California's budget drama intensifies

Gov. Schwarzenegger stakes his political legacy on fiscal reform without tax hikes.

Rich Pedroncelli/AP
At a news conference in Sacramento Wednesday, California Governor Arnold Schwarzenegger held up past proposals to reform the state's welfare programs, which he said had been rejected by the Democratically-controlled legislature.

If the battle to close California’s whopping $26.3 billion budget gap were a play, the state’s politicians would only be starting the first act.

While the political theater in Sacramento is intensifying -- wheelchair-bound protesters rallying against cuts to social programs were arrested Tuesday and a top lawmaker has boycotted budget meetings -- analysts say that legislators are probably weeks away from coming to any agreement on how to close this state’s budget shortfall.

At the center of this drama is Gov. Arnold Schwarzenegger, who is staking his political legacy on demanding a balanced budget that comes with fiscal reforms and without tax hikes.

“This is the year that we finally have to put our fiscal house in order,” Governor Schwarzenegger said Wednesday at a press conference to pitch his proposal for cuts to the state’s social welfare programs.

While Schwarzenegger says he wants to get rid of “waste, fraud, and abuse” in the state’s welfare-to-work program -- which he says could save the state $753 million this fiscal year and $1.5 billion annually -- Democrats say he’s mainly trying to force through reforms that he’s been trying to make for years because the end of his term is in sight.

“He is undoubtedly aware that he has 18 months left and that this is his second to last budget,” says Timothy Hodson, executive director of the Center for California Studies at Sacramento State University. “This year it’s the governor who is very much encouraging the senate Republicans to hold fast.”

Mr. Hodson points out that the annual budget process in California typically comes down to a “game of chicken” between Republicans and Democrats. But this year’s fiscal fracas has been intensified by the national recession and compounded by the issuance of IOUs by the state of California. Some banks have said they will stop recognizing the IOUs come Friday. What’s more, Fitch Ratings cut this state’s bond rating just two clicks above junk status.

Schwarzenegger is trying to nudge legislators to make some headway by taking his message to the people. In addition to his press conference on welfare reform Wednesday, he published a column in the Los Angeles Times last week calling on legislators to accept his proposals.

He’s even using Twitter. On July 1, he tweeted: “Instead of working on budget, the Legislature is about to debate whether cows can keep their tails while we’re in a fiscal crisis.” He was talking about a bill to prevent what’s known as “docking,” which is cutting off the tail of a horse.

State Democrats say that Schwarzenegger is being unrealistic. And some social service advocates have said he's acting like a bully.

Assembly Speaker Karen Bass from Los Angles boycotted a recent budget meeting in protest of the governor’s refusal to sign any spending bills unless they are accompanied by cuts to social programs.

"We believe that many of the governor's reforms are worthy of consideration, but what is most important right now is that we close the deficit, that we not continue to lose $25 million a day," Ms. Bass said, according to the Associated Press.

But as the fiscal impasse lingers, the public grows increasingly frustrated with all politicians in Sacramento, says Mark Baldassare of the Public Policy Institute of California.

"The governor has gone to the voters before to make his claims and try to persuade the legislators through his efforts," he says. "What the voters really want now is a solution."


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