Democrats judge grip on handle of budget ax

San Diego Union Tribune ^ | Dec 22, 2003 | Ed Mendel

[John Jorsett]

SACRAMENTO – If a new governor can use existing law to increase spending by $2.65 billion without the approval of the Legislature, what about the flip side: How much spending can he cut on his own?

It's a question faced by Democratic legislators now after Gov. Arnold Schwarzenegger, boldly outflanking them, issued an order last week that will repay local government for revenue lost when he repealed a car tax increase.

The Republican governor, who wants to avoid a tax increase, is getting ready to propose a new state budget by Jan. 10 that is expected to include deep spending cuts to close a gap that could be as much as $17 billion.

After the Democratic-controlled Legislature – whose members Schwarzenegger called "spending addicts" – rejected his proposal for $1.9 billion in mid-year cuts, he used new power given the governor this year to cut $150 million last week.

Former Gov. Gray Davis, a Democrat who wanted the Legislature to restore the power to make mid-year spending cuts that was lost by the governor two decades ago, seemed to have settled for a watered-down version when he signed the current budget.

At the time, Senate President Pro Tempore John Burton, D-San Francisco, said he regarded the new authority given the governor as a minor change going little beyond the status quo.

"The only cuts that can be made are administrative cuts," Burton said last week. "You can't cut programs because that takes statutory changes (by the Legislature)."

But after seeing what Schwarzenegger did last week, Democrats may have to re-evaluate what an aggressive governor can do with the new power, particularly if the Legislature does not pass his proposed spending cuts.

When Davis took office, he had a quarter-century of experience in Sacramento watching budget battles, first as chief of staff to former Gov. Jerry Brown, and then as an assemblyman, state controller and lieutenant governor.

The first budget Davis proposed in January 1999 included an unsuccessful request to restore the power of the governor to make mid-year spending cuts needed to keep the budget in balance, without the approval of the Legislature.

When former Republican Gov. George Deukmejian took office in 1983, facing a large budget gap, he invoked a little-known law to order a 2 percent across-the-board cut in spending.

As part of a budget deal later that year, Deukmejian signed legislation eliminating the mid-year cut authority. California became one of only a dozen states that did not allow the governor to make mid-year cuts.

In 1992, voters rejected Proposition 165, an initiative sponsored by former Republican Gov. Pete Wilson that would have cut welfare payments while also giving the governor the power to make mid-year cuts to balance the budget.

Last January, when Davis again proposed restoring the mid-year cut authority, there was a widely reported response from the Senate leader, Burton: "Not in my lifetime."

Burton and other Democrats were surprised last week when Schwarzenegger used a routine procedure for covering overspending to repay cities and counties for revenue lost when, keeping a campaign promise, he repealed a car tax increase.

Davis had administratively triggered a $4 billion increase in vehicle license fee revenue to help balance the budget. Schwarzenegger contended that the tax increase was illegal and swiftly signed a repeal order.

Democrats bottled up legislation sponsored by Schwarzenegger to repay local government $2.65 billion this fiscal year, contending that the governor had not identified a source of revenue for the repayment.

Alarmed local government officials warned of cuts in police and fire service. Instead of taking the blame, Schwarzenegger won their praise by issuing an order that will make the repayment without legislation.

The governor found a toehold in the current state budget. The state had been repaying local government for revenue lost when a cut in the vehicle license fee was phased in beginning five years ago. The vehicle license fee historically had helped fund local government.

After Davis triggered the increase this year, the repayment, or "backfill," requirement was not removed from state law. What had been an annual payment of $4 billion to local government was simply reduced to $1,000.

Schwarzenegger issued an order declaring the $1,000 appropriation "deficient" under a procedure routinely used when spending goes over budget because of forest fires or unforeseen costs in prisons and health care.

Normally, a routine deficiency order does not take effect for 30 days, giving the Legislature a chance to consider the issue, and then the Legislature approves the overspending several months later with a deficiency bill.

But the governor declared an emergency, allowing the order to take effect immediately, and apparently no legislation will be needed to keep the $2.65 billion repayment flowing to local government this fiscal year.

A spokeswoman for state Controller Steve Westly, who writes the checks, said the repayments are now regarded as a "continuous appropriation" that requires no further legislation.

"No," said Erika Soto, a Westly spokeswoman, when asked if legislation will be needed to keep the money flowing to local government.

"We are in legal harmonic convergence with the controller on that," said H. D. Palmer, a spokesman for Schwarzenegger's Department of Finance.

Along with the deficiency order, Schwarzenegger used one of the new powers given the governor by the current state budget to make cuts of up to 5 percent in some programs to cover shortfalls in other areas, totaling $150 million.

The current budget strengthened the governor's ability to make mid-year cuts without legislative approval under four different code sections, including deficiency orders, state worker salaries, purchasing and administration.

Michael Cohen of the nonpartisan Legislative Analyst's Office said the new language is not strong enough to override other laws covering core programs, such as welfare payments.

"There is certainly a lot of flexibility there to take some action that is still within the general framework of the budget that would generate potential savings," Cohen said.

[John Jorsett]

Democrats should also be checking their grip on reality.

[Naspino]

They've been outsmarted by an actor.

[goldstategop]

Arnold should take advantage and cut spending to the maximum the new powers permit him. It will make it easier to convince voters to approve his plan in March when they see a good faith effort has been made to cut state spending. Maybe nothing will happen in the end but only if he doesn't at least try to get it under control. And hopefully, that is what he will do up to the time he presents the new state budget in January.