CA: Governor stalled on spending controls

SACRAMENTO – Gov. Arnold Schwarzenegger says enacting a spending control measure is "Job No. 1." But the committee charged with selecting what kind of measure should be put before voters appears deeply split.

Schwarzenegger wants a spending control plan to prevent massive state budget deficits such as the one that helped drive former Gov. Gray Davis from office and to curb "autopilot" spending formulas that grow faster than tax revenue.

Citizens to Save California, a business-led group aligned with the governor, has not yet decided whether to back a spending control similar to Schwarzenegger's plan or a tighter limit backed by state Sen. John Campbell, R-Irvine, and two taxpayer groups.

Getting a spending control measure is a top priority in what Schwarzenegger calls a "year of reform." He also is pursuing measures in the Legislature and on the ballot to curb public-employee pension costs, switch teachers to merit pay and draw more competitive legislative districts.

The split over the spending limit is the latest challenge for the governor. His teacher-pay plan was weakened and his pension overhaul has drawn stiff resistance from public-employee unions.

Citizens to Save California, which while supporting Schwarzenegger claims independence from him, has not yet backed all his goals, notably the redistricting plan.

The directors of the committee have an obvious split on the competing versions of a spending control. One faction is supporting a measure similar to the old Gann limit, which limits spending based on annual growth in population and inflation, with several variations.

The other faction backs a softer initiative along the lines of a Schwarzenegger proposal that requires mid-year cuts when spending outpaces revenue, with a spending limit based on the average growth of revenue during the previous three years.

Two of the board members head taxpayer groups and are co-sponsors of the tougher limit proposed by Campbell. They are Jon Coupal of the Howard Jarvis Taxpayers Association and Larry McCarthy of the California Taxpayers Association.

Two business leaders on the board wrote a softer limit that reflects much of Schwarzenegger's plan. They are Bill Hauck of the California Business Roundtable and Allan Zaremberg of the California Chamber of Commerce.

The other directors are Joel Fox, formerly of the Jarvis group but now head of the Small Business Action Committee, and Rex Hime of the California Business Properties Association.

A new director has been added, Janet Lamkin of the California Bankers Association – which led to some speculation that the committee was being stacked to influence the vote.

Although the competing spending controls might seem to pit business against taxpayer groups, McCarthy said it is not that simple. His 80-year-old group, for example, is primarily funded by business.

There is some irony that a business group and Republicans are pushing a spending limit. Former Republican Gov. George Deukmejian and business groups led a drive in 1990 that loosened the spending limit sponsored a decade earlier by Paul Gann, a co-author of the Proposition 13 property-tax cut.

Deukmejian and the business groups said the Gann limit needed to be lifted to allow more funding for transportation, and voters approved a gasoline tax increase in Proposition 111 along with the change in the spending limit.

When Schwarzenegger took office in fall 2003, he proposed a new spending limit based on the annual growth in population and inflation, similar to the old Gann limit.

When Democratic legislators objected, Schwarzenegger settled for a mild balanced-budget amendment, Proposition 58, as a companion to a $15 billion deficit bond, Proposition 57, that he needed to avoid a cash crisis.

Campbell and the two taxpayer groups, saying Proposition 58 did little or nothing to control spending, launched Campbell's Gann-like initiative, the Deficit Prevention Act.

In January, Schwarzenegger proposed a new spending control that would trigger automatic across-the-board cuts if spending exceeded revenue during the year and the Legislature failed to take corrective action in 45 days. Business leaders Hauck and Zaremberg expanded upon that and filed an initiative.

One concern about the Hauck-Zaremberg initiative is that it was filed late, possibly leaving only about a month to gather signatures.

The target is April 19 for turning in the 598,105 signatures of registered voters needed to qualify a constitutional amendment for an expected Nov. 8 special election. The deadline usually can be stretched a couple of weeks.

Campbell believes the HauckZaremberg initiative – the California Live Within Our Means Act – is not tough enough and would have allowed more spending than actually occurred in eight of the last 16 years.

Hauck of the Business Roundtable said his measure "would clearly permit state government to grow, but in conjunction with the way the economy of California grows."

Democratic legislators tend not to like spending limits and argue that lawmakers need flexibility while preparing the annual state budget.

Assembly Budget Committee Chairman John Laird, D-Santa Cruz, noted that Schwarzenegger's finance director told a hearing that the spending control is needed to deal with a chronic state budget gap, now about $5 billion.

It was George Deukmeijian and his conservatives in the GOP who undermined the Gann Limit and brought us a decade and a half of reckless spending. Wow! I didn't know this before.

Well, you still don't know. It was not conservatives, nor was it the majority of the GOP. It appears it was Deukmejian and the same type of business folks trying to convince us that we can borrow our way out of debt. The GOP, in total, did not embrace this initiative. Some of the same folks helping Deukmejian sell this deceptive legislation are behind some of Arnold's initiatives. Beware. Be very aware.

Views on Governor's Fiscal Legacy Vary Widely
State budget: Deukmejian anticipated criticism of his spending plan vetoes. The Legislature is unlikely to overturn them. A later effort to restore programs is seen.
Los Angeles Times, August 2, 1990
Author: CARL INGRAMMAX BOOT; TIMES STAFF WRITERS Metro Desk
(snip)
Assemblyman Tom McClintock of Thousand Oaks, a conservative Republican who sharply disagreed with Deukmejian when the governor embraced a gasoline tax increase last summer as a means of financing the Proposition 111 transportation plan, credited Deukmejian's prison construction program as a "solid accomplishment."
But he charged that overall the Deukmejian fiscal legacy would be remembered as a "new era of major tax increases" and as "eight years of muddling through without any clear idea of where he wanted the state to go."
Democratic Turnout Helped Pass Prop. 111
Los Angeles Times, June 7, 1990
Author: GEORGE SKELTON; TIMES SACRAMENTO BUREAU CHIEF Metro Desk
(snip)
Republican Gov. George Deukmejian and California's business establishment can thank Democratic voters--especially liberals--for passage of the costly, ambitious transportation plan they eagerly sought, the Los Angeles Times Poll found.
GOP voters rejected the measure, which will double the state gasoline tax and open the state treasury by raising the government spending limit.
The narrowly passed proposal, Proposition 111, clearly benefited from a hot Democratic gubernatorial primary that brought out liberal voters and created an electorate more sympathetic toward spending than would have been the case had there been a compelling GOP battle, the survey indicated. Democratic voters outnumbered Republicans on Tuesday by 5 to 4.
Prop. 111 Victory Eases Calif. Anti-Tax Stance
Voting: Experts say approval shows public is willing to pay to solve specific problems. But don't write the tax revolt's obituary, one cautions.
Los Angeles Times, June 7, 1990
Author: VIRGINIA ELLISTOM REDBURN; TIMES STAFF WRITERS Metro Desk
(snip)
Indeed, several political analysts said the election could easily have swung the other way if the political dynamics had been slightly different, if more Republicans had come to the polls or more Democrats had stayed away. While the measure had support among Republican business people, it had less support among grass-roots party members.

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