"A passion for politics stems usually from an insatiable need, either for power, or for friendship and adulation, or a combination of both."... ...Fawn M. Brodie
Commentary of the Day - October 11, 2003: Ahhnold the Educator.
Well the dust from the California recall election is beginning to settle, and the outline of governor-elect Schwarzenegger's take on state government is beginning to emerge from the fog of the recall campaign. Schwarzenegger swept into office in a tide of voter anger at Gray Davis's lack of candor about the state's budget crisis and his inept attempts to deal with it.
In contrast with most professional politicians, Davis never built a core constituency even though he spent more than 30 years in state government. The primary reason for this was his lack of core convictions. Instead, Davis allowed his position on major issues to shift to accommodate the wishes of a variety of special interests that were willing to contribute large amounts of money to his campaigns for public office. In those campaigns he rarely championed his own ideas and programs. His campaigns were notorious for their negativity. Most of the advertising money went towards tearing down opponents. In the primaries, he would run down members of his own party to gain nomination before going to work on his Republican opponent in the general election. This tactic won him few friends; and, when the chips were down in the recall few came to his aid.
Though, in truth, Davis did little during his time as governor to justify a recall, he made enough missteps on key issues to make himself hugely unpopular. These included his initial handling of the energy crisis, which was the result of a flawed electricity deregulation program that he inherited from his Republican predecessor, Pete Wilson; cozy deals with Indian gaming interests that ensured that the state would receive almost nothing in revenue from these highly profitable enterprises; deals with a number of public employee unions that ensured that pension costs would skyrocket; and, deals with education interests that guaranteed a significantly increased flow of state funds to K-12 education. However, his greatest mistake was to ignore the growing structural imbalance between state spending and state revenue.
The stock market bubble of the late 1990's artificially inflated the state coffers. A legislature that owing to term limits was too inexperienced to recognize that the revenue increase probably was transitory went on a spending spree. The increases in spending for K-12 indeed were needed to correct years of neglect by the Wilson and Deukmejian administrations; however, most of the other spending increases just pandered to special interests. As governor, Davis had both the experience and the authority to rein in spending through his line item veto. However, he was even more beholden to the special interests than the legislators, so he was loath to veto those spending bills.
When Sacramento was awash in money it didn't seem to matter. In fact, the growing surplus in the state treasury put pressure on the legislators to return something to the taxpayers. Unfortunately, instead of providing one-time rebates from the windfall surpluses, the legislators decided to reduce taxes on a permanent basis. The seeds of Davis's downfall were sown in one of these tax reduction bills. The legislature enacted a bill that reduced automobile registration fees to one third of the their previous amounts. The bill included a provision that the original rate could be restored by the governor if state revenues declined substantially. Again Davis failed to rein in the legislators. In the end, his decision to "triple the car tax" after the recall began was the final nail in his coffin. In California the automobile is an extension of a citizen's personality. Tripling the car tax, even if it only meant restoring it to its previous rate, was a fatal mistake -- one that Schwarzenegger and other opponents were quick to exploit.
Californian voters have an immense blind spot. In the early 1970's a previous governor, who like Schwarzenegger was a B-movie actor, convinced them that there was no causal relationship between taxes and public services. So, the citizens of the golden state generally feel that they are entitled to great public services, but at the same should not have to pay any taxes for these services. Instead, they are of the opinion that there is enormous waste and inefficiency in government, and just by squeezing a little bit of the waste and inefficiency out they will be able to have it both ways -- great public services and no taxes.
This was the pitch that Reagan sold to the voters, and it is the same pitch that Schwarzenegger sold to them this time around. He promised to reverse the car tax increase, to maintain K-12 education funding at its present level, and to somehow balance the budget without raising taxes. Instead, he promised to "audit everything" to find those billions in waste.
Currently, the structural deficit in the California budget is about $8 billion. That means that in an average year the state will take in $8 billion less in taxes than it spends to provide services. As "Ahhnold" is likely to find out fairly soon there is not $8 billion worth of waste and inefficiency in state government to be had.
In the short run, he likely will convince the voters to approve a bond issue to take care of the current extraordinary deficit. However, in the long run he is going to have to tackle the 800 pound gorilla of state politics. Namely, how to deal with the structural deficit. It is unlikely that he will be able to cut enough state services to make up the $8 billion. Almost half of the spending in the budget has been mandated by the voters through the initiative process. Much of the rest goes to funding things like the highway patrol and the prisons.
Some hard decisions will have to be made. Across the board cuts in those state agencies that are funded from the discretionary part of the budget certainly will take place. Here in the state university system rumors of a 17% mid-year cut along with yet another 30% increase in tuition already are circulating.
If Schwarzenegger sticks to his word on maintaining funding for K-12 (and it appears that he does have some core convictions about education), then raising taxes eventually may be his only option. Reagan did this early on in his first term as governor, while he still was able to blame the Democrats for the fiscal mess. Schwarzenegger may have his character flaws, but stupidity is not one of them. He definitely is a clever guy. He might even be clever enough to figure out that he can raise taxes without appearing to raise them.
For example, currently between 80 and 90% of the cost of running the California State University system comes from the state general fund. In other states as little as 25% of the funding for state universities comes from general fund budgets. The students and their parents pay the rest through tuition charges. The higher education committee of the California State Legislature already is looking for ways to remove the public colleges and universities from general fund support. If that can be accomplished, it would reduce the structural deficit by at least a few billion dollars. It likely won't happen all at once, but look for steep increases in tuition charges for public higher education in California over the next few years.
Look also for a shift of taxing authority back to local government. The passage of proposition 13 in the early 1970's left local governments with few sources of revenue. To cover the gap, state revenues were shared with local entities. If Schwarzenegger can somehow figure out a way to give taxing authority back to the cities and counties, then he would not have to raise state taxes. The blame for tax increases instead will fall on local officials. Look for an interesting few years in California politics, with some very serious implications for public higher education.
Arnold is just one more in a long series of "education governors", and the IP predicts that we are about to get an education.
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