California's decision day nears

Referendums aim to solve California's budget crunch - and its deeper causes.

Ever since Californians decided to replace Gray Davis with Arnold Schwarzenegger as governor, the press, pundits, and the public agreed that solving the state's immediate fiscal emergency would be his first and biggest test. Long-term problems - including spending commitments that outstrip likely revenues - would come later... but soon.

Now, as he finishes 100 days in office, exam day for both issues is approaching.

By most accounts, four propositions on the ballot a week from Tuesday will define Mr. Schwarzenegger's governorship and could redefine the fiscal posture of the nation's largest state for years to come.

The looming vote is forcing residents here to confront their ambivalence about how to dig out of a $37 billion deficit: by hiking taxes, slashing spending, or loading debt on future residents. Their choices aren't easy, but they are necessary. The state will run out of money unless it finds a way to produce $14 billion to pay short-term notes due June 16.

Schwarzenegger has been supporting four measures with Hollywood-style fanfare. They include a $15 billion economic recovery bond (Proposition 57) to cover first-year operating deficits, a balanced budget act (Prop. 58). The third, Prop. 55, is a public school education bond, while Prop. 56 would lower the the size of the "supermajority" required to pass a budget in the state legislature from two-thirds to 55 percent of lawmakers.

Polls show all the measures struggling to gain enough support to pass next Tuesday. The governor's promotion of the initiatives at town meetings, rallies, and talk radio has budged some of the numbers, leaving a neck-and-neck sprint this week.

"People have real misgivings about doing anything that will put the state further into debt - including passing bonds, which has historically been the most palatable way of raising money," says Mark Baldassare, director of the Public Policy Institute of California (PPIC), which released poll figures Friday. Written into each law are provisions stating that Props. 57 and 58 must both pass or neither will go into effect - a tactic by proponents to tie the more popular idea of a balanced-budget provision with the less-popular idea of borrowing money to cover debt.

Transforming the budget process

Several political analysts say Prop. 56 would have the most wide-ranging effect on the state for years to come, because it rewrites the key law that complicates California budgets year after year. The state is only one of three (Arkansas and Rhode Island are the others) that requires such a "supermajority" threshold, which analysts say holds the budget process hostage to small groups of ideologues who demand concessions for their votes.

"Dropping the requirement from two-thirds to 55 percent would be the most significant long-term change for the state," says Elizabeth Garrett, a political scientist at the University of Southern California. "It's still more than a simple majority but one that could undo the logjams that have plagued the state."

Key leaders in both state parties have come out strongly in favor of Props. 56, 57, and 58 - a tribute to Schwarzenegger's persuasive abilities, say observers.

But with public support less than overwhelming, the same analysts say Schwarzenegger will have to up his personal charisma and unleash whatever money is available for TV ads in the final few days to really persuade voters..

Many analysts say that is an uphill battle.

"The reason voters are hesitating is that they are a bit unclear about what these propositions really mean and are wary of supporting them in that unclarity," says Larry Berg, founding director of the Jesse Unruh Institute of Politics. "They are suffering from initiative fatigue."

Facing the tough choices?

Mr. Berg and others also suspect voters are wising up to the longer term problem of California's inability to face the tough political choices of adding more taxes or cutting services - a tactic that has worked for previous administrations of both parties - including Jerry Brown, George Deukmejian, and Pete Wilson.

One thing working against support of the $14 billion bond measure is public reluctance to borrow to cover debt (rather than to build schools, roads, and the like). One thing working for it is that no formal opposition is now fighting the measure. Another is the fear that - if Props. 57 and 58 do not pass - the government will have to sharply raise taxes and cut services.

Several "Plan Bs" are circulating, by such leaders as state Treasurer Phil Angelides who recommends taxing wealthier households (of $140,000 income or more) and by some academics who say a tax of the superwealthy (incomes over $250,000) could solve the problem.

Still others say the "bond-or-armageddon" argument is a red herring altogether, overstating fiscal woes from the outset.

"We are hardly facing armageddon with this $37 billion deficit in a state [economy] of $1.2 trillion," says Steve Levy, director of the Center for the Continuing Study of the California Economy. "There are lots of viable alternatives if only public and policymakers enter into an honest dialogue."

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