The Unknown of a Second Term Schwarzenegger

I planned to write today's commentary on the state budget, but then I read Assemblyman Chuck Devore's e-mail to his supporters that Nicholas Romero posted yesterday afternoon and realized that there wasn't much to say beyond what DeVore wrote (or the San Diego U-T or the OC Register).

While the Legislature and the Governor can campaign this year as having passed and signed the state budget into law before July 1 as required by the state's constiution, no one should be throwing a party.

Sure, this year's budget is not disastrous for the state. But neither is it responsible. How can any legislative body approve a budget that runs a deficit in a year when the state had an unexpected windfall of money?

I must say that the Republicans in the Legislature did the best they could--without the help of any major muscle flexing by the governor, a fellow member of the GOP. One can't help wondering what the budget might have been like if Gov. Schwarzenegger had participated in the budget negotiations before the Legislature voted (it makes this Republican think fondly on the days when Iron Duke was in charge!). Although after Schwarznegger's remarks last year about Big Five sessions, it's no surprise. ("I've never reached any kind of agreement, or accomplished anything, in a Big Five meeting," he told reporters.)

Granted, the official budget process isn't supposed to need a Big Five meeting. But the reality is that we're more likely to get a better budget, from a Republican point of view, when the GOP governor gets involved before the legislature votes. That strategy worked for Deukmejian and Wilson, but they were both experienced politicians who were interested in the details of government and were committed Republicans. You can't help to get the feeling that Schwarzenegger likes the budget signing photo op better than he likes the process. While you can't blame him (who wants to spend hours on hours discussing budget minutia with Don Perata and Fabian Nunez?), as a Republican, I voted for him because he promised to stop the spending spree in Sacramento. I think this budget violated that campaign promise.

One can't help thinking about the budgets in the second Schwarzenegger term. I'm figuring this was the best budget we're going to see in the next five years and that scares me.

I have no faith in what Schwarzenegger will do in his second term, except that I assume that he will likely continue to work closely with Allen Zaremberg and his team at the Chamber of Commerce to fight major job killing proposals. That's good. And we know that a Gov. Angelides would bring us universal health care and (hopefully) Ah-nold won't. That's good too. But everything else seems like a big gamble. Will he go down the path of universal preschool? Will he sign nutty environmental bills? (Even this year, when he's running as the Republican gubernatorial candidate and needs to appear business-friendly to his GOP base, a business lobbyist friend told me that there doesn't seem to be an environmental bill that the governor doesn't support.) Will he agree to raise taxes rather than cut health and welfare programs if the economy stumbles and tax revenues fall?

The uncertainty of a second term Schwarzenegger makes it critical that Tom McClintock and Chuck Poochigian get elected. Perhaps the fellowship of some good, solid conservatives serving in constitutional offices will help keep Schwarzenegger on the Republican reservation in his second term!

http://www.chuckdevore.com/blogdevore.html

Assemblyman Chuck DeVore's Blog

June 28, 2006: A Big Government Budget

Last night the California Legislature approved the budget for 2006-07. Compared with the approved budget from the current year, it grows government by $11.3 billion – $90 billion to $101.3 billion in the General Fund, $131 billion overall including even more State employees than the record number under former Gov. Gray Davis.

I voted “no” as did 23 of the 31 Republicans in the Assembly, with only 8, the minimum needed, voting to approve the budget. Last year, by contrast, almost two-thirds of Assembly Republicans voted to approve the budget with only 13 voting “no.”

I joined the majority of Republicans last year to approve the budget. This year I spoke out against the budget and voted with an even larger majority to oppose it. Why the difference? Last year the budgeted increase in State General Fund spending was 10%; just on the edge of fiscal irresponsibility. This year the rate of budget growth accelerated to an unsustainable 12.6%. Typically government grows a little more than the amount of the approved budget, so before all is said and done, we may very well see actual growth of 14-15% over the 2006 Budget Act numbers.

To that end, the Los Angeles Times quoted me in today’s edition:

Some fiscal conservatives said the spending package does not go far enough in bringing the state's books into balance. Even with all the extra revenue and debt repayment, the state is still on target to spend more than it brings in by fiscal 2007-08. Current projections show lawmakers will be facing a shortfall of at least $3.3 billion for that fiscal year.

"We're bursting through the ceiling with this budget," said Assemblyman Chuck DeVore (R-Irvine).

"We're not going to have the windfall next year that we have this year," he said. "Mark my words, we're going to have some very painful budgetary decisions to make next year."

What did others say about the budget deal?

The San Diego Union Tribune editorialized:

The bottom line is that the new state budget isn't the assault on sanity we used to see in the Gray Davis years. But that's not saying much. The closer one looks at this budget, the more timid – even cowardly – it seems.

While the Orange County Register wrote in its editorial column:

A major problem with this budget is that it doesn't account for the slowing of the state economy. Chapman University's economic forecast, released June 21, expected state job growth to slow to 1.5 percent in 2006 and 1.0 percent in 2007, from 1.8 percent in 2005. State housing prices were projected to drop 6.4 percent in 2007, compared with gains of 2.2 percent in 2006 and 16.6 percent in 2005. This state economic slowdown, Chapman forecasts, will produce a $2 billion reduction in revenue growth, wiping out the $2 billion reserve fund of the actual budget.
But, as Californians learned to their dismay in the early 1990s and again in the early 2000s, counting on good economic times in planning state spending is folly because the business cycle has not been repealed. In short, by continuing to deficit-spend in good economic times, this budget is irresponsible and could lead to a disaster should the economy turn sour.

The most expert voice on the budget, the nonpartisan Legislative Analyst Office wrote in their June 27, 2006 Budget Review:

“Based on current estimates of the policies reflected in the package, the state would continue to face multibillion dollar operating shortfalls in 2007-08 and 2008-09.”

So, there you have it. We approved the budget. Republicans got some of the things we wanted, such as the total removal of funds to support a costly new program to subsidize health insurance for illegal immigrants, as well as more money for law enforcement and school equalization (meaning a little more money for Orange County classrooms). Also important, we won significant reforms to the broken Drug Court process due to GOP unity and an exceptional negotiating effort by Assemblyman Todd Spitzer. This is all good. The problem with the budget wasn’t with some of the Republican victories, the problem is with the big picture – government is growing too fast and someday soon there will be serious consequences for our failure to hold the line.

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