Contributor

Ray Haynes

Mr. Haynes is an Assembly member representing Riverside and Temecula. He serves on the Appropriations and Budget Committees. [go to Assembly Member Haynes website at California Assembly][go to Haynes index]

How Democrats Negotiate
Take and keep on taking...
[Ray Haynes] 12/16/03

Governor Schwarzenegger learned an important lesson this last week. He came to Sacramento with a desire to “negotiate” a “bipartisan” solution to our budget crisis. He honestly believed that this “bipartisan” solution was possible. He even proposed a “bipartisan” solution to the crisis. The Democrats then threw his “bipartisan” solution in the trash can, and told the world he “refused to negotiate.” Welcome to Sacramento, Governor.

Let me explain.

For each of the past three years, Democrats have spent $8 billion more than they have received in revenue. In the 2001-02 budget, this was not a problem, because the state had four years of record surpluses. That surplus was burning a hole in the pockets of the Legislative Democrats, so they spent it as fast as it would come in, but even still, in June, 2001, the state ended the year with a $6 billion surplus.

That surplus didn’t last long. By July of 2002, the state had spent the entire $6 billion, plus $2 billion more. By the end of the 2002-03 budget, the state had a $10.8 billion debt. That debt was financed with a one-year loan, due in May, 2004. In addition, the state owes the state employee pension fund (Cal-PERS) $2.5 billion that it cannot pay. To get state finances through 03-04 (the year the state is in now), and to get the debt off the books, the state borrowed $2.5 billion from the state pension fund, and approved a $10.8 billion bond to be sold as soon as possible. A court has recently ruled the pension loan illegal. Some believe the $10.8 billion bond is illegal, too.

The state is, therefore, faced with three options to deal with this accumulated debt: (1) raise taxes; (2) cut spending drastically; or (3) refinance the debt over a period of time longer than one year with voter approval (to remove any legal doubt). Schwarzenegger promised not to raise taxes, so he is left with two options. He chose the refinance option, mainly because the Democrats won’t cut spending enough to pay off the $13.3 billion in debt we already owe. He said, however, that he would not borrow the money unless the state imposed a strict spending limit. Republicans reluctantly agreed to go along with the borrowing, if the spending limit was part of the deal.

The Democrats then complained about the bond. Now, wait a minute. You either cut programs to pay for this accumulated debt, or you borrow the money; the choice is one or the other, not inaction. The debt will come due, and the banks will get real unhappy if the state doesn’t pay. The bond helps the Democrats avoid massive program cuts. Most Republicans I know want the cuts. The Democrats do not.

Republicans want the spending limit, since overspending got us into this mess in the first place. Schwarzenegger’s plan bridged this partisan divide by giving the Democrats a way to protect their programs, and Republicans a way to swallow a bitter bond pill. The Republicans swallowed the pill, the Democrats whined.

That is how Democrats negotiate. We’ll take what we want, they say, give you nothing of what you want, and then cry about how difficult you are to negotiate with. The lesson to the Governor should be—kick them first, just to get their attention, and then negotiate. In this case, the Governor started out with the best solution, in light of the depth of the problem. The Democrats, who created the problem, then sought to blame the whole thing on him, and then deny him a solution.

That is Sacramento under Democrat domination. Maybe, just maybe, the people will get the idea, and change the Legislature like they changed the Governor. One can only hope.

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