Robert Galbraith/Reuters
GUBERNATORIAL PROP: California Gov. Arnold Schwarzenegger outlined his case for budget reform March 12 in San Francisco.

California's voters get next say in budget battles

They'll consider six ballot measures that address budget reform and a new $8 billion shortfall.

California Gov. Arnold Schwarzenegger apparently has taken to heart the adage that begins, "If at first you don't succeed...."

He is trying again to persuade state voters to embrace his vision for budget reform, via a set of six ballot initiatives that address both a new $8 billion revenue shortfall and the unwieldy annual budgeting process.

The measures, which come before voters May 19, may seal Governor Schwarzenegger's legacy, whether as a reformer who repaired a broken government or as a politician of great bombast but little consequence.

The package includes temporary tax hikes as well as cuts in government spending, a way to borrow against the state's lottery, a temporary shift of funds away from preschoolers and the mentally ill, and a way to clamp the salaries of elected officials during future deficits. So far, he's winning praise for his effort, if not for his suggested solutions.

"This is the best he has done in the past five years as governor and really confronts the state's budget crises," says Tony Quinn, a Sacramento-based political analyst and coauthor of the so-called California Target Book, a nonpartisan guide that tracks state political races. "He is acting the very best as governor in confronting real problems. He is not playing Hollywood anymore. When he goes out and talks about this stuff, he's not being bombastic.... He is talking in much more serious tones."

Schwarzenegger, a Republican, took a drubbing the last time he asked voters to approve his ideas for reforming state government. In November 2005, Californians rejected four ballot initiatives the governor had backed, calling into question whether he could in fact fulfill promises to do a better job leading the state than did ousted Gov. Gary Davis, from whom Schwarzenegger seized the reins two years earlier.

In a speech March 12 before the Commonwealth Club of California, the governor characterized his package of six ballot measures as "the agreement that ends the current budget deficit." He added that it also "changes our approach to budgets in the future."

If Schwarzenegger is unable to persuade voters to pass the measures, says Mr. Quinn, "I am absolutely convinced that the state will go into bankruptcy, like New York did in the 1970s."

It's expected that voters will approve all six initiatives or reject them all, because their provisions are closely linked, say Quinn and others.

Two powerful groups have already come out against them.

One is the League of Women Voters of California, which has long pushed for an overhaul of the budget process. League President Janis Hirohama has called the measures "hurriedly drafted" and said they "will only make our fiscal situation worse."

Another is the Howard Jarvis Taxpayers Association, a California-based taxpayers' rights group. Executive Director Kris Vosburgh says the organization is taking a position against only one of the measures, Proposition 1A, because it extends a tax increase from two years to four.

"Prop. 1A dwarfs all the others in importance," Mr. Vosburgh says. "The rest are merely rearranging deck chairs on the Titanic."

The state's revenue problems are exacerbated by the flight of residents and businesses from California's already-too-high taxes, he says. The state currently ranks sixth in the nation in terms of the share of personal income that goes to taxes, and Proposition 1A would move the state to first place, Vosburgh says.

"We are losing productive people and businesses, which means less revenue for the state," he says. "This will only compound the problem."

Some analysts say Schwarzenegger is shooting himself in the foot by not being more forthcoming with voters about the tax-hike extension.

"The governor has suggested that a vote to extend higher taxes for two additional years is not really a tax increase. Most people would disagree," says political scientist Jack Pitney of Claremont McKenna College in Claremont, Calif. "The governor and legislators may think they're being clever, but such tactics could very well backfire."

Schwarzenegger's more sober role as a salesman will be the thing to watch in the weeks ahead, as this package moves to the top of the governor's priority list, analysts say.

"This will be a very hard sell for voters, because the politicians will be asking voters to have faith in them and that's hard to do these days ... trying believe that legislators won't be the profligate spenders anymore," says Quinn. "Arnold is saying, 'I won't be the bombastic governor anymore,' and I don't know if the voters will buy it."

Voters will have an opportunity to register disapproval of legislators via Proposition 1F, which would bar lawmakers and the governor from receiving pay raises when the state runs a deficit. Some call the measure misleading.

"Proposition 1F naively hopes to prevent budget deficits by withholding raises for legislators and elected state officers if the state budget does not balance. This is just plain silly," writes Pete Stahl, author of a nonpartisan newsletter on state politics, in the proposition's formal "argument against" section. "Our state's structural deficit, if anything, has been caused by their overeagerness to serve too many constituencies, rather than the kind of selfish greed that would make Prop. 1F effective."

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