WELCOME TO SACRAMENTO….Back in the dog days of September, here was Arnold Schwarzenegger’s proposal for solving California’s fiscal crisis:
Here is my plan: audit everything, open the books, and then we end the crazy deficit spending.
Well, time passed, and ending our “crazy deficit spending” eventually receded into the background. In fact, Arnold’s plan these days is to continue our crazy deficit spending by passing a gigantic $20 billion bond measure next March that will get us through the following year. It’s sort of an Enron-style bid to put off the bad news just a little while longer in the desperate hope that somehow things will get better before the whole scheme completely unravels and people end up in jail ? or, worse, recalled.
But it turns out there’s a problem: things aren’t going to get better, and Arnold’s bond measure doesn’t solve anything. As the chart on the right shows, California has an estimated $15 billion deficit in 2004-05, but it also has the same deficit in 05-06, 06-07, 07-08, and 08-09. A bond measure solves precisely nothing.
(For all the chart geeks out there, “VLF Backfill Restoration” is lege-speak for the car tax. Since Arnold has promised to reduce it, it adds about $4 billion to the deficit, which is the part shown in pink.)
This chart comes courtesy of California legislative analyst Elizabeth Hill, who is nonpartisan, widely respected ? and, as nearly as I can tell, universally ignored. But the LAO’s numbers are almost certainly correct, and they’re based on a reasonably optimistic view of the state economy over the next few years.
So what’s going to happen? I had dinner with retired blogger Ann Salisbury and Armed Liberal on Saturday, and my (tentative) prediction was that Arnold would end up resorting to the oldest trick in the book: after being elected, he would declare that his research had shown that the problem is even worse than he imagined ? probably because Gray Davis was deliberately hiding it ? so he has no choice but to raise taxes.
Indeed, he seems to be preparing the ground already. Here is incoming Finance Director Donna Arduin, who was in charge of the “audit”:
“We knew that this was going to be bad, but in fact it’s staggering,” said Arduin, a budget expert brought in from Florida by Schwarzenegger.
….After he takes office Monday, Schwarzenegger is expected to call a special session of the Legislature….Republican consultant Dan Schnur said the session appeared to have been orchestrated to prepare the public for the potentially unpopular budget solutions that Schwarzenegger would be forced to present in the coming days.
“Think of it as shock therapy,” Schnur said. “This is the way you set the stage for a difficult set of proposals. The first step is to make clear how dire the situation really is.”
It’s obvious that we can’t keep borrowing for five years, and a variety of state, federal, and judicial mandates limit how much we can cut spending. We can make some cuts, but every analysis I’ve seen indicates that it’s legally impossible to cut $15 billion.
So that leaves one choice: raise taxes. The only question is, how long will it be before Arnold fesses up?
Today is inauguration day and the clock starts ticking at noon. Welcome to Sacramento, Arnold.