Posted on 07/31/2004 5:47:52 PM PDT by NormsRevenge
SACRAMENTO (AP) - Amid much fanfare inside the Capitol's historic rotunda, Gov. Arnold Schwarzenegger signed a $105 billion budget package Saturday that he celebrated for imposing no new taxes while balancing spending with income.
While technically accurate, the Republican governor failed to mention that $7 billion in loans and one-time saving are embedded in the spending plan and are used - much as former Gov. Gray Davis did last year - to paper over the state's spending problems one more time.
The budget, negotiated after a difficult 26-day standoff with the Legislature's Democratic majority, does little to resolve the spending imbalance either by raising taxes or cutting spending. Some say this plan may even make the problems bigger in the future because of funding agreements the governor and the Legislature have made with key interest groups, such as schools and local governments.
Some of these problems, administration officials said, will be addressed in the governor's long-awaited California Performance Review plan, which is expected to propose eliminating 12,000 state jobs, hundreds of state boards and commissions while possibly saving $32 billion over the next five years. But he will have to move that interest-attacking plan while also pushing for a budget that fixes many of the problems that remain unsolved.
Still, an upbeat Schwarzenegger told a big crowd of tourists and supporters that he was proud of the compromise plan.
"We started the recovery by reforming workers' compensation to get rid of the poison of our economy," he said. "And we are continuing the recovery with this budget by controlling spending, holding the line on taxes and taking back the special interest giveaways."
However, early indications are that workers' compensation insurance rates haven't dropped as the governor had predicted, and holes still remain in the budget. The plan authorizes the state's general fund to spend $78 billion next year while showing income of about $80 billion. But as the nonpartisan Legislative Analyst pointed out in a review of the spending plan, much of that income is borrowed and there's little detail explaining how the state will pay back the loans.
The biggest amount of borrowing - $2.7 billion - comes from bond money approved by voters in March in Proposition 57. That loan will be paid back by diverting a portion of the state sales taxes over nine years.
The new budget includes a suspension of Proposition 42, which directs sales taxes paid on gasoline purchases into a fund for road and transportation programs. That means another $1 billion will go into the general fund next year without cutting costs or raising taxes.
There is also pressure to stop this particular practice from local officials as businesses who depend on the state highway system. Since 2001, the state has borrowed more than $3.6 billion from the fund, according to an analysis from the Republican Senate caucus, and to date, the state has only paid back $273 million.
The new budget does, however, include repayment of about $1.3 billion to other transportation accounts.
There are also a number of promises the governor and the Legislature have made to interest groups that will make budgeting in the future more difficult. In an effort to extract savings this year, the state got teachers and public schools to accept $2 billion less this year than they could have demanded under voter-approved funding guarantees. School officials say a similar agreement next year is not likely.
The state got $2.6 billion in savings from cities and counties over the next two years, but also won support for a constitutional amendment that would permanently protect local tax money from the Legislature in the future. University presidents also went along with funding cuts this year and higher tuition with the understanding that state support would begin to increase again in 2005-2006.
"The governor has really boxed us in," said state Treasurer Phil Angelides, a Democrat and potential rival of Schwarzenegger in 2006. "We will come out of this budget with $7 billion in new debt but in two years the bill really becomes due."
Anxiety over the deficit spending emerged as a key issue in getting members of the governor's own party to support the budget last week. Both houses of the Legislature has trouble finding the votes needed for the required two-thirds majority - the issue was especially difficult in the Senate where only four Republicans voted for the budget plan.
"Successful diets don't start in the future," said Sen. Tom McClintock, R-Northridge. "They always begin the present. This budget obligates us to begin making massive balloon payments in 2006 - this is some diet."
The governor, along with many Democrats who support the plan, defend the budget as a compromise between competing interests. They point out that both sides had core positions that they would not waver; Republicans would not consider raising taxes and Democrats refused to consider big cuts to health and welfare programs.
Schwarzenegger has also said he hopes his California Performance Review, a massive plan for overhauling the state bureaucracy, will help fix some of these problems.
That, however, is headed for confrontation within the Legislature. Besides the state's bureaucracy that naturally resists change, there are dozens of powerful interest groups that will fight his plan. Angelides, for instance, said he was not sure the administration could deliver on the promise of making the state more efficient.
"The governor made a lot of promises during the recall campaign," Angelides said. "Now he's promising to make the state more efficient, to blow up the boxes. But in fact, he should be judged on his promise that he made.
"The governor so far has promised very big and delivered very little."
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On the Net
Gov.'s home page: http://www.governor.ca.gov/state/govsite/gov-homepage.jsp
Read the budget bill online: Senate Bill 1113 at:
http://www.sen.ca.gov/
California Senate
http://www.assembly.ca.gov/acs/defaulttext.asp
California Assembly
Gov. Arnold Schwarzenegger signed a $105 billion budget Saturday characterized by loans, accounting gimmicks and one-time solutions that eventually will have to be paid:
-Uses $2.7 billion in Proposition 57 bond money
-Suspends Proposition 98 funding guarantees for schools, saving $2 billion
-Borrows $1 billion to pay pension obligation
-Suspends Proposition 42 funding for transportation, saving $1.2 billion
-Assumes $450 million from punitive damage awards will go to the state
-Suspends teacher tax credit for two years, saving $200 million annually
-Commits to $1.3 billion funding guarantees for cities and counties that begin in two years
-Promises funding increase to state universities in 2005-2006
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After the monthlong budget impasse, the Democrats got:
-$33 million to lift enrollment cap at state universities
-$74 million to provide a cost-of-living increase for welfare recipients
-$130 million to maintain state's share of wages paid to home health care workers
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The administration and Republicans got:
-No new taxes
-Revision of state law that allows workers to sue employer over labor code violations
-Repeal of fire protection fees that would have generated $53 million
-Repeal of timber harvest fees that would have generated $10 million
-Maintains most of a tax exemption for buyers of luxury yachts, motor homes and airplanes
-Eliminates Legislature's authority to shift local property taxes for state purposes
Source: Legislative Analyst's office; Assembly Budget Committee; Republican Senate Caucus.
Repeal of timber harvest fees that would have generated $10 million
key interest groups? .. are they like a level above just a plain old special interest?, I wonder 8-?
It sounds like Arnold is trying to do the best he can with what he's got. Remember, this is Caleeforneea.
Arnold showed up at the OC Fair and rallied a crowd of 3,000. Came on to the tune of "Taking care of Business"
The fans sang Happy Birthday to him on his birthday, yesterday I guess, ......from Sat OC edition of LA Times.
How disappointing. Arnold didn't even pick up his line item veto sword.
As Govenator of California, Arnold has the line item veto power to cut, cut, cut the budget. This is pretty much the only way a Republican governor can control the overspending of a Demorat legislature. It is disappointing that Arnold decided not to exercise that power.
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