Five things Schwarzenegger can do

Posted: November 25, 2003

by BILL LEONARD

Five things Schwarzenegger can do

Begin by tossing Davis’s budget: its cuts weren’t made and
its revenue projections won’t come through.

Bill Leonard represents California’s second district on the state Board of
Equalization. He served in the Legislature, in the Senate and Assembly, from
1978 through 2002.

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ONE: TELL CALIFORNIANS HOW BIG THE DEFICIT REALLY IS.

The first thing to do is to reject the current Davis budget because it relies on cuts that were never implemented and on new revenue that will never show up. The outgoing governor never truthfully laid bare the real size of the deficit. Governor Arnold Schwarzenegger should make clear the full size of the gap between what we are spending and what we are taking in so the public fully understands the extent of the problem Davis left us. In addition, this true gap should be calculated using revenue projections that are in line with a moderately improving economy, not Davis’s imagined economic miracle.

TWO: SELL GOVERNMENT ASSETS.

To replace the bad idea of debt, or increasing debt, we should instead look at selling assets. The state owns thousands of acres of land it is not using. The full list of surplus properties should be reviewed. Surplus land that might have value as open-space or wildlife habitat might find buyers willing to accept a conservation easement as a precondition for the sale. The governor could look at properties like student housing on the UC and CSU campuses that could easily be sold to private property management entities. These sales could offset some of the current deficit while cuts are being identified.

THREE: ELIMINATE VACANT POSITIONS AND STOP HIRING.

Davis’s 2001 hiring freeze did not keep the state from adding more employees until quite recently. Davis’s version of a hiring freeze was loaded with exemptions. Somewhere around 30 percent of state employees work for the UC and CSU systems — these are responsible for much of the growth. In addition, the Department of Finance had authority to look at exemption requests for all other departments and these were granted too liberally. The new Governor should not grant exemptions except for very special circumstances where all other options fail.

FOUR: ENACT CONSTITUTIONAL FISCAL REFORMS.

Many of these reforms have been discussed in other essays in this section. I would add my vote for a new Constitutional spending limit. I particularly like the idea of indexing spending to no more than inflation and population growth. In negotiating with the Legislature, if the majority decides to obstruct his efforts to balance the budget, Schwarzenegger might generate greater cooperation by threatening a Constitutional ballot measure to return to a part-time Legislature.

FIVE: USE A TRIMMER TO FULFILL DAVIS’S PROMISES. USE AN AXE FOR THE REST.

An August letter from outgoing Director of Finance Steve Peace announced that the 2003 Budget Act requires his department to reduce spending by at least $1.1 billion and 16,000 positions. But the letter was rescinded shortly thereafter with an announcement that major layoffs would not occur until after the October election. This has deprived agencies flexibility in finding ways to save. Now, as we approach the current fiscal year’s halfway point, these delayed cuts — booked in the current budget — have not been fully realized. Governor Schwarzenegger will have to accelerate them, though it is difficult to see how this can be done in agencies where personnel budgets are a small sliver of the spending for which the agencies are legally responsible. It is almost certainly too late to accomplish fully the layoffs the current budget mandates, but the governor-elect should start doing what he can immediately.

Even if the entire deficit could be eliminated by trimming, it would still be wise to eliminate less useful state programs. But, in fact, California government has grown to such gargantuan excess that our economy can no longer support it. This means Governor Schwarzenegger will have to look beyond trimming to the elimination of entire categories of state spending. That alone will achieve the multi-billion dollar correction that truly balancing the budget will require. The magnitude of the deficit makes such reductions more politically feasible than ever before.

The spending lobbies want us to believe nothing remains to be cut except vital, politically-sacrosanct state services. But the governor will find ample resources available that make the case for programmatic cuts with lots of specific suggestions. The Reason Foundation, the Claremont Institute, the Auditor General, and the Legislative Analyst all have cut lists available.

Governor Deukmejian’s former Chief of Staff Steve Merksamer remarked that a governor has about one year before his appointees are captured by the bureaucracy and start fighting their own governor. Governor Schwarzenegger should remember this, appointing department heads who will question every dollar and every spending program. Each should be tasked with reducing permanently the size of their department.

On New Year’s Day, many of us talk optimistically about losing weight, exercising more, stopping smoking, lots of good things. But by Valentine’s Day, most of us have given up hope. We thought we could change a little and keep the rest of our lives the same. Those who succeed in their resolutions practice new, healthier habits, changing their lives to accommodate their desired goals. In the same way, to escape its budgetary morass, California government will have to acquire permanent new habits, leaving behind once and for all the unhealthy binge-and-purge ways of the past.

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