Fabian Núñez (D–Los Angeles) was certainly headed toward acquiescence this week, provided that Schwarzenegger’s team negotiates over details of the bond, the spending cap and proposed midyear budget cuts. For one thing, Núñez wanted the bond reduced to about $11 billion, which would replace Davis’ borrowing with voter-approved bonds, which could qualify for better interest rates. Núñez doesn’t want Schwarzenegger to hide the money lost from the car tax in the bond.

“We’re trying to fix a problem that was created by an election promise,” said Núñez. “The governor wanted to roll back that fee, and he got a political benefit for it. Now he needs to show how he’s going to pay for it. He needs to put that on the table.”

The proposed cuts target some of the neediest Californians, including those in the revamped welfare program, who already face strict time limits for receiving aid. Currently, a CalWORKS grant for a family of three in high-cost counties is $728 per month. The governor’s proposal would reduce this grant to $669, which is less money than this family would have received more than a decade ago, according to research from the nonprofit California Budget Project. The amount would equal only 52.6 percent of the federal poverty level, which is no one’s idea of a generous index. Federal food stamps could make up some of the difference in the short term.

Another proposed cut would eliminate home-care services for 74,000 elderly, blind and disabled persons. “There are some proposals that would certainly contradict things Arnold Schwarzenegger said during the campaign about protecting children and the elderly,” said Jean Ross of the Budget Project. “He made a very strong statement with respect to the Healthy Families program — that he would find kids and sign them up. His midyear reductions would cap enrollment for the program so you couldn’t cover more kids.”

 

Cuts aside, the Schwarzenegger bond package has similarities to Davis’. Both use substantial borrowing to postpone the pain of additional program cuts — in hopes that the state economy will rebound and grow out of its troubles. They both share the fundamental flaw of failing to deal with a state spending more than it’s taking in, although both governors talked of forthcoming plans for handling that, too.

In the end, Davis borrowed because he couldn’t win over the handful of Republican legislators he needed to raise some taxes, even on a temporary basis, even when combined with program cuts. Schwarzenegger, by contrast, starts in the same place as the Republicans. That is, he opposes tax increases seemingly at all costs. But he too gets to deficit financing as a fallback to avoid steeper program cuts.

Davis chose not to rely on voter approval for deficit financing, which opened the door, under California’s constitution, to court challenges. And litigation has tentatively undone some of his plan. Schwarzenegger won’t face that dilemma if he can win over voters. He’s banking on his popularity and charm — and on calling the financial crisis a Davis fiasco that he inherited. Go with Arnold, he’ll tell voters, and don’t hold the messiness of his fix against him.

Come March, however, voters could easily reject these bonds. If Schwarzenegger then responded by putting a tax increase on the ballot instead, voters could readily spurn that, too. And if he put the “last” alternative, draconian program cuts, on the ballot — well, why would voters go for that either? It might not be the same majority of voters each time. Maybe more Republicans would oppose taxes; maybe more Dems would oppose program cuts. But it’s quite possible that a diverse majority of voters, for varied reasons, will simply refuse to bail out either California or Schwarzenegger.

What then?

The sky will not fall in. The Davis budget deal remains in place. It could survive through June, although something must be done about the $4 billion lost through the car-tax repeal and the state’s structural spending problem. And postponing the cure will only exacerbate the financial hemorrhaging.

Neither the Davis nor Schwarzenegger borrowing schemes will go down as a bargain for taxpayers, said Ross of the Budget Project. “Bonds are usually used for things like building schools, which last for decades,” she said. “This is the equivalent of putting last year’s groceries on your credit card, and then paying them off over 20 to 30 years.”

If voters decide they don’t like that prospect, then Schwarzenegger probably doesn’t have time to go back to voters with another try. The next scheduled statewide election after March is nearly a year from now. “You can’t always govern by litmus test,” said Assembly Leader Núñez. “Bold leadership sometimes requires people to do things that are not the most popular.”

Christine Pelisek contributed to this story.


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